Lower AUD to overwhelm Grexit, commodities, results

While European investors fret about the possibility of a Grexit, unusual behaviour in selected local stock prices over the last week point to further gains for Australian shares. These gains may come regardless of the corporate results delivered by sixteen top two hundred companies today. Underpinning likely strength is further stability at higher prices of oil, copper and iron ore.

Stocks such as CBA and Domino’s Pizza have risen over the last five trading sessions, regardless of any potential negatives. This suggests a re-weighting by major global investors into Australian shares. The driver here is not the share price, but the currency adjusted price, and while the AUD sits below eighty US cents the support is likely to continue. This theory will be tested today by CBA going ex-dividend. Theoretically, CBA shares should drop by the value of the franked dividend at the open – close to $2.81. Any outperformance from that level would point to an ongoing international campaign.

Another potential kicker is the release of the minutes from the RBA February meeting. While the quarterly statement on monetary policy outlined the reasons for the rate cut, investors will look for a formal shift to an easing bias. Confirmation could see interest rate markets push towards certainty for a March cut, and spark further enthusiasm for Australian higher dividend yield plays.