Stock markets face another day of conflict between risk aversion and bargain hunters

News that the Greek crisis is heading towards another weekend crunch point, steep declines in metals prices and concerns about the implications of ongoing volatility in China’s stock market for the wider economy all causes of concern for share traders. If the last couple of weeks are a guide, traders are likely to baton down the hatches by Friday in anticipation of the increasingly familiar routine of Greek induced volatility on Monday morning.

Set against the inclination for risk aversion implied by Greece and declining commodity prices have been the frequent bouts of across the board bargain hunting in Australian stocks such as we witnessed yesterday. While conscious of the downside risk, investors who are overweight cash are also keen not to miss out on the upside that’s likely to materialise quickly if the Greek debt crisis is resolved without contagion and China’s stock market forms a base. Low interest rates are likely to support equity valuations for some time to come and international investors may be seeing improved value in Australian stocks as the currency declines.

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