Weak Offshore Markets Overwhelm Turnbull Effect

Falling international share prices and lower commodities dominated any positives from Prime Ministerial renewal in the opening hours of trading in Australia today. “Top down” considerations, including the September futures expiry, are distracting attention, and low trading volumes and a fall in the “fear and greed” index suggest investors are collectively sitting on their hands.

Sectoral performance provides little insight to investor thinking today. The hardest hit are the usual suspects in a tumble; banks, healthcare and energy stocks. The flat sectoral performance – most are in line with the broad market fall – also points to a pre-dominance of index trading over “bottom up” stock assessment. Unusually, the volatility index is down 0.5% this morning, despite the fall in the index. This suggests higher levels of investor confidence than this morning’s falls indicate.

The selling comes despite a more significant than usual political change. Markets are generally wary of political promises and sceptical of actual market impacts, but the almost bloodless overnight coup brings a markedly more business friendly Prime Minister to the Lodge. Mr Turnbull’s business background and pro-market stance should lift business confidence, and may see investors reflect this potential lift through higher share prices.