US fiscal deal brings relief to markets
Fund managers say that attention will begin to turn to the reporting season, while volumes are likely to pick up as traders return to work.
In the first full trading week of the year, the benchmark S&P/ASX200 Futures Index shows the market opened at 4741 points, up from 4723 points on Friday.
The local market gained nearly 100 points, or 1.9 per cent, in two days last week after the US Congress's deal produced a rally on global markets.
That momentum is expected to continue this week, with the Nikkei 225 (up by 0.7 per cent), the FTSE 100 (up by 0.6 per cent) and the S&P500 (up by 0.3 per cent) all tipped to open higher. Only the Nasdaq looks like opening lower, down by 0.5 per cent, while Hong Kong's Hang Seng is expected to fall by 0.6 per cent on opening.
"Following the resolution of the fiscal cliff, you've had a very positive reaction from markets worldwide. The focus of the domestic market will turn to whether or not there's a possibility of earnings upgrades coming through," Above the Index Asset Management's head of research, David Liu, said.
"Sentiment's been pretty good due to a stabilisation in the European situation, and the fact that there hasn't been total disintegration of the eurozone. You've also had a recovery in the US market."
A principal at Auscap Asset Management, Tim Carleton, said investors would focus on conditions in China in coming months.
"For Australia, the key is really what's happening in China because that determines the demand for our resources," he said. "There is a positive mood around China's leadership transition in March [and] commodity prices have bounced strongly."
Data out this week includes a snapshot of the economy in the lead-up to Christmas; and trade balance figures, retail sales and job vacancies figures for November.
Frequently Asked Questions about this Article…
US politicians signed a budget deal that avoided the so‑called fiscal cliff, which eased uncertainty and sparked a global market rally. For everyday investors, that meant reduced short‑term risk and improved sentiment across sharemarkets.
The S&P/ASX200 futures showed the market opening about 18 points higher (4,741 vs 4,723), and the local market had gained nearly 100 points (around 1.9%) over two days after the US Congress deal produced a rally.
Momentum was expected to continue with the Nikkei 225 up about 0.7%, the FTSE 100 up about 0.6% and the S&P 500 up about 0.3%. The Nasdaq looked like opening lower (around -0.5%) and Hong Kong's Hang Seng was expected to fall about 0.6% on opening.
Reporting season is when companies publish quarterly or annual results. Fund managers say attention will turn to reporting season to see if positive sentiment translates into earnings upgrades, which can drive stock price moves.
According to market commentators, sentiment improved because of a stabilisation in Europe and a recovery in US markets, which helped lift investor confidence globally.
Investors are watching China because its economic conditions determine demand for Australian resources. A positive mood around China's leadership transition and a strong bounce in commodity prices could support Australian resource earnings and market sentiment.
The week includes a snapshot of the economy in the lead‑up to Christmas plus November trade balance figures, retail sales and job vacancies — data that can influence short‑term market moves.
Volumes are likely to pick up as traders return to work after the holidays. Higher trading activity during reporting season and after major political outcomes can increase price movement and volatility, so investors should be prepared for more active markets.
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