Futures markets are indicating a soft start to trading today. The key question is whether the international investors who are the marginal buyers of Australian shares will be active. With the Australian dollar still around 78 US cents and 93 Japanese yen, the answer is probably yes, bringing the potential for further moves towards the six thousand mark for the Australia 200 index.
Soft US producer prices and the Greek soap opera should introduce a cautionary note, but may instead spur the bulls. The current global enthusiasm for shares is not driven by economic optimism but anticipation of European stimulus and a delayed US tightening. The minutes of the most recent US Fed meeting, released this morning, offer comfort to both hawks and doves, with the latter seizing on expressed concerns about sharp adjustments in markets once tightening begins.
The local reporting season passed the half way mark yesterday, and the overview stands in stark contrast to the market performance. Sales and earnings are down around 4% across industries on average, although there is huge variation from stock to stock and sector to sector. Yesterday’s $5.5 billion in trading suggests a high level of commitment from cash investors, adding to the possibility of further strong gains.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.