Markets overnight made a comeback to close in the green. The trend is still up but it seems a breather at current levels in the US is likely. Whilst this is happening, we are seeing the local market edge higher. The Australian market has a lot to be optimistic about and has a long way to go before we reach pre-COVID levels.
The market right now is a balance between Virus, Stimulus, and Vaccine. We continue to see positive vaccine news but what the market needs to drive higher is a path forward on more US fiscal stimulus. Lockdowns are going to get worse again in the US, but that is not seeing markets sell-off. Instead, we are seeing a lot of sector switching. Investors took profit in Tech and Communication sectors last week, but we are now seeing buying back in those sectors again this week.
One way or another equities market seems set to go up as it is a logical place to invest right now. Bond Yields are extremely low, Central banks are very accommodative and are signaling further stimulus to come. Many economies in the world will be looking at infrastructure spending over the coming years to help stimulate. This all should help money flow toward equities.
With positive leads from the U.S last night our market is set to edge higher on open. It is likely that the expected move higher this morning is being held back by U.S futures which sit in the red by a good measure. If U.S futures regain some of their losses or come back to flat then our market should have a healthy strong day, otherwise expect our session to be subdued or even negative by close.
We are consolidating at the top of the range as we continue to closely follow the U.S, albeit in a more subdued fashion. It feels like we want to break free of their influence and continue higher as locally we have a lot to be positive about. South Australian virus cases has not seemed to cause issues for our market just yet – perhaps we are simply waiting to see how it is handled and how long lockdown will actually last. Right now though, the virus is controlled locally, vaccine news is positive, and we are seeing expansionary fiscal and monetary policy from governments and reserve banks. Coupled with a Christmas rally, our market has not much reason for excessive falls or corrections at this stage.
Any retracements we do experience are likely to be a healthy reversion and shallowing out of the trend.
US shares ticked slightly higher overnight, reversing course from earlier losses. Tech stocks led the gains as investors favoured businesses that would be less affected by potential lockdowns. US shares pushed higher despite jobless claims data coming in higher than expected, although manufacturing and home sales data was better than expected.
Federal Reserve of Dallas President Robert Kaplan warned that there was a risk the economic recovery would stall in the next two quarters with virus cases high and with some places returning to partial lockdowns. In addition to the strong gains in Tech stocks, Oil & Gas stocks shot higher overnight, while Basic materials and Financials stocks also rose. Utilities and Telecoms fell and Healthcare was flat.
- Nasdaq pulls back, with selling in Tech, Discretionary, and Communication Services - May 5, 2021
- Markets continue to consolidate at top of the range - May 4, 2021
- US markets break higher again but with low momentum - April 30, 2021