Australian shares outlook - Higher on improved sentiment towards U.S. economy

SYDNEY, May 05, 2008 (Thomson Financial via COMTEX) -- -- Australian shares are expected to open higher on Monday following sentiment towards the U.S. economy being boosted by a smaller-than-expected fall in U.S. employment in April.

The non-farm payrolls report boosted Wall Street on Friday.

Gains are likely to be led by the resources sector following solid rises in metal and oil prices on Friday prompted by a growing belief that the U.S. economy won't move into recession.

The S&P/ASX 200 ended its last session up 60 points at 5,755, suggesting a positive start to the week.

"Firm market futures will see our indexes strengthen further. Once we clear the 5,760 level, closing the gap between there and 6,000 looks inviting," said Stuart Smith, a private client advisor at Bell Potter Securities.

He said at the start of the week all indicators are positive but there may still be some resistance to buying.

"Perceptions are being hampered by our higher PEs (price-earnings multiples) compared to the rest of world but at same time Australia is a blue chip place to be," Smith said.

On Friday Australian shares closed at a nine-week high led by financial stocks, with confidence returning to the market fuelled by Wall Street's gains over the week.

The benchmark S&P/ASX 200 added 114.6 points or 2.1 percent to close at the day's high of 5,700.4. It was the first time the index hit 5,700 since end-February. For the week, the S&P/ASX 200 rose 113.1 points or 2.0 percent.

The broader All Ordinaries index closed up 107.7 points or 1.9 percent at 5,760.4.

In New York, share prices rose on Friday in response to the better-than-expected jobs data. But technology stocks eased after a disappointing earnings result from Sun Microsystems.

The report showed 20,000 jobs were lost in April, a far better result than an expected loss of 75,000 jobs.

The Dow Jones Industrial Average closed up 48.2 points or 0.4 percent at 13,058.20. For the week the Dow gained 1.29 percent, the S&P 500 index ended up 1.15 percent and the Nasdaq composite index rose 2.23 percent.

News Corp, which reports its third-quarter earnings in New York on Thursday, ended up 1.4 percent on Friday.

Investors on Wall Street are expected to start this new week in an upbeat mood as they are growing more confident that the economy and the financial markets are heading towards a second-half recovery.

Share prices in London made strong gains on Friday helped by the more upbeat mood across the Atlantic. The FTSE 100 index was up 128.2 points or 2.1 percent at 6,215.5.

BHP Billiton jumped 4.8 percent and Rio Tinto gained 4.6 percent.

Base metal prices posted firm gains on the London Metal Exchange on Friday after the U.S. jobs report prompted investors to again embrace commodities.

Aluminium rose 2.9 percent while copper added 2.3 percent. Chile's Codelco also announced on Friday that it would reopen mines after unions said they would examine a government proposal aimed at ending a two-week strike.

Gold prices recovered from four-month lows after the U.S. jobs report. The most active June Comex gold contract rose $7.10 to $858.00 an ounce.

Crude oil prices rose on Friday after three days of declines with investors encouraged by the better-than-expected jobs report. The June Nymex crude oil quote ended trade up $3.80 or 3.4 percent at $116.32 a barrel.

Ahead in Australia, ANZ releases its monthly survey while TD Securities releases its monthly inflation gauge ahead of Tuesday's May meeting of the Reserve Bank of Australia. Although inflation is expected to remain uncomfortably high over the remainder of the year, recent data has indicated that domestic demand is starting to ease following a series of rate hikes.

($1 = A$1.07)

bruce.hextall@thomsonreuters.com

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