Strong leads

Strong leads from international markets will see Australian shares jump at the opening today. In a delayed reaction to the People’s Bank of China’s newest round of stimulus, share markets in Europe and the US surged, reversing the weaker Asia Pacific market response. Oil prices made further gains, but weakness in other industrial commodities and precious metals will likely restrain enthusiasm.

The key question for local investors revolves around banks. Heading into the ex-dividend season, is the four year bull-run coming to an end? While ever lower interest rates have kept investors involved, lofty share prices are increasing capital risks. Modest support for banks today, especially in light of a lower AUD, could see an overall modest gain for the market.

A slightly lower read on weekly consumer confidence this morning could introduce a note of caution to the recent interest in consumer staples and discretionary stocks. Energy stocks could lead the market once again, as both Brent and West Texas crudes break higher. In the absence of significant economic data, any turn around in Shanghai and HK from yesterday’s selling could bring a second wind to Australian stocks.

For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.