The Market Constellation

In a rare alignment of stars all arrows are pointing upward for Australian shares today. European and US share markets rose again, oil leapt 5% and both industrial and precious metals made gains. The resurgence in risk appetites is also lifting the AUD. Futures are pointing to a gain of better than 1% at the open, but today’s trading will likely be shaped by unemployment data and the 18 major companies reporting earnings during the session.

Explanations for the swing to positive moves are weak. While the sell-off that began 2016 was attributed to an ever evolving and chimeric set of concerns, the best explanation for the rally appears to be the universal pessimism. “Bears have no shares”, and therefore little influence on market action. The positive moves are now stirring investors who are too cashed up, and there is a risk of a “melt up” on global markets if fear of missing out takes over from fear of catching a falling knife.

Analysts are expecting a further slight increase of around 10,000 jobs in January. The forecasts have this offset by an increase in participation, to leave the jobless rate unchanged at 5.8%. However, given everybody up to and including the Governor of the RBA have doubts about the numbers, market reactions to a strongly divergent number could be tempered by disbelief. Good pre-market reports from AMP, Investa and GPT could add to investor enthusiasm today, although Telstra’s small earnings miss could see the sector drag on market performance.