Australian Stock Market Report – Afternoon 10/11/13

EVENING REPORT
(5pm AEDT)

It certainly was an eventful end to the week, with stocks rising by 1.6 per cent by the close of trade, taking the gains for the week to a modest 0.44 per cent. The biggest catalyst for the improvement was the Republican Party putting forward a temporary six week increase in the debt ceiling to allow time for congress to negotiate on 2014 budget.

Although there still remains much work to be done (as President Obama is pushing back on the proposition), it seems to be a step in the right direction; helping investors believe that a resolution isn't too far off.

The Volatility Index (VIX), which is often referred to as the 'fear index' has improved to a reading of 16. The higher the number the greater the uncertainty in markets. This is almost 20 per cent lower than at the start of the week, thanks to debt ceiling hopes. Although the index has jumped in recent weeks, it is still well below the levels hit in 2008. This is a sign that the concerns in markets are starting to subside a touch.

No sectors missed out on the fun today, with gains of more than 1 per cent quite common across the different sectors. The mining and energy stocks were hit hardest this week due to the political uncertainty in the US, however rose impressively today. The major banks were the best percentage movers, with the big four (which make up around a third of the Australian market) gaining by more than 2 per cent.

The Australian dollar remains strong and buys US94.7 cents. The nomination of 'dovish' Federal Reserve candidate, Janet Yellen has been pushing the US dollar lower.

Looking ahead tonight will be a busy session in the US with plenty of top shelf data due for release. Monthly retail spending data, producer prices, consumer sentiment and the continuation of the US reporting season are all on the agenda. IMF meetings are expected to be held and tomorrow, China's trade balance will be announced.

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