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To put the market in a technical perspective, commodity markets are working in a primary up trend. Copper has now crossed $6000 a ton on the LME, alongside the equities markets which are also in a primary up trend.
The ones that really matter like the S&P 500, Dow and Aussie 200 are all making new highs week after week, and even the China A50 has started to trend higher. A primary market trend is observed in the longer time frames of weekly and monthly charts, but not in the daily as the smaller time frames carry too much day-to-day market noise and rumour.
Going back to basics, the Australian markets are currently reporting with a mixture of hits and misses. However, the market is moving higher, so are animal spirits in play? 64% of Australian companies are above the 20-day moving average and within that statistic, 15% of the Australian market is trading at a four-week price high. These are certainly not extreme numbers.
The forward earnings per share for 2017 in Australia is expected to increase between 13-18%, which will really show up in the August – September reporting season. All of that cost cutting and rationalization over many years is starting to pay off. Rio Tinto (RIO) is announcing an increase in its dividend and [shares:FMG -AU|FMG] has been paying down its debt pile, only to have Moody’s lift its corporate bond rating to BB+.
On the back of rising commodities prices and lean operating structures, the markets are well placed for further growth. If you bring in inflation now starting to work its way towards 2% on a global basis and rising real estate prices adding to the bottom line valuations of business enterprise: we may have an animal spirits bull market underway.
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