Local shares on the edge

After a startling underperformance to start the week, the Australian share market looks vulnerable today as local investors eye a global sell off in bonds, falls in US shares overnight and lower metals’ prices. Futures markets are pointing to a fall of just three points at the open, but this looks very optimistic in light of the pressure on dividend yielding stocks in the financial, telco and consumer staples sectors yesterday.

A failure to resolve the Greek funding crisis is adding to the pressure on local shares. While the rest of the world is now largely economically insulated from Greece, risks remain. Throw in major banks going ex-dividend (Westpac tomorrow, NAB on Friday) and even the most optimistic investor may hold off on any purchases, at least for the short term.

Stand out performances from resource shares have helped offset losses in other sectors over the last week. Today, energy shares may once again provide market ballast. However general metals weakness, despite further iron ore gains, may see miners adding to the weight on the market today. The release of home lending data may provide support if it shows a “quality” pick up in lending to owner occupiers. A surge in investment lending could see a negative response if investors focus on the possibility of an overheated market.

For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.