An expected cut to interest rates would likely see the Australian share market rise in the coming week amid improved sentiment in the US financial sector, dealers said.
For the week ending August 29, the benchmark S&P/ASX 200 index closed up 204.2 points, or 4.1 percent, at 5,135.6 after finishing above the 5,000 point mark every day this week. Dealers said the market would likely continue to climb if the central bank cut interest rates on Tuesday.
The Reserve Bank of Australia (RBA) meets on Tuesday to discuss monetary policy and is widely tipped to cut its official cash rate for the first time since 2002. The RBA left its official cash rate on hold, at the 12-year high of 7.25 percent at its monthly meeting on August 5. "If they cut it, it probably is really going to spur on the market," said Harley Salt, head of sales trading at IG Markets Australia.
"It could sort of ignite our market. You will see a lot of money returning to the embattled financial stocks... so if the interest rates are cut you might find that people are starting to pump more money into the banks."
Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, said the Australian share market rose in the past week on the back of the positive global lead and slightly better profit releases. "Shares appear to have built a decent base since mid July and may rally a bit further in the short term," Oliver said. "However, the next few months are likely to remain rough for shares as the economic downturn feeds into more profit downgrades, particularly for cyclical sectors, and as bank asset write downs continue." Oliver said that the September/October period had historically been poor for shares.
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