Sigh of relief as cliff's edge recedes
Fund managers say attention will begin to turn to the upcoming reporting season, while volumes are likely to pick up as traders return to work.
In the first full trading week of the year, the benchmark S&P/ASX 200 Futures Index shows the market will open at 4741 points, up from the 4723 close on Friday.
It comes after the local market gained nearly 100 points - or 1.9 per cent - in two days last week after the US Congress backed a deal to avoid the fiscal cliff that inspired a relief rally on global markets.
That momentum is expected to continue this week, with the Nikkei 225 (+0.7 per cent), FTSE 100 (+0.6 per cent) and S&P 500 (+0.3 per cent) all tipped to open higher.
Only the Nasdaq looks to open lower, down 0.5 per cent, while Hong Kong's Hang Seng is expected to dip 0.6 per cent on opening.
"Following the resolution of the fiscal cliff you've had a very positive reaction from markets worldwide. The focus of the domestic market will turn to whether or not there's a possibility of earnings upgrades coming through," David Liu, of ATI Asset Management, said.
"Sentiment has been pretty good due to a stabilisation in the European situation, and the fact that there hasn't been total disintegration of the eurozone.
"You've also had a recovery in the United States market," he said.
Auscap Asset Management's Tim Carleton said investors would also be focusing on conditions in China over coming months.
"For Australia the key is really what's happening in China, because that determines the demand for our resources," Mr Carleton said.
"There is a positive mood around China's leadership transition in March, commodity prices have bounced strongly, especially Australia's [top] export iron ore, and, if you believe that the Chinese stockmarket leads its economy, then its recent performance is indicating an improvement in domestic economic conditions," he said.
In the week ahead, data from the Australian Bureau of Statistics will provide a snapshot of the health of the domestic economy in the lead-up to Christmas.
Trade balance figures for November will be released on Tuesday, and retail sales and job vacancies figures for November will be published on Wednesday.
On Thursday, building approvals are tipped to show a large swing, from minus 7.6 per cent in October to plus 2 per cent in November.
Frequently Asked Questions about this Article…
Markets rallied because US lawmakers signed a budget deal that removed the immediate risk of the fiscal cliff, which sparked a global relief rally. The article notes that this resolution helped lift sentiment worldwide and contributed to nearly 100 points (about 1.9%) of gains on the local market over two trading days.
The S&P/ASX 200 Futures Index was tipped to open at 4,741 points, up from the 4,723 close on Friday. That suggested the Australian sharemarket was expected to open about 18 points higher, extending the recent momentum from the global relief rally.
The article reported the Nikkei 225 (+0.7%), FTSE 100 (+0.6%) and S&P 500 (+0.3%) were tipped to open higher, while the Nasdaq looked set to open lower (down 0.5%) and Hong Kong's Hang Seng was expected to dip 0.6%. For everyday Australian investors, these mixed global opens signal positive international sentiment but also show there can still be selective weakness across markets.
Fund managers said attention will turn to the upcoming reporting season to see if companies deliver earnings upgrades. David Liu of ATI Asset Management highlighted that the market is focusing on the possibility of earnings upgrades as a driver of further momentum.
Tim Carleton of Auscap Asset Management said China's conditions are key for Australia because they determine demand for our resources. He noted a positive mood around China's leadership transition, a strong bounce in commodity prices—especially iron ore—and that Chinese stockmarket performance may indicate improving domestic conditions, all of which can support Australian resource stocks.
The article lists several ABS releases: trade balance figures for November (Tuesday), retail sales and job vacancies for November (Wednesday), and building approvals for November (Thursday). Building approvals were tipped to swing from -7.6% in October to +2% in November.
Commodity prices have bounced strongly, with iron ore singled out as Australia's top export showing a notable recovery. According to the article, that bounce has helped lift sentiment because higher commodity prices support resource demand and the Australian economy.
Yes. The article says fund managers expect volumes to pick up as traders return to work, and that the first full trading week of the year tends to shift focus toward reporting season and key economic data releases.
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