Fed, NAB to the rescue
By Michael McCarthy (chief market strategist, CMC Markets)
After a day of inordinate selling the Australian share market may bounce back today following an overnight expression of
confidence from the US Federal Reserve board and a consensus beating half-year result from NAB. Comments by the
Treasurer that a de-listing of BHP is against the national interest could help, although a rout in industrial metals may
constrain enthusiasm.
The Fed board looked through Q1 weakness, describing it as “transitory”. Consequent USD strength is expected to give
Asia Pacific shares a lift today.
Yesterday’s rout of the ASX 200 index was led by bank selling. This morning NAB reported 2.3% profit growth, just above
the median estimate, despite an 11 point decline in margin and a 5.1% jump in bad debts. The result could see the
aggressive sellers buying back bank shares over the session. Given the almost 50% weighting of financial shares in the
index this dynamic alone may push the market in to the green.
An overnight report showed metals inventories increased in Asia and Europe. Additionally Philippines lawmakers declined
to appoint an aggressive environmentalist to a key post, meaning more nickel mines may come back on line sooner. Copper,
nickel and lead all fell more than 3% in London trading. This explains the current negative indication from futures
markets. However the key question for investors is whether resurgent major banks can overwhelm resource selling.