Stars align

Rising share prices, rising commodity prices, and the AUD creeping higher, all point to strong support for Australian shares today. The quarterly futures expiry will add extraordinary liquidity, and combined with the overnight impulse could see a heavily traded surge higher. However, the key market event remains the US Federal Reserve’s interest rate decision due early tomorrow morning, and investors may curb their enthusiasm ahead of the call.

Strong disagreement over potential Fed action is at the heart of recent volatility. The longer term focus of the Fed could see it look through recent market moves, although consensus is against a lift at this meeting. An increased risk premium on shares and a USD that has already appreciated significantly may give voting board members confidence that markets are prepared for an increase. Any hike is likely to be accompanied by very soothing words about the gradual nature of the interest rate normalisation.

Strong commodity prices and positive currency moves suggest significant additions to yesterday’s rises. The week so far is dominated by index trading – this may change today as the switch from the September to December futures contract is complete. Energy and finance stock are likely to lead again. A takeover bid for SABMiller announced overnight could re-inforce M&A speculation, and bring further support for media and food stocks today.