Shares likely to defy the gloom from overseas

AUSTRALIAN stocks were not expected to match the slump on global bourses over the weekend in response the unfolding crisis in Greece, an analyst said.

By InvestSMART · 7 Nov 2011

By InvestSMART ·
7 Nov 2011

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AUSTRALIAN stocks were not expected to match the slump on global bourses over the weekend in response the unfolding crisis in Greece, an analyst said.

The Wealth Within chief analyst, Dale Gillham, said the latest developments in Europe would have an impact on the market, particularly in terms of trading volatility, but events from closer to home would have more bearing.

"I think this week we are going to still be a little bit choppy, but I don't expect our market to be really down," Mr Gillham said yesterday. "I actually expect our market to probably generally trade up from now through to Christmas and into January.

"We are much more affected by China and things going on in the Asian markets."

Stocks closed lower in New York on Friday night, despite figures showing the US jobless rate fell to 9 per cent last month, compared with 9.1 per cent the previous month.

The non-farm payrolls report also showed the economy added 80,000 jobs in the month. Although the result was below market expectations, there were significant upward revisions to previous months.

"The October labour market report provides further evidence that recession risks that were gaining prominence in mid-summer have receded and that growth seems to have returned to a trend-like pace," JP Morgan economists said in a research note.

The Dow Jones Industrial Average slipped 0.51 per cent, the S&P 500 fell 0.63 per cent and the Nasdaq declined 0.44 per cent.

This week market players were expected to focus on Chinese economic data, including figures on growth and inflation on Wednesday.

"The data out of China this week is something that will give us [a] heads-up of what the next 12 months is going to be like," Mr Gillham said.

On the local data front, the October labour force report is due out on Thursday. The median forecast among economists was for the nation to have added 10,000 jobs last month and an unemployment rate of 5.2 per cent, which is unchanged from the September result.

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Frequently Asked Questions about this Article…

Will Australian stocks tumble because of the Greece crisis?

No — the article says Australian stocks were not expected to match the sharp slump on global bourses caused by the unfolding Greece crisis. Analysts expect the European developments to increase trading volatility, but events closer to home and Asian economic news are likely to have more direct impact on the local market.

How important is China economic data for Australian shares?

Very important — the article highlights that Australia is much more affected by China and Asian markets, and market players were expected to focus on Chinese growth and inflation figures. Analysts said China data will give a useful heads-up for what the next 12 months may look like for Australian stocks.

What did the recent US jobs report mean for markets and investors?

The US jobless rate fell to 9% from 9.1% and non-farm payrolls rose by 80,000, which was below expectations but included significant upward revisions to previous months. Despite that, US indexes closed lower (Dow -0.51%, S&P 500 -0.63%, Nasdaq -0.44%), showing mixed market reaction to the labour-market details.

Should investors expect more market volatility in the near term?

Yes — the article notes that developments in Europe and other global events are likely to increase trading volatility in the short term, and the market may be a little choppy in the near term even if it doesn’t fall sharply.

What local economic data should everyday investors watch this week?

Investors should watch the Australian October labour force report due on Thursday. Economists' median forecast in the article was for the nation to have added 10,000 jobs and an unchanged unemployment rate of 5.2% from September.

How did major US indexes perform in the recent trading session mentioned in the article?

In the session referenced, the Dow Jones Industrial Average slipped 0.51%, the S&P 500 fell 0.63%, and the Nasdaq declined 0.44%.

What is analyst Dale Gillham’s short-term outlook for the Australian market?

Dale Gillham, chief analyst at The Wealth Within, said he expected the market to be a little choppy in the short term but generally trade up from then through to Christmas and into January, noting greater sensitivity to China and Asian market developments than to European events.

How might overseas events versus local factors influence the ASX?

The article suggests overseas events like the Greece crisis would affect trading volatility, but local and regional factors — especially Chinese economic performance and domestic labour-force data — are likely to have more bearing on the ASX’s direction.