Friday the Australian market sold off strongly compared to most other markets. We initially sold off following the Asian region lower, but Asian markets recovered whilst we closed heavily lower. Over the weekend we then saw the AUD rise strongly and the 10-year yields jump again.
Investors continue to sell out of the long-term bonds sending yields soaring higher. The selling in the bond space is not out of fear, but a race to take profit and move money into an investment that will likely yield a better return. The question at this stage is where will the money flow next?
The move higher in the Australian dollar over the weekend is notable and could see the Australian market hold back. In saying that moves higher in commodities pricing will help the local market, keep an eye on Materials stocks. The steepening of the yield curve will also see the banks rise as it will help their net interest margins, thus their probability.
Otherwise not much has changed overseas, Bidens go big Fiscal stimulus will likely be passed in the coming weeks. The FED will remain extremely accommodative for a long time. 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.
The XJO is expected to open fairly flat this morning following a similar move from the U.S on Friday. Futures sit flat for both markets, so we will need to see what leads we get during our session. Interestingly, our market fell off aggressively on Friday for no obvious reason except perhaps a speculated (and confirmed) rally in the AUD and negative U.S futures. Typically, when our market snaps down, but it is not reflected in the U.S, we recover the next couple of sessions.
Reporting season continues, notably – Today BSL, LLC; Tuesday AWC, OSH, WOR; Wednesday IFL, MPL, SCG, SYD, WOW, WTC; Thursday A2M, FLT, ILU, QAN, RHC, SFR, RHC, SGP; Friday APT, HVN.
US markets closed flat to higher on Friday, as US shares continue to drift just below their all time highs. Investors in the US continue to trade on expected future economic conditions, rather than those at present. Should the democrats manage to pass their ambitions stimulus plan, we would expect further upside to US share prices.
Basic materials and oil and gas stocks were the strongest performers on Friday, while telecoms, utilities, and healthcare stocks fared the worst.