Calmer start tipped for local market
The ASX ended the week at a five-week low after hitting 5-year highs a little over a week ago.
US markets closed flat on Friday while European stocks were down. In futures trading in Australia, the ASX 24 is pointing to a fairly flat open on Monday of six points lower.
CommSec chief economist Craig James described the events of late last week as good old-fashioned and healthy profit-taking after a strong run in bank and industrial stocks.
"I think a lot of investors, particularly fund managers with thoughts turning to June 30, are thinking now is the time to take some profits if there is a flatter time or period of weakness ahead," he said.
He believes much of the economic news that drew negative reactions on markets last week represents positive news longer term.
That includes the US Federal Reserve pondering pulling back on stimulus for the economy, indicating a recovery, the Australian dollar falling and even the Chinese slowdown, because authorities can stimulate it.
Fund managers might take cash out of the market short term to reassess investment strategies, following rises in sharemarkets around the world of late, Mr James said, but it was not a big concern.
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The article says the sharemarket is expected to open in a calmer mood. After two volatile days that wiped off nearly $60 billion, ASX futures (ASX 24) were pointing to a fairly flat open — about six points lower — following the market finishing the week at a five‑week low.
CommSec chief economist Craig James described the recent falls as ‘good old‑fashioned and healthy profit‑taking’ after a strong run in bank and industrial stocks. The article notes investors and fund managers may have taken profits ahead of a potentially flatter period or the June 30 reporting date.
According to the article, nearly $60 billion of value was wiped off the market during the two days of volatile trading.
The piece reports US markets closed flat on Friday while European stocks were down, and Australian futures signalled a fairly flat open. Those international moves, combined with local profit‑taking, helped shape the recent ASX volatility.
Craig James suggested much of the economic news that triggered short‑term negative reactions could be positive longer term — for example, the US Federal Reserve contemplating pulling back stimulus (a sign of recovery), the Australian dollar falling, and the Chinese slowdown being something authorities can stimulate.
The article says fund managers might take some cash out of the market short term to reassess investment strategies after recent rises in global sharemarkets. However, Craig James indicated this was not a major concern.
The article frames the Fed potentially reducing stimulus as a positive sign of economic recovery in the longer term. While it may have prompted short‑term market reactions, the commentary suggests it’s a sign the economy is improving rather than an immediate problem for investors.
The article notes that a Chinese slowdown and a falling Australian dollar were among the economic stories that drew market reactions, but Craig James argued these can be managed — for example, China’s authorities can stimulate growth — so they are not necessarily negative for the longer‑term outlook.
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