Overnight the Dow Jones index closed in blue skies whilst the SP500 put on modest gains. Investors continue to pile into companies sensitive to an economic comeback. Fed Chair Jerome Powell gave investors’ confidence to look past the risk of inflation and rising interest rates.
The recovery theme continues with strong buying in any company that will benefit from the world economy getting back on track. At this stage Financials, Energy, Industrials, and Miners are getting the most attention. Many of these companies are Value stocks which make up the majority of the top 200 in Australia. We are seeing play out what we have been talking about for months and that is a move back to Value.
There is a lot of talk about controls at airports to identify people that have been vaccinated. Talks of e-vaccination certificates are good news for travel companies as we may see more ease of travel. Many of the Australian travel stocks will be reporting this week.
Commodities took off again overnight with Crude, Copper, and other metals pushing strongly higher. Iron Ore continues to hold strong above US $170. Miners should continue to do well, in particular, Copper stocks should continue to outperform in this space.
Biden’s go big Fiscal stimulus will likely be passed in the coming weeks, and the FED will remain extremely accommodative in the long term. So even though US markets seem overdone here, with so much cheap money around it is unlikely to see a sizable correction any time soon. Instead, we are seeing a rotation out of overbought growth stocks and into value.
The XJO is expected to edge lower on open following a tumultuous night in the U.S. With U.S futures sitting slightly in the dream, the market once again isn’t giving much of a signal this morning as to how the day may pan out.
Uncertainty in markets remain as displayed in the U.S last night. Sentiment remains positive but inflation worries are underpinning moves. Powell coming to the rescue last night has helped keep optimism which hopefully is reflected in our market during our session today.
Yesterday’s move higher was expected as our move down was exaggerated and we bounced from a very key level of support. We continue to track sideways in a broader sense, but hopefully Powell, and potentially stimulus will be the catalyst to help us push higher in the short term.
US shares jumped higher overnight, with analysts pointing to Fed Chair Jerome Powell’s comments the night before that the Federal Reserve would continue to support the economy with ultra-expansionary monetary policy. Economic reporting overnight showed that new home sales were higher than expected in January.
We also saw crude oil inventories build-up at a greater rate than expected, though this wasn’t enough to stop a strong rise in oil prices. Oil & Gas stocks were the strongest performers overnight, while Financials and Basic Materials stocks also rose strongly. Utilities were the only stocks to close lower on average overnight.