Australian Shares back in the Black as market looks to U.S employment data
By Tristan K’Nell – Market Analyst – Altair Asset Management
The Australian Share Market opening the day in positive territory with the market erasing two consecutive days of losses
to be trading on the back of a positive lead from Wall Street & Commodity markets and shrugging off a poor day of trade on European markets.
Overnight no real surprises from the Fed Reserve with Brexit & the job markets the main themes of current discussions. European markets under performed as the uncertainty in the EU
and the impact of Brexit continued to be discussed. Outperformance in Crude Oil supported the U.S Equity markets as data
showed crude inventories falling with the commodity again approaching $50 a barrel.
RE to U.S interest rate movements, Altair Chief Economist Stephen Roberts in a piece yesterday also pointed for the need
to keep an eye on the strength of the U.S dollar.
To quote Stephen Roberts:
“The US recovery looks vulnerable if the USD pushes up too strongly in response to uncertainties besetting currencies in
Europe and Asia. The recovery becomes even more vulnerable if the US Federal Reserve miscalculates and tries to
normalize US interest rates too fast”
Locally market activity was fair due to school holidays, with Market Turnover into lunch $1.3 billion, given a limited
economic release day locally and ahead of employment data out of the U.S Friday evening expect action to be limited in
the afternoon session.
With Fed minutes from this morning citing the poor job numbers from last month which came in 38,000. The market is
looking for a number of 180,000 jobs to be added in Friday’s reading so there could be some nervousness ahead of the
number. Tonight the market will be looking at the weekly jobless claims and ADP Employment which will give a good
indicating into private sector jobs.
Some role reversals on the market today with the market up across the board from financials to commodity based stocks
with the only negative sector being Health Care particularly amongst device stocks.
It was a positive day for the banks after they came under selling pressure post Saturday’s Election uncertainty. We did
point to the uncertainty of the proposed Royal Commission as a stumbling block for the banks, however today the sector
reversed it recent weakness with ANZ (+0.68%), CBA (+0.81%), NAB (+0.20%) Macquarie (+0.34%) WBC (+0.32%) all returning
to positive territory.
Big moves from the Energy sector with Crude’s moves overnight supporting the sector, Oil Search (+3.23%), Origin
(+2.70%) Santos (+3.06%), Woodside (+1.37%), while in the Resource sector we saw the majors all bounce back and continue
their major momentum since the beginning of the year. Spot Iron Ore trading over $55 a tonne and making a 28% recovery
for the year has removed some of the uncertainty seen last year. The bigs making good gains today with BHP (+2.35%), FMG
(+0.92%), Rio Tinto (+0.98%). The resource sector is an area of the market we continue to like in the short to medium
term. Altair took an overweight position in the sector in late 2015 and the upside we see in the short to medium term is
due to stimulus continuing in China and local miners beginning production cuts.
Health care the only weakness on the market lead by device stocks with Cochlear (-0.61%), Resmed (-1.17%), Sonic
Healthcare (-0.62%) all seeing some profits taken off the table.
ENDS