Markets continue to whip around as better than expect unemployment is offset by large increases in daily Virus numbers.
The big picture in the short term is Stimulus vs Recession. This recession is vastly different to others in that interest rates are at record lows, with Central banks and Governments stimulating economies like never before.
The earning sentiment quant for the top 200 stocks has been slowly rising again over the past few weeks. This is indicating that earning expectations are starting to slowly improve from the lows of 11%. This is likely happening as we are slowly seeing company’s release some guidance one how things are going which is helping many analysts adjust earning expectations. In saying that a reading of 28% is still very low suggesting that many of the top 200 companies are going to report weak earnings this year.
With positive leads from U.S trading last night and their futures this morning, our market is set to have a moderate rise on open this morning. We are set to open at 6100, which puts us in no-mans land between support at 6000, and resistance around 6200.
With the U.S still in consolidation, it’s surprising to see us heading back towards our highs. We will likely need to see their futures remain in the green during our session today to stay elevated.
Monday will be interesting as over the past month or so, it usually has as starting lower with the rest of the week either being flat or higher. Don’t expect to see 6200 in the next few trading sessions, but it is the next target.
Fundamentally, the recent drive up could be attributed to vaccine news and better than expected job numbers.
US shares pushed higher overnight but gains were pared back after a fairly mixed bout of unemployment data. The unemployment rate fell and came in better than expected overnight, but Jobless claims were worse than expected. Virus data continues to be somewhat negative in the US as well, with some southern states experiencing record new infection numbers. Also of concern to markets is the US-China relationship, with White House economic adviser Larry Kudlow overnight stating that ‘there are going to be export restrictions’ to China. Every major sector pushed higher overnight, with Oil & Gas stocks and Basic Materials stocks seeing the strongest gains. Financials were the weakest sector, closing practically flat. US markets will be closed tonight for the Independence Day public holiday.
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- Australian market set to catch up after strong leads from the US - August 4, 2020