Another nervous session ahead for stock market investors

Yesterday’s mood of caution is likely to continue as potential buyers wait on statements by the US Fed and Bank of Japan.

Overnight news of softer than expected GDP growth in the UK feeds into a narrative of moderate world growth. The Bank of England is widely anticipated to be the second of the major developed central banks to begin lifting rates after the US Fed eventually makes its move. Markets are now anticipating that both the Fed and BOE could push out the timing of rate increases, while the BOJ will add to its stimulus providing valuation support for equity markets.

Despite a steady spot iron ore price yesterday, investor confidence in the mining and energy sectors is likely to be capped by recent price weakness for both iron ore and oil. The reality of ongoing supply surpluses continues to make its present felt as markets move into a period of potential seasonal weakness.

NAB is delivering on its strategy of divesting underperforming assets. However, market attention will now focus increasingly on its core Australian business. One key issue will be whether the investment of increased overhead aimed at improving market share and revenue in its Australian business lending and other priority segments will turn out to be justified.