The ASX 200 is off to races on Monday. Here's why

Investors are sending the ASX 200 sharply higher on Monday. But why?

A group of young people celebrate and party outside.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The S&P/ASX 200 Index (ASX: XJO) is enjoying a strong run higher today.

In late morning trade on Monday, the benchmark Aussie index is up 0.6% at 7,673.8 points.

Barring an unexpected turnaround, this will mark the third consecutive day of gains for the ASX 200, which closed up 0.6% on Friday and 0.2% on Thursday.

The Australian stock market is following the bullish lead of US markets.

On Friday, the S&P 500 Index (INDEXSP: .INX) closed up 1.3%. And the tech-heavy Nasdaq Composite Index (INDEXNASDAQ: .IXIC) finished the day up 2.0%.

Here's what's happening.

ASX 200 lifts on 'bad news'

Much of today's rally looks to be driven by some poorer-than-expected economic news out of the US on Friday.

As we often see, bad news for the US or Aussie economies often translates to good news for ASX 200 stocks. That's because any deterioration in economic data indicates that central banks are winning their struggle with inflation.

In turn, that means investors could be looking at some highly anticipated interest rate cuts sooner than feared.

US markets soared on Friday after the Bureau of Labor Statistics reported that the world's top economy added 175,000 jobs in April. That's sharply below the 315,000 added in March, and came in below consensus estimates of 240,000. It also marks the smallest jobs gain posted in the US in six months.

While still low by historic standards, the US unemployment rate of 3.9% also topped consensus forecasts of 3.8%.

What are the experts saying?

Commenting on the employment data that's helping boost the ASX 200 today, Olu Sonola, Fitch Ratings head of US economic research, said (quoted by Bloomberg), "For those looking for a rate cut sooner than later, this deceleration in payroll growth is good news, and the weaker wage growth number makes it even better news."

But Sonola cautioned investors not to get ahead of themselves, adding:

However, one month does not make a trend, so the Fed will likely need to see a few months of this type of moderation coupled with better inflation numbers to put rate cuts back in play sooner than later.

Jeffrey Roach, chief economist for LPL Financial, said the slowdown in jobs growth ups the odds of a 2024 interest rate cut from the world's most influential central bank.

"The demand for labour is slowing, which will eventually ease inflation pressures, giving the Fed some leeway to cut rates later this year," he said (quoted by The Australian Financial Review).

Roach added, "Slower payroll growth and fewer hours worked imply the economy is slowing at a measured pace. This jobs report is consistent with the soft landing narrative."

On the home front, ASX 200 investors will be carefully watching the RBA's upcoming interest rate decision, due out at 2.30pm AEDT tomorrow.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Man sitting in a plane looking through a window and working on a laptop.
Opinions

2 cheap ASX 200 shares I'd buy in May

I think these stocks are too cheap to ignore.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Share Gainers

Why Gentrack, New Hope, Nuix, and Star Entertainment shares are charging higher

These shares are starting the week strongly. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Core Lithium, Duratec, Galan Lithium, and Michael Hill shares are sinking today

These shares are starting the week in the red. But why?

Read more »

A trio of ASX shares analysts huddle together in an office with computer screens all around them showing share price movements
Broker Notes

Why brokers just revised their outlook for these 4 top ASX All Ords shares

These four ASX All Ords companies were just re-rated by top brokers.

Read more »

Invest written on a notepad with Australian dollar notes and piggybank.
Opinions

I'd invest $10,000 into these excellent ASX shares for the long term

I’m bullish about these top stocks.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Materials Shares

Why did this ASX All Ords stock just crash 24%?

What is weighing down this lithium stock today? Let's find out.

Read more »

Young woman using computer laptop with hand on chin thinking about question, pensive expression.
Opinions

Should you buy Telstra stock on a pullback?

Is this telco a buy for value hunters?

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Share Fallers

Why did the Core Lithium share price just crash 6%?

Investors are bidding down the Core Lithium share price today.

Read more »