How far will banks be sold?

This morning’s market open is likely to be characterised by trader caution ahead of potentially significant news events; a weak lead form overseas markets and ongoing reaction to ANZ’s capital raising.

The extent of ongoing selling in major bank stocks will be one of the key features of this morning’s trading. While ANZ’s profit update yesterday was solid in most respects there may be some concern that greater than expected bad debt provisioning will herald a sector wide cyclical change in what has been an area of strength for Australian banks in recent times. Investors will also be alert to the possibility that CBA will follow NAB and ANZ with a capital raising when its results are released next week. 

Market reaction to Rio’s better than expected result will be another focus for today’s markets. Rio continues to please investors by doing a better than expected job on those aspects of the business that it can control. While the stock had rallied leading into yesterday’s announcement further gains are possible as investors search for relative value. However, investors will be conscious of the ongoing risk of lower commodity prices meaning the rally could be capped with significant technical resistance on the horizon between $55 and $55.50.

Markets are confronted with a number of potentially outlook changing news events in the near future including the RBA’s statement of monetary policy this morning, US labour market data tonight and, potentially most significantly of all, China’s trade data over the weekend. Traders are likely to be cautious ahead of these releases.

The energy sector will again be in focus today following yet another progression in the oil markets relentless downward slide.

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