Despite the move higher overnight we are still seeing US markets toy with the all-time high levels set back in September. There is a high likelihood of sideways movement here in the short term. Markets are reacting positively to Vaccine news in the short term, this is seeing selling in bonds and gold overnight and strong buying in Crude and the energy sector. The Financials also had a strong night which has been moving similarly to the energy sector in the past few months.
Locally, our equities market is playing catch up as it still has a long way to go before getting back to pre-COVID-19 levels. Vic has no active cases and no new cases for 25 days, SA only had 1 new case which eases the mood around COVID-19. Today we will hear news on borders, in particular the QLD borders to NSW and QLD. This is all more and more positive news and will help the positive sentiment in the market continue.
Australian Outlook
The XJO is expected to continue edging higher this morning, opening near 6600. This follows a modest rise in the U.S last night and flat futures this morning.
With the U.S tracking sidewards at the top of the range for the past week or so, our market seems reluctant to move too much higher. Despite local news being positive, it seems our market still needs permission from the U.S to continue to price it in.
Overall the market looks ripe for a pullback, especially to help set up a Christmas rally by end of year. When or why this will happen is up for debate, but expect one in the coming weeks.
US Markets
US shares rose again overnight, with further positive vaccine news. Stocks that would benefit from an economic reopening were the strongest performers as various vaccine developers reported positive results for their testing. The market also loved the fact that Joe Biden will likely nominate former Federal Reserve Chair Janet Yellen to be Treasury Secretary; Janet Yellen is thought of very fondly by much of the American investor community. US manufacturing data was also released overnight, showing much larger growth for US manufacturing in November than expected.
We will see a bumper release of economic data and Federal Reserve minutes tomorrow night, which could influence the sentiment moving forwards. Oil & Gas stocks were the strongest performers overnight, while Basic materials and Financials were also quite strong. Health Care, Telecoms, Utilities, and Technology stocks were all roughly flat.
Tim Michaelides is the Head Trader at Emerald Financial Group.
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