MARKETS SPECTATOR: Deflated energy

Energy and materials sectors are likely to dip at the open, while investors await key employment data that could indicate an imminent interest rate move.

So today’s lead looks very similar to what we had yesterday, with US markets all down around the 1 per cent mark as participants have decided to refocus their attention on global growth concerns and the beginning of the Q4 earnings season hasn't exactly inspired confidence.

At the moment, the benchmark S&P/ASX 200 index is predicted to open around the 4460 level, around 0.7 per cent lower than yesterday’s close. Cyclical sectors like energy and materials are likely to be the main areas of weakness following selling seen offshore.

There doesn’t seem to be a huge amount of fear or panic based selling at the moment, which can only be a good thing. In fact, the volatility, or fear index as its commonly known is only trading around the 16 level which isn't worrisome yet.

Although Alcoa beat expectations, their Q4 outlook looks to have disappointed the market and that’s what seems to be worrying participants the most. The concern that Q4 expectations might need to be lowered.

The bulk of what you read is expecting this market to pull back further so we might get a bit of a self-fulfilling prophecy where, because everyone is waiting for the pullback there are no buyers, which naturally results in a heavy market.

Domestically, all eyes will be on this morning’s employment data due at 1130 AEDT. The market is expecting 5,100 jobs to have been created and the unemployment rate to rise to 5.3 per cent from 5.1 per cent.

It should be interesting as the market has bid higher recently on the premise that we’re going to see a record low in interest rates over the next six months. So any weaker readings here would support the move for lower rates, and possibly see some buying come into the market. However, the flip side would result in some uncertainty about interest rate policy and could add to the selling pressure.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles