National

Australian market tipped to make gains

By AAP Newswire

The Australian share market is expected to start the week higher, after investors around the world were buoyed by news that Germany might might splash some cash to stimulate its economy.

The German coalition government would be prepared to dump its rule to keep a balanced budget and instead take on new debt, the magazine Der Spiegel says.

The report raised global hopes the nation would be willing to spend money to avoid a local recession, and helped US stocks close higher on Friday after a tumultuous week.

The Dow Jones Industrial Average rose 306.62 points in the day, or 1.2 per cent cent, to 25,886.01, while the S&P 500 gained 41.09 points, or 1.44 per cent, to 2,888.69.

Australian shares are tipped to follow suit when trading resumes on Monday, though the rise is likely to be more modest.

Futures suggest the benchmark ASX200 will gain about 40 points at open, or 0.6 per cent.

The local market had shed 178 points last week, or 2.7 per cent, after growing fears of a recession in the United States sparked a global rout.

The fears emerged as the US bond yield curve "inverted" for the first time since 2007, meaning long-term bonds started earning less interest than short-term ones.

The trend has preceded every American recession in the past 50 years.

But AMP Capital chief economist Shane Oliver says on this occasion it was only short-lived.

"A lot of the talk about yield curve inversion was a bit over the top," he told AAP.

Nonetheless, Dr Oliver said the markets are likely to remain "fairly choppy" in the months ahead, unless there is some resolution to the trade war between the US and China or more economic stimulus.

"We're probably in for a continuing bout of volatility in markets."

This week, Dr Oliver expects investors will be particularly keen to check out the Purchasing Managers' Index surveys coming out on Thursday.

They will tally business conditions in several countries for August, including Australia.

Investors will also be focusing on what central banks have to say.

The Reserve Bank of Australia will on Tuesday release the minutes from its August board meeting, which might include more detail on its stance that it would further reduce the interest rate "if needed".

RBA Govenor Philip Lowe will also address the Jackson Hole symposium in Wyoming on Saturday, an annual event focused on economic policy.

Dr Oliver isn't expected anything too fresh from the governor.

"I think whatever it is, his message will be pretty dovish."

Federal Reserve Chair Jerome Powell will also address the event.