MARKETS SPECTATOR: Sky high Citi

Don’t be gloomy about the stock market’s prospects, says Citigroup. Australian strategist Tony Brennan has been reiterating for weeks now that the S&P/ASX200 Index will recover after its 8.9 per cent fall from a 52-week high of 5220.987 reached on May 14. At 1025 AEST the index was down 42.357, or 0.9 per cent, to 4749.40.

“The market seems on track for moderate earnings growth in the financial year 2014, supported by lower interest rates, widespread cost-cutting and, most recently, the falling Australian dollar,” writes Tony Brennan.

“We have raised our ASX200 year-end forecast to 5400, and put forward a mid-2014 forecast of 5600.”

Another Brennan, Paul, Citigroup’s Australian economist says pessimism about the Australian economy is “overdone”.

“While bad news dominates the media, the reality is that unemployment hasn’t risen sharply and consumer sentiment is not too far from average levels,” writes Paul Brennan.

“Business confidence remains low, but provided the fall in the Australian dollar is sustained and even corrects further in the second half of the year this should encourage a more positive financial outlook”.