The ASX Today
Local traders seem to have grabbed the lead from US markets for the ASX to eye a higher open after its "awful" price action on Friday.
Local traders seem to have grabbed the lead from US markets and the ASX looks to be opening higher after “awful” price action on Friday.
The S&P 500 closed at a record level in the US on Friday, topping 2,500 points, as traders bet on tax cuts and stimulus coming into the fold. The momentum spread to the Dow and the Nasdaq, which both ended slightly higher too.
Despite US markets making firm gains throughout the week, the ASX just couldn't seem to grab a lead – the latter's performance was “awful, appalling, ugly” according to AxiTrader chief market strategist Greg McKenna.
The ASX ended lower on Friday but SPI traders then marked the index up 16 points. Analysts think financials could find some support.
- ASX looks like it wants to bounce after a bad Friday
- Local market finding support from overseas markets, namely financial sectors
- Energy stocks hint to opening on the upside
- New vehicle sales data out today – forecasted to drop another 0.5 per cent from a 2 per cent drop last month
- Aussie dollar direction could soon be changing
The US dollar has weakened as the British pound has strengthened. Apparently a dovish-turned-hawkish Bank of England helped the pound, and weak retail sales and production hurt the dollar.
Gold and copper are both lower since Friday.
Last week the biggest sectors on the ASX came under pressure. Money laundering and compliance issues affected the big banks, although broader financials did finish higher on the week, and currencies and spot prices impacted materials. This period marks the first global underperformance in metals and mining since mid-June.
Financial stocks have been performing well overseas on recent central bank commentary. IG analyst Chris Weston said judging from overseas listings, BHP looks to be opening lower, which could be a pull that works in favour of our big banks today.
“Energy could also fare ok, with US crude closing unchanged on Friday's session, although crude still closed the week 5.1 per cent higher and there the prospect of firm prices on the futures open,” said Weston.
McKenna noted the Aussie dollar as holding strong at around US80c while providing some forward-thinking commentary on where it could be heading.
“But that is largely because the US dollar hasn't really kicked on with its recovery and also that the global growth backdrop has been solidly in the Aussie dollar's favour for some time now,” said McKenna.
“But one thing that caught my eye over the weekend was that one of my indicators of sentiment for the AUDUSD – the relative performance of MSCI metals and mining shares versus the overall performance of the MSCI global market – reversed.
“Indeed this ratio of relative performance went backwards for the first time since mid-June. Of course that reflects the price action of metals themselves. But it's possible pointer to the fact that investors' focus might be moving to other assets once more.”
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