Key world markets remain resilient and continue to hold key levels and edge higher. The Local market pulled back whilst other markets continue higher, so we expect some catch up at some point. But we may need to wait for the budget which is to be handed down today.
At this stage markets, are expecting the budget to be bad, with a hit to revenue including 12 billion in company tax receipts and with $164 billion in emergency spending. They are calling this the biggest blowout since world war 2.
They have already indicated that they will hold off giving forward estimates until the October budget announcement. We need to remember that in this environment government spending is a positive thing for markets, the more they are going into deficit the quicker we will see the economy recover.
The reporting season in the US continues, At this stage, out of the 60 in the SP500 that have reported – 46 beat expectations and 14 missed.
With positive leads from the U.S last night, but their futures lightly in the red this morning, our market is set to have a flat open. Despite breaking the pennant pattern a couple of days ago, thanks to the announcement of further stimulus from our government and RBA, the move put us straight to the next key resistance at roughly 6175 which is the highest our market has traded following the excessive fall in March.
The U.S has broken their equivalent of 6175, but our market has stalled here, unwilling at this stage to make fresh highs. This puts us back inside a triangle pattern, with the uptrend line keeping us buoyed but the resistance forcing us lower. There is perhaps enough room to the point of the triangle for another week of sideward movement, though if we see strong leads from the U.S we are likely to break one way or the other before then. At this stage, it is more likely than not that we break higher in the direction of the underlying trend.
We have disconnected somewhat from the U.S. This may come down to VIC’s record virus case numbers yesterday, keeping the market uncertain of one Australia’s largest state economies. We are likely to still follow the U.S, but as this news weighs harder on our market, it may just be in a more subdued fashion.
It was another positive session for US shares, with a fourth day of gains pushing them to a five-month high. The gains were helped by US dollar weakness, talk of fresh stimulus, and the potential for a coronavirus vaccine, which helped to outweigh escalating tensions with China. Futures had earlier retreated on news that the US had ordered China’s Houston consulate to close. Earnings were a bit mixed but mostly postivie overnight, with strong gains in Tesla after its report, and some muted selling in Microsoft despite a fairly strong report as well. Gains were led by Utilities and Basic Materials stocks, while Telecoms and Oil & Gas stocks closed lower.