Markets remain flat and are starting to disconnect. Indeed, this is being reflected in our own market the past couple of weeks with almost out of character strength. We continue to fail at 6200, but the reliance for our market to remain here is a positive sign that seems increasingly likely will lead to an eventual push through.
The positivity is likely due to our own unique circumstances for having curtailed the virus (for now). Indeed, Victoria has announced a path for reopening, and talks continue amongst states about travel bubbles and border reopening. We also have our fair share of stimulus through government spending, low interest rates, and the new budget.
Our relationship with China remains murky at best, and if it does not sour too rapidly our market may continue to ignore this area for now.
Instead, a unifying factor for all markets’ focus is the U.S election on November third. The market likely cares not who wins, as both candidates have expressed large stimulus if they win, which is largely all the market cares about for now.
With flat leads from the U.S on Friday and their flat futures this morning, our market is set to have a modest rise back to resistance at 6200 on open.
The positive sentiment that has boosted our market the past two weeks is likely on the back on Australia’s own positive news around both the budget, low interest rates, and falling Victoria case numbers. Indeed, yesterday Victoria’s Dan Andrews announced further easing to come now.
For this positivity to continue to result in higher market prices, the XJO will need to push through 6200, a level it has been reluctant to stay above since our falls earlier in the year. Today will mark another day following numerous failed efforts to push through this level.
Eyes will be on China’s GDP read this morning, as expectations remain that it will continue to recover from the pandemic quicker than any other nation. Australia has a more vested interest in China’s recovery being that they are such a close trading partner. In addition, our relationship with China continues to deteriorate, with a recent expression of that deterioration coming about as tariffs on some of our exports. This remains murky as things usually do with China.
US stocks ended a three-day losing streak to close slightly higher on Friday. However, shares did reverse strongly from their intra-day highs. The selling came despite largely positive economic data, with US retail sales coming in stronger than expected for September. However, industrial data was mixed, with industrial production for September weaker than expected. US company earnings season is ongoing and the results are continuing to beat expectations at the usual rate; however, unusually, this isn’t necessarily causing the ‘outperforming’ companies to rise. Oil & Gas stocks were the weakest on Friday, with Telecoms, Tech stocks, and financial also falling. Every other major sector saw some degree of gains.
Technically, the S&P 500 is in a bit of no-mans land below the all-time high resistance at 3,600. With a hotly contested presidential election rapidly approaching and with the absence of the long-awaited fourth fiscal stimulus deal, it is looking unlikely that this level will break in the coming fortnight. To the downside, there is some support around 3,430-3,400 that will have to break before further selling looks likely. Until either 3,600 or 3,400 breaks, we have to assume more sideways movement.
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