Australian Stock Market Leads - 30 January 2012
The Australian stock market is set to mildly rebound on Monday's trading in spite the weak leads from U.S. and European markets. What are today's market leads?
The resume of trades at China's Shanghai and Hong Kong's stock markets after the Lunar New Year holidays are seen to give Asia-Pacific markets a boost on today's trading.
IG Markets analyst Stan Shamu said in an emailed advise to clients, the strong recovery in the U.S. markets will also bode well for the Asia-Pacific Region. Risk assets are still generally attractive buys, with commodity-related stocks and risk currencies set to gain from this lead.
"Looking at the strong recovery in US markets, it is clear that the investor environment is more optimistic than last year. Risk assets are generally looking buoyant with gains for commodities and risk currencies. The Asian region might benefit from China's return to trade today. After having been closed for the Chinese New Year last week, China missed out on significant gains seen elsewhere in the region. On a macro-risk level, the Greece debt issues will remain a source of uncertainty and might dampen the risk mood ahead of the EU summit today. Markets seem to have already priced in a debt deal being announced very soon," Shamu notes.
He explains, however, that based on Saturday's close for the futures, the Aussie market is pointing towards a 0.1% fall at the open to 4285.
Ric Spooner, chief market analyst at CMC Markets echoed this call with his technical view that "the 200 day moving average on the S&P/ASX 200 index looms as the first hurdle. This currently intersects at around 4342. A decisive break through the 200 day moving average may see a run up to resistance at around 4520/4550. This represents the top of a well-defined trend channel as well a previous support zone established in June last year."
Spooner, is however, more optimistic that "Australian markets may set a mildly positive tone this morning despite Friday's weaker US close."
Analysts are also weighing the continued strength in gold stocks after the precious metal pushed higher on Friday night.
"The energy sector could also be a strong performer today after oil prices advanced on Friday. Unfortunately, the strength we are seeing in the Aussie dollar could start to affect some of the currency-sensitive stocks. This could start mounting pressure on names like CSL Limited and Billabong," Shamu adds.
European Influence on the markets
Spooner notes that "Australian investors may take some heart from weekend announcements that an agreement on restructure of Greece's public debt is imminent. Although we are far from a resolution of the European debt problem, there have been a number of positive developments in recent months. These include the European Central Bank's monetary support via loans to European banks, new leaders in Italy and Greece intent on economic reform and now, potentially, a reprieve from the near term potential of Greek debt default. These developments have been reflected in lower Italian and Spanish bond yields as investors have shown themselves willing to buy bonds and lend to these " too big to fail" countries. Spanish 10 year bond yields have dropped below 5%, a rate not seen since August last year."
He points out that "these developments may see further, progressive unwinding of the significant risk premium currently built into Australian equity valuations. Although investors are likely to maintain a substantial risk premium to reflect the still elevated medium term risks in Europe, they may remove some of the large discounts developed over previous months when a European crisis appeared imminent."