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…
Despite the US government shutdown and heavy losses on Wall Street and in Europe, the ASX held onto a shred of optimism — the S&P/ASX 200 Index firmed 19.3 points (0.4%) to 5,234.9 as local markets joined other Asian bourses in finishing in positive territory.
Big miners and high‑yielding stocks such as the major banks and Telstra helped cushion the ASX from falls on Wall Street, with investors seeking higher income and metals rallies supporting mining names.
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% to $71.70, reflecting appetite for higher‑yielding bank stocks during the session.
Mining stocks strengthened after a rally in metals prices — BHP Billiton rose 0.8% to finish at $35.60 and Rio (Rio Tinto) also jumped 0.8% to $60.78, helping underpin the market.
The article notes market commentary that a widely expected interest rate cut before year‑end could drain deposits, which might turn the tide for bank stocks despite current appetite for higher‑yielding shares.
Arab Bank Australia's treasury dealer David Scutt warned the regional optimism was "running on the smell of an oily rag," pointing to thin trading volumes and saying a protracted US shutdown would be negative for the global growth outlook heading into debt ceiling negotiations.
ANZ FX strategist Andrew Salter said the longer the US shutdown lasts, the more likely the Fed is to delay trimming its US$85 billion‑a‑month asset‑buying program, which would tend to weaken the US dollar — although a spike in global risk aversion could instead see the US dollar appreciate against riskier and commodity currencies.
The update shows the ASX was supported by miners and high‑yielding stocks while global risks from the US shutdown remain. Trading volumes were thin and strategists warned conditions are fragile — investors should be aware that developments on the US shutdown, interest‑rate expectations and currency moves can quickly change market sentiment.
Call 1300 880 160
Start a chat
Schedule a call
