Neutral macro setting for markets but Woolworths disappoints

The share market looks likely to finish the week and the reporting season focussed mainly on company results. The broad macro lead from international markets was largely neutral for our market this morning.

Woolworths is likely to be under pressure this morning. Investors will be nervous about news of subdued sales in December and January and management’s downward revision in full year guidance following plans to compete more aggressively on price. This news comes after recent improvements in the share price which have increased the stock’s vulnerability to bad news.

The banking sector may see some support in coming days as investors seek to replace stock sold as a consequence of yesterday’s option expiry.

US Dollar strength was one of the main features of the market landscape last night. This was assisted by the US core inflation figure which showed that price increases are occurring outside the fuel sector. Given recent Fed statements that it will require comfort that inflation data is heading back towards its target before lifting rates, market are going to be very sensitive to news on inflation in coming months. Last night’s figure shows that while core price gains are subdued they are within sight of the Fed’s target on an annualised basis and any increase from current levels could see the Fed beginning to move on interest rates.