15.01 AEDT, Tuesday 29 January 2013
Domestic confidence pushes markets upwards
By Ben Taylor (Sales Trader, CMC Markets)
The poor weather has done little to stop today’s domestic confidence pushing our market along in what is proving to be a
strong uptrend globally. Locally today we are seeing a lot of defensive buying taking our market higher with large
stakes being taken across the finance and healthcare sectors.
Improving equity markets, falling bad debts combined with an improving global outlook in a low interest rate environment
has seen our banks clearly sort after. Investors with money on the side lines now seem keen to dip their toe back in the
water and the banks are providing the platform to seek exposure.
While it seems like the market is full steam ahead there are a number of non-believers warning that our market is
vulnerable to correction as stocks are already pricing in an earnings recovery. Personally I believe the risk on
sentiment is too hot at the moment to stop this run, we will need to see a clear change in sentiment before I would sell
risk in this current environment.
Our business confidence read today has also given investors reason to extend their long positions. It seems that a lower
interest rate environment is starting to improve confidence among the Australian business community, mix this in with
the China rebound and we have a sharp rise in confidence.
The improving risk appetite has seen the Australian dollar come under pressure lately as traders move money out of
perceived “safety” towards risk. However, the improving confidence in our own market today has seen traders buying the
Aussie dollar as the risk of a future interest rate cut decreases.
If our market continues to improve along with the prospects of the macro environment we could see a sharp change of
consensus opinion in regards to domestic interest rates. This change may prove to keep rates on hold rather than see the
substantial falls which analysts are currently predicting.
ends