Australian Stock Market Leads - 2 February 2012

The Australian stocks market is set to benefit from the positive turnout of overnight markets. The milestones include the European equity markets and Wall Street posting solid gains as hopes of the global economy advancing in positive territory, while the banking sector continued to rally on the belief that Europe will avoid a catastrophe.

Stan Shamu, market analyst at IG Markets, says that "the big improvement in investors' risk appetite as markets cheered better-than-expected manufacturing data in China and Europe, plus a successful Portuguese short-dated bond auction."

Although the U.S.manufacturing data was disappointing and did not meet expectations, it is still was running at a healthy 54.1.

Shamu and other analysts points out the that among the major averages, the Dow Jones Industrial Average put on 0.8% to close at 12733.

The S&P climbed 1% to finish at 1326, and the NASDAQ added 1.2% to close at 2849. The S&P's 50- and 200-day moving averages are about to cross. During the last 50 years, this Golden Cross has occurred 26 times. In 21 out of those 26 times, the stock index climbed an average of 5% within the next six months. On the last two occasions (June 2009 and October 2010), the bullish trends were larger (20% and 12%).

Emerging Australian Stock Market Trend

Analysts are optimistic that the local stocks will directly benefit from the emerging trend that risk assets and risk currencies have again moved across the board.

IG Markets said this should be positive for Australia's high beta names. The better global manufacturing data sent base metals higher, with copper breaking a three-day losing streak to post a gain of around 1.4%.

"This could finally see our resource stocks come to life after a poor performance this week. BHP Billiton's ADR is pointing to a gain of around 1.8%. Investors will be hoping the Aussie market breaks its recent run of underperformance," he adds.

Analysts are,however, convinced that the high Aussie dollar will keep pressure on the currency sensitive stocks. AUD/USD broke through technical resistance ahead of 1.0700 and remains at worrying levels for exporters

Woolworths released its second quarter retail results this morning. At first glance, the results look roughly in-line with what analysts were expecting with a particularly strong performance from Coles. Analysts from CS and DB were expecting Coles to outperform Woolworths, and it seems WES has delivered on this. The Malaysian government has granted rare earths miner Lynas a temporary refinery license. This will be supportive of LYC shares. Ahead of the open, we are calling the Aussie market up 1.2% at 4276. On the economic front, participants can look out for trade balance data due out at 11.30am.