Unfortunately timed data has kicked the Australian share market where it is technically vulnerable. After repeated failures by the index to break through the 6,000 level, local investors have seized on the negative overnight action and slammed the market, pushing the index under 5,900. Volatility is up, and every sector in the red, albeit on light and unconvincing volumes.
Worryingly, the dramatic falls in US shares are pointing to a sea change in sentiment. Previous poor data spurred buying, as investors speculated weaker economic indicators pushed back the Fed’s tightening timetable. The fall in February durable goods orders reported overnight instead saw investors bail out, possibly reflecting the near record highs of US shares. Whatever the cause, it is evident that bad news is now bad news again.
There is little economic reasoning behind today’s local action. The two worst performing sectors, property and consumer discretionary, come from opposite sides of the growth exposed / defensive divide. The situation at the opposite end of the performance table is the same, where defensive utilities are keeping company with growth exposed energy stocks. A higher Australian dollar is sideling international investors and exacerbating the situation.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.