Uncertain investors await news from US
At the close on Wednesday, the benchmark S&P/ASX 200 Index was up 4.8 points at 5052, while the broader All Ordinaries increased 9.4 points to 5035.
The market dropped off in afternoon trade, which Stock Report analyst Benny Sada said reflected uncertainty about a key US Federal Reserve meeting.
The Federal Open Markets Committee is expected to make an announcement on Thursday, Australian time, about the tapering of its stimulus measures.
"There's just that uncertainty," Mr Sada said. "A lot of market participants are looking towards that meeting for clues on how the US central bank intends to scale back its monetary-easing policy."
He believed the local market rallied during the day after positive comments from the Chinese government on economic growth.
"A bit of good and a bit of bad today," Mr Sada said. "We had some good news out of China, countered by uncertainty ahead of the US central bank meeting."
High-yield retail and banking stocks were the strongest performers. The big four banks were all higher, with ANZ up 30¢ at $29.89, Commonwealth Bank up 47¢ at $74.50, NAB rising 17¢ to $31.36 and Westpac 22¢ higher at $31.08. In the retail sector, Wesfarmers was up 34¢ at $40.56.
The big miners were down, with BHP Billiton 31¢ lower at $34.64 and Rio Tinto 20¢ down at $57.51.
"The weight of the market, including a pretty bearish night in commodity markets overnight, had an impact on our miners," Mr Sada said.
The dollar was lower following a dovish speech by Reserve Bank governor Glenn Stevens on Tuesday that hinted at another rate cut next week.
It followed weaker than expected building approval figures for June that also put pressure on the local currency.
Late on Wednesday, the dollar was trading at US90.16¢, down from US90.63¢.
Forex.com research analyst Chris Tedder said Tuesday's drivers were still weighing on the Aussie.
"Everyone has just started jumping on the bandwagon after that weak building approvals data but especially that dovish rhetoric we saw from RBA governor Glenn Stevens," Mr Tedder said.
Frequently Asked Questions about this Article…
The sharemarket in Australia ticked up after positive comments from the Chinese government about economic growth, which helped lift sentiment. However the market later eased in afternoon trade as investors reacted to uncertainty ahead of a key US Federal Reserve meeting on tapering stimulus. At the close the S&P/ASX 200 was up 4.8 points at 5052 and the All Ordinaries rose 9.4 points to 5035.
Everyday investors should watch the Federal Open Market Committee announcement because markets are looking for clues on how the US central bank plans to scale back monetary-easing measures. That uncertainty already contributed to afternoon weakness on the ASX, so the Fed’s guidance on tapering could move Australian stock and currency markets.
High-yield retail and banking stocks were the strongest performers. The big four banks were all higher: ANZ rose 30¢ to $29.89, Commonwealth Bank gained 47¢ to $74.50, NAB added 17¢ to $31.36 and Westpac was 22¢ higher at $31.08. In retail, Wesfarmers was up 34¢ at $40.56.
Miners were weighed down by a bearish tone in commodity markets overnight and broader market pressure. BHP Billiton was 31¢ lower at $34.64 and Rio Tinto fell 20¢ to $57.51, reflecting that commodity weakness and market sentiment.
A dovish speech by RBA governor Glenn Stevens that hinted at a possible rate cut, combined with weaker-than-expected building approvals for June, put downward pressure on the Aussie. Late on Wednesday the Australian dollar was trading around US90.16¢, down from about US90.63¢.
Keep an eye on the US Fed announcement about tapering, RBA commentary and any domestic data such as building approvals, commodity market moves that affect miners, and currency fluctuations in the Australian dollar — all of these factors have been driving short-term market moves.
Stock Report analyst Benny Sada described it as “a bit of good and a bit of bad” — positive China news supported a rally while uncertainty ahead of the US central bank meeting capped gains. Forex.com analyst Chris Tedder noted market participants were reacting to weak building approvals and dovish RBA rhetoric weighing on the Aussie.
Short-term rallies tied to international developments — such as positive Chinese growth comments — can lift sentiment but may be offset by other risks like central bank decisions or weak domestic data. For everyday investors this means balancing optimism from upbeat news with awareness of upcoming policy meetings and key economic releases that can reverse moves.
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