All eyes on bank stocks : CMC Markets

09:45 AEST, Friday, 6 February 2015

All eyes on bank stocks
By Ric Spooner (Chief Market Analyst, CMC Markets)

It promises to be a fascinating day on the stock market with all eyes focussed on whether the relentless pursuit of “yield” will continue in the form of ongoing buying of bank stocks. History may reveal that much of the recent weight of money for these stocks has come from offshore. However, domestic investors considering dividends as an alternative to dwindling incomes form term deposits and bonds will be very focussed on today’s RBA monetary statement. The extent to which the downgrade forecasts for inflation and GDP growth is likely to influence thinking on how far and how fast they are likely to cut interest rates.

Traders are also dusting off the “Greek crisis” skills they acquired in 2010 and 2011. The key attribute here is the ability to capitalise on the volatility caused by a rapid fire series of conflicting announcements and foreshadowed actions. News that the ECB will allow the Greek central bank to provide €59.5bn funding to banks appears to be the 2nd half of the previous news that it will no longer accept Greek debt as collateral. This led to the Euro reversing its significant declines of the previous session.

The rally in EURUSD was assisted by a surprising increase in the US trade deficit during December. This will have a negative impact on GDP growth and will increase sensitivity to any downside miss in tonight’s Non Farm Payroll data.

Energy stocks are likely to find some support today after another turn around in oil prices overnight. However investors may now be getting a bit wary of recent volatility in the oil price, preferring to wait for the further signs of a market turnaround in the form of a break above this week’s highs.

ENDS

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