Australian Trading Day Preview

The ASX 200 has bucked the trend and defied conventional wisdom this week, shrugging off the global trade-war fears that shook other equity markets, to close yesterday’s trading session at levels not seen since the early days of the Global Financial Crisis.

Market data
Source: Bloomberg

In what might be attributed more to luck than overwhelmingly strong fundamentals, a 2.5% recovery in bank stocks led the drive higher, following several weeks of selling due to fears about regulatory shake-ups and a slow-down in domestic property prices. Nevertheless, the overweight financials sector of the ASX weathered the worst of global geopolitical headwinds, to drag the rest of the index in its slip stream, to break above tough resistance at the 6,160, and close 1.15% higher at 6,172.58. SPI Futures are indicating a higher open again this morning for the ASX, pointing to an early gain of 0.3%, or 6193.

The winners and losers

The banks did most of the leg work yesterday, with some notable contributions from some of the relatively smaller market-cap stocks. The banks were led by a solid rebound in the CBA share price, which rallied 2.90% to push above the $70.00 handle following several weeks of hard selling. Tech stocks were the next best performing sector yesterday, climbing 1.45% itself, thanks to the ASX’s biggest gainer for the session, WiseTech Global, which closed 5.65% higher for the day. The major loser out of yesterday, in what amounted to the only real black mark on the session, was Telstra, which was dumped 4.81% after the company announced a major restructure of the business, along with a downgrade to profit expectations. In the day ahead, look for more action in financials, along with signs that the momentum that has carried index higher this week is beginning to wane.

The little Aussie battler

One area of the Australian market that has been punished this week, amidst escalating trade-war tensions, is the AUD, which fell on Tuesday to a 12-month low against its US counterpart. After several weeks of range trading and even a respectable recovery, the spike in risk aversion on Tuesday sent the local unit plunging, to break through support at 0.7410 to settle just above June 2017’s low of 0.7372. The spill seems to have been cleaned-up for now, as trade returns to a close level of normalcy. However, given the RBA’s clear position of keeping interest rates low (so not to place further stress on household balance sheets), combined with the US Fed’s growing hawkishness regarding rate hikes, further falls from the AUD/USD should be expected.

The data day     

The calendar is looking light in terms of local data today, with headlines to be generated from overseas events. New Zealand GDP was released this morning, which revealed kiwi growth slowed last quarter to expand by 0.5%. In low impact local news, the RBA release their bulletin today, with little trader response expected out of this release. Finally, the next 24 hours will be headlined by the meeting between the BOE tonight, before focus shifts to the highly anticipated meeting of OPEC members on Friday.

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