Neutral macro setting for markets but Woolworths disappoints
The share market looks likely to finish the week and the reporting season focussed mainly on company results. The broad macro lead from international markets was largely neutral for our market this morning.
Woolworths is likely to be under pressure this morning. Investors will be nervous about news of subdued sales in December and January and management’s downward revision in full year guidance following plans to compete more aggressively on price. This news comes after recent improvements in the share price which have increased the stock’s vulnerability to bad news.
The banking sector may see some support in coming days as investors seek to replace stock sold as a consequence of yesterday’s option expiry.
US Dollar strength was one of the main features of the market landscape last night. This was assisted by the US core inflation figure which showed that price increases are occurring outside the fuel sector. Given recent Fed statements that it will require comfort that inflation data is heading back towards its target before lifting rates, market are going to be very sensitive to news on inflation in coming months. Last night’s figure shows that while core price gains are subdued they are within sight of the Fed’s target on an annualised basis and any increase from current levels could see the Fed beginning to move on interest rates.
For further comment from Ric Spooner please call 02 8221 2137.
Frequently Asked Questions about this Article…
Woolworths is facing pressure due to subdued sales in December and January, along with management's downward revision of full-year guidance. This is compounded by their plans to compete more aggressively on price, which has made the stock vulnerable to bad news after recent share price improvements.
The banking sector may see some support in the coming days as investors look to replace stocks sold due to the recent option expiry. This could provide a temporary boost to banking stocks.
The strength of the US Dollar, bolstered by core inflation figures showing price increases outside the fuel sector, is a significant market feature. This strength can influence international trade and investment flows, affecting market dynamics.
US core inflation figures are crucial as they indicate price increases outside the fuel sector. The Federal Reserve has stated it needs assurance that inflation is moving towards its target before adjusting interest rates. Current figures suggest that any increase could prompt the Fed to consider raising rates.
The current macroeconomic setting for the markets is largely neutral, with no significant international market leads impacting the local market at the moment.
Investors are nervous due to Woolworths' subdued sales in recent months and the company's decision to revise its full-year guidance downward. This has increased the stock's vulnerability to negative news.
Inflation data plays a critical role in market sensitivity as it influences expectations around interest rate changes. Markets are particularly sensitive to inflation news because it affects monetary policy decisions by the Federal Reserve.
Investors can contact Ric Spooner for further commentary by calling 02 8221 2137.
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