Yesterday the market closed flat but if you look under the hood a little closer, it the Banks that held us back. Locally we have the banks gearing up to call people that are on loan holidays which will likely lead many to foreclose. Whilst in the US banks have warned that revenue will be lower than expected on the back of weak loan demand.
Locally, we have been selling off for a few weeks now, but with the negative press, there could still be more to come. Whilst in the short term this space is being battered, do not forget that the banks will come out the other side stronger. But we need to get on the other side of lockdowns and the economy to get back on track first.
Sentiment will be affected by the FED tonight. We expect them to remain very dovish and will continue to support financial markets now and through the coronavirus recovery over the next few years. Furthermore, any news around the AstraZeneca and Oxford University’s vaccine can affect sentiment overall. At this stage trials resume in the UK, but not in the US. The US arm will remain on hold until the FDA conducts an independent investigation.
The XJO is expected to push higher this morning, opening near 5950. This is on the back of a rally seen in the U.S and a clear indication they will continue to hold their support level. If U.S futures remain in the green through our session today, it is likely we hold the positive move.
Today’s open is likely playing a bit of catch up. Yesterday we didn’t have the rally we were probably due because our largest sector – the financials, fell because of issues weighing on the banks. These issues come from plans to reduce stimulus from the government, and banks taking one of the largest call arounds for people who have deferred mortgages. It is getting to crunch time for people who have been affected the hardest during the shutdowns and subsequent recession. In addition, people can longer withdraw from their Super. With all of these factors occurring in a similar time frame, it is feared that foreclosures on residential and commercial properties are coming, and the flow on effect to the economy and property market could be substantial.
Regardless, provided the U.S maintains their support, we are likely to hold our key level that acts as the bottom of the channel we have been trading in for the past couple of months. The name of the game is still sideward, but be cautious as the reluctance for our market to have a strong rally is likely to remain.
US stocks rose again overnight, with tech stocks once again doing much of the heavy lifting. It was the third straight session of gains for the S&P 500 index, which came after some fairly positive manufacturing data. The eyes of US investors will now turn to the Federal Reserve, who will meet tonight to decide on any changes to monetary policy; they are expected to keep the current extremely dovish settings unchanged.
We have also seen the World Trade Organisation rule that the US violated international regulations by imposing tariffs on more than $234 billion of Chinese exports, although this doesn’t seem to have impacted markets yet. Technology stocks were the strongest performers overnight, with Utilities and Telecoms also rising nicely. Financials and Oil & Gas stocks were the weakest performers overnight and the only major sectors to finish lower.