Higher Volatility Expected

By Michael McCarthy (chief market strategist, CMC Markets and Stockbroking)

Asia Pacific trading is off to a steady start this morning ahead of a week filled with data releases, a European Central Bank policy meeting, and the final run up to US elections. The British pound is higher after a weekend announcement, and takeovers and capital raisings could dominate local share market activity.

The European Union and the United Kingdom agreed to extend their trade talks until October 28. The distance between the two parties on the shape of post-Brexit trade suggests a “no-deal” arrangement remains most likely, but currency traders are giving some heed to the possibility of a last minute agreement. Sterling is trading higher, adding to last week’s gains.

The deliberations are unlikely to affect the ECB’s interest rate decision on Thursday night, where no change is expected. However analysts are looking for a substantial increase in monetary stimulus in light of the resurgence of Covid-19 infections. Forecasts centre on a 500 billion Euro expansion of the current 1.35 trillion program.

US stocks made further gains on Friday night as investors appear comfortable with any combination of post-election scenarios. Polls indicate a Democrat White House and potentially a clean sweep of the House and Senate. The support for shares indicates comfort with a significant social stimulus program.

Local beverage group Coca Cola Amatil confirmed this morning a $9.3 billion offer for its operations from Coca Cola Europe. The merger offer is at $12.70 per share compared to CCL’s last traded price of $10.75. An increase in the bid for Link Administration group and a $200 million convertible note issue from Bank of Queensland should ensure a busy morning for investors.

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