We can thank central bankers for the expected strong open for our market as Australian equities are poised to extend Friday's strong gains on the back of big gains in US and European markets.
The Chinese central bank is the latest to cut rates on the weekend to stimulate the country's sagging economy following comments by the European Central Bank (ECB) that it is considering expanding its quantitative easing (QE) program to support growth and fight deflation.
That's sweet music to the ears of investors with the futures market pointing to a 0.7% gain for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) at the open as record low global interest rates and QE, which involves the central bank buying bonds and other assets, have been the key contributor to a rebound in equities since the global financial crisis.
But resource stocks are likely to lag financials as the price of most commodities fell on Friday night. This thematic could extend over the medium term too because the latest round of stimulus will likely send the US dollar higher and commodities have an inverse relationship to the greenback.
Commodity producers were one of the biggest beneficiaries when the US Federal Reserve was undertaking QE and cutting rates as the actions weakened the US dollar.
This time it is the other developed countries that are injecting liquidity into their economies at a time when the Fed is likely to be the first of among its peers to tighten monetary conditions so you can expect the greenback to pull further ahead of the other major currencies, including the Australian dollar.
This won't be welcome news for shareholders of energy stocks like Woodside Petroleum Limited (ASX: WPL), who will also have to contend with the 1.7% crash in the West Texas Intermediate oil price to $US44.60 a barrel on news of rising US inventories, while the miners like Rio Tinto Limited (ASX: RIO) could face pressure after the price of the steel making ingredient fell for the fifth day as it shed 1.1% to $US51.62 a tonne on Friday.
On the bright side, merger and acquisition (M&A) activity will keep investor interest in the sector with Beach Energy Ltd (ASX: BPT) acquiring Drillsearch Energy Limited (ASX: DLS) and Santos Ltd (ASX: STO) fending off takeover approaches.
Nickel and gold miner Metals X Limited (ASX: MLX) is a step closer to acquiring Aditya Birla Minerals Limited (ASX: ABY) after the Australian Foreign Investment Review Board approved the potential merger.
Steel maker BlueScope Steel Limited (ASX: BSL) will also be in the spotlight after it upgraded its earnings outlook for the current half and acquired Cargill's 50% share in the North Star joint venture (JV).
Cimic Group Ltd's (ASX: CIM) Middle East JV is also up for grabs with media reports saying that Al Habtoor is in talks to sell its 27.5% stake in Habtoor Leighton.
But M&A action isn't confined to the resources sector. Australia's largest medical test provider Sonic Healthcare Limited (ASX: SHL) is among companies keen on bidding for Swiss diagnostics company Unilabs SA, according to Bloomberg. The sale could be worth as much as €1.5 billion ($2.3 billion).
In other news, property group Stockland Corporation Ltd (ASX: SGP) is expected to release its first quarter trading update, while free-to-air television broadcaster Ten Network Holdings Limited (ASX: TEN) has gone into a trading halt to undertake a capital raising.
Ten Network is also expected to unveil its full year results.
