ASX tipped to rise after Wall Street snaps five-day drop

In the US markets, the AI theme continues to motivate investors even as they contemplate Donald Trump’s return to the White House in 16 days.

“We really need to see more of that clarity on Jan 20 for markets to have greater conviction,” Laura Cooper, global investment strategist at Nuveen, said on Bloomberg Television. “US exceptionalism will continue to be the dominant theme at least in the first half of the year, regardless of what some of those policies that come through are.”

Louis Navellier sees “growing concern regarding the plethora of changes being proposed by the incoming Trump 2.0 administration”.

“The sabre-rattling about tariffs brings inflation risks. The deportation of many thousands of illegal immigrants may cause labor disruptions,” the chief investment officer of Navellier & Associates wrote in a note.

Meanwhile, JPMorgan strategists led by Nikolaos Panigirtzoglou told clients that as long as retail investors “continue to pour money into the AI theme, the AI led boom in stock markets is likely to continue”.

US economic data, out on Friday, showed US manufacturing rose at a modest pace in the final month of 2024. The Institute for Supply Management’s gauge hit 49.3, topping estimates, but remained below 50, a level that indicates economic expansion. New orders rose to the highest since the start of last year. Treasuries dipped after the report while stocks held on to gains.

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Investors sieving through data to find signs the world’s largest economy was still going strong had to weigh that against the prospect of slower and shallower interest-rate cuts after Federal Reserve Chair Jerome Powell’s hawkish pivot in December.

Vital Knowledge’s Adam Crisafulli said the ISM readout was incrementally positive but “but it will reinforce worries about hawkish policy and elevated yields.”

In other markets, Chinese stocks closed out last week in poor shape, extending their worst start to the year since 2016, reflecting worries about the growth outlook. The yuan fell to breach the psychological milestone of 7.3 per dollar for the first time since late 2023. The nation’s 10-year government bond yield slipped below 1.6 per cent for the first time ever.

“There’s been many false dawns in China in recent months and it looks as though it’s unraveling again,” said Kenneth Broux, a strategist at Societe Generale.

“We’ve seen three big days of selling which is not really conducive to sentiment.”

This story was produced with the assistance of Bloomberg Automation.

With assistance from David Finnerty, Richard Henderson, Divya Patil, Margaryta Kirakosian, Cecile Gutscher, Sujata Rao and John Viljoen.