Australian shares will start strongly today after the Morrison Government retained power – though as a minority administration.
The surprise election result means the bogey policies of the ALP – ending negative gearing for housing investors and concessional capital gains and the planned change to dividend imputation rules, won’t happen.
The overnight trading on Friday ended with a small gain of 5 points for the ASX futures, but that will be left behind as the uncertainties of a Labor win are left behind.
A surge in global iron ore prices above $US100 a tonne for the first time in five years will help sentiment and the shares of the major miners are likely to bounce higher for a while after their solid weeks last week.
The share prices of major miners, Rio, BHP and Fortescue were all higher on Friday – Rio Tinto shares ended up 2.1% to $101.35, BHP shares rose 2.5% to $38.46 and Fortescue shares jumped 6.6% higher at $8.95.
Over the week BHP rose 4.5%, Rio Tinto shares rose 6.4% and Fortescue Metals Group surged 18.7%.
Fortescue shares were one of the best performers on the ASX last week thanks in part of the surge in global iron ore prices, but also the surprise news of the early payment of a 60 cents a share dividend before the end of the financial year.
Bank shares should do OK with investor property lending untouched by the election result but watch for a major speech by Reserve Bank Governor, Phil Lowe tomorrow in Brisbane on monetary policy and the economic outlook.
We can expect a more commentary from the governor on the future path of interest rates.
One thing to keep an eye is the weakening Aussie dollar – the election result could see the currency bounce higher, especially after the surge last week in iron ore prices past $US100 a tonne.
The weaker dollar means a big advantage for the iron ore exporters and other resource companies. Their costs are priced in Aussie dollars and their sales are in greenbacks.
The ASX 200 Index rose 54.4 points, or 0.9%, to 6365.3 last week, briefly touching a fresh 11-year high in the early part of Friday’s session after rebounding from the slump that started the week’s trade.
The major banks held back the market this week. ANZ shares fell 6% to $25.85, NAB shares lost 7.8% to $23.92 and Westpac closed 6.6% lower at $25.41 as all three stocks traded ex-dividend. Macquarie Group also traded ex-dividend, losing 3.8% to end the week at $119.93.
Commonwealth Bank shares fell 3.4% to $72.83 after a weak third-quarter trading update.
