Market holds on to shred of optimism
The ASX joined other Asian markets in keeping in positive territory, with the benchmark S&P/ASX 200 Index firming 19.3 points, or 0.4 per cent, to 5234.9.
This is despite the ongoing US government shutdown, which fed fears of an American debt default and sparked heavy losses in the US and Europe in overnight trade.
But Australia and Asia shouldn't be too smug. Arab Bank Australia treasury dealer David Scutt said whatever optimism was spreading across the region was "running on the smell of an oily rag".
He said volumes were thin, and the longer the US shutdown ran, the worse it was for the global economy.
"If this is a protracted process, it's negative for the global growth outlook, particularly leading into the debt ceiling negotiations."
A meeting between US President Barack Obama and key Republicans failed to break the budget impasse, instead the leaders of the world's biggest economy only blamed each other for the deadlock.
Although there was appetite for higher-yielding stocks, such as the banks, Mr Scutt said the tide could turn if there was, as widely expected, another interest rate cut before the end of of the year, which would drain deposits.
National Australia Bank finished 1 per cent higher at $34.89, while Westpac added 0.7 per cent to $32.64. ANZ and Commonwealth Bank firmed 0.2 per cent to $30.96 and 0.04 per cent to $71.70 respectively.
Mining stocks strengthened following a rally in metals prices. BHP Billiton rose 0.8 per cent to finish at $35.60 and Rio also jumped 0.8 per cent to $60.78.
ANZ foreign exchange strategist Andrew Salter said the longer the US shutdown lasted, the more likely the US Federal Reserve was to delay further any trimming to its $US85 billion-a-month asset buying program, which would continue to weaken the US dollar.
"But of course there are other considerations," Mr Salter said. "It's not a one-dimensional issue. If, for example, the financial markets do experience a spike in risk aversion, then it's likely the US dollar will benefit and appreciate against some of the riskier currencies in the world, emerging-market and commodity currencies."
Frequently Asked Questions about this Article…
Australia's sharemarket edged higher as the S&P/ASX 200 rose 19.3 points (0.4%) to 5234.9, helped by big miners and high‑yielding stocks such as the banks and Telstra. Those yield‑attractive names cushioned the market even as concerns from the US shutdown weighed on global markets.
Higher‑yielding bank stocks showed appetite from investors: National Australia Bank finished about 1% higher at $34.89, Westpac rose 0.7% to $32.64, ANZ gained 0.2% to $30.96 and Commonwealth Bank was up 0.04% at $71.70, according to the article.
Mining stocks strengthened after a rally in metals prices. BHP Billiton rose 0.8% to finish at $35.60 and Rio Tinto jumped 0.8% to $60.78, supporting the broader ASX performance.
The article notes that while there was demand for higher‑yielding bank stocks, a further interest rate cut (widely expected before year end) could drain deposits and potentially change the sector’s outlook, according to market commentary.
Commentators warned the US shutdown fed fears of an American debt default and sparked heavy losses overseas. Arab Bank Australia's treasury dealer David Scutt said regional optimism was 'running on the smell of an oily rag,' noting thin trading volumes and that a protracted shutdown would be negative for global growth, especially ahead of debt ceiling talks.
ANZ foreign exchange strategist Andrew Salter said the longer the US shutdown lasted, the more likely the Fed would delay trimming its $US85 billion‑a‑month asset‑buying program, which could continue to weaken the US dollar. He also noted that a spike in global risk aversion could instead see the US dollar appreciate against some riskier and commodity currencies.
The article highlights thin volumes during the trading session, which can make gains fragile and increase volatility. Investors should be aware that thin trading can exaggerate moves and that ongoing political developments (like the US shutdown) could change market direction quickly.
Key takeaways: higher‑yielding stocks and big miners helped the ASX stay positive amid global risks; political events like the US shutdown can pressure global growth and central bank actions; and thin trading volumes may make short‑term moves less reliable — so consider risk tolerance and longer‑term strategy before reacting.
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