Investors looking for a hat trick

Australian investors are looking for a third daily rise in a row as positive US data and quieter commodity markets further ease the pressure from a constrained global growth outlook. Falls in volatility, elevated trading volumes at lower levels, and a lower Australian dollar all point to the potential for under invested managed funds to continue to support the local market. Futures markets are indicating a lift of 11 points at the open, but these key short term factors may see additional gains over the session.

Energy stocks were the best performers on US bourses, after a modest lift in oil prices. However, investment bank downgrades of key local energy stocks could overwhelm this lead in trading today. After defensive healthcare and utility sectors lead the charge yesterday, it may be the turn of the financial stocks to do some heavy lifting. Telcos were also a notable laggard yesterday, and may play catch up today.

While journalists torture gloom and doom headlines from yesterday’s GDP data, the market view on any interest rate cuts is much more conservative. March short term interest rate futures are trading at the yield equivalent of 2.4% - pricing a 40% chance of a cut in February. This contrasts strongly with claims of 70-80% pricing, or an “almost certain” rate cut. Regardless, share trading volumes may drop away ahead of Friday night’s read on US non-farm payrolls.