Cautious start to the week

Markets will start the new week without much lead from international markets and with a large amount of macro data due over coming days likely to dictate trader caution.

Markets will start the new week without much lead from international markets and with a large amount of macro data due over coming days likely to dictate trader caution.

Weak oil and gold prices will do little to help investor sentiment towards the resources sector. Investor sentiment towards BHP will also be tested by news that the Brazilian Government’s ambit claim for damages against BHP and Vale over the Samarco disaster could be around $7bn.

Gold appears to be getting out ahead of the $US in reacting to upcoming decisions by the ECB and Fed. While the US Dollar has been well supported, it has so far been unable to push into new high ground ahead of these meetings. Gold on the other hand, is beginning to break below support. A continuation of these trends would set up divergence between gold and the $US which is likely to be resolved once the ECB and Fed decisions are known.

By the end of this week markets will have more clarity on the potential for divergence between the ECB and Fed. The ECB decision on further monetary stimulus will be announced on Thursday while Friday’s US jobs data represent one of the last boxes to be ticked prior to the Fed’s rate hike decision. Investors will also have a major update on the state of the Australian economy this week with the final round of data for the September quarter, as well as a number of updates for the month of October.

Oroton Group’s advice that sales this financial year had begun well with positive like-for-like sales over the first 17 weeks builds on solid quarterly sales reports by David Jones and Myer. These results represent a potential “green shoot” and provide hope that consumer discretionary sales will be a plank of support for the economy over coming months.

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