Bank stocks and profit results the key to near term direction

The new trading week will kick in with a focus on profit results and bank stocks following a relatively steady lead from broader international markets on Friday.

The question of whether or not bank stocks begin to attract buyer support once trading resumes in CBA will a key factor for overall market sentiment over the next couple of days. With three of the big four banks now having completed capital raisings and Westpac this morning confirming a Tier 1 capital ratio of 10.5%, investor focus is likely to return to the dividend yields offered by these stocks in a low growth environment.

Rail freight operator, Aurizon unveiled a result this morning that reflects some of the core themes of the reporting season so far. Revenue growth is hard to come by and Aurizon is forecasting that tonnages hauled will be flat to slightly lower next financial year. However cost control and ongoing improvements to its operating ratio are likely to see some profit growth while a cautious approach to new investment and balance sheet management has allowed Aurizon to join the ranks of high dividend paying companies. Aurizon announced a 64% jump in final dividend and a new payout policy where in future its dividend will be in the range of 70-100% or earnings per share.

It’s been a torrid month for the stock market with the ASX 200 index finishing on Friday 6.5% below its peak on 4th of August. From a chart point of view the market is now approaching a zone of potential support around 5300. This includes the 78.6% Fibonacci retracement of the October to March rally which intersects at 5309.