Australian Stock Market Leads - 31 January 2012
Lacklustre trading is expected in Australian markets following the subdued overnight trading results in the U.S. and European markets still deeply embroiled in the debt crisis.
The news on European Union's decision to put up a permanent bailout fund, dubbed as the 'European Stability Mechanism', for the region worth EUR500 billion and will take effect in July this year, has pulled down the value of the Australian dollar overnight.
Analysts from CMC Markets and IG Markets are seeing Australian morning trades to open a little weaker on Tuesday in reaction to the struggles of other foreign equity markets trying to maintain an upward momentum.
Ric Spooner, chief market analyst at CMC Markets, notes that investors have positioned for the probability that a default on Greek debt will be avoided in the near term.
"Markets now appear to have reached a level where they need formal confirmation that an agreement on debt restructure has been struck with private investors and that a second rescue funding package will be provided to the Greek government. After the rally of recent weeks, equity markets may remain nervous at current levels until these issues have been formally resolved," he says.
Although the markets got some encouragement from the positive U.S. personal spending data for the month of December, the results also confirmed the subdued spending as savings rates recorded gains, he adds.
Mr. Spooner points out the same low credit growth are foreseen in Australia with the Reserve Bank's official release on Australian private sector credit growth for December.
He says that this is also expected to show a continued pattern of subdued growth and will provide further insight into revenue conditions for the major banks, which will undergo review with Fitch Ratings.
IG Markets analyst Stan Shamu says, however, that "Fitch placing Australia's four major banks on review for possible downgrades after market close yesterday will not significantly impact on listed bank shares on Tuesday.
"Fitch downgraded five eurozone nations on Friday. The response to the downgrades was fairly muted, suggesting that investors are paying less attention to ratings agencies. However, the return of Eurozone debt concerns could see bank stocks struggle," he adds.
Commodities-related stocks led by Lynas Corp. will feel the market jitters in the next few days as the Malaysian government is about to issue a statement on whether rare earths miner Lynas Corp. may be granted a pre-operating refining license.
Shamu says the decision on Lynas will also bring peers like Arafura and Greenland Minerals and Energy into focus.
Investors should also keep an eye out for Woolworths' quarterly sales numbers. The Aussie market is seen slightly skidding 0.1% at 4271.