Momentum in markets has softened as we see many markets start to tick sideways to slightly higher. With the US at such a key resistance point, we feel that this could continue until we get another catalyst.
Locally we are seeing a very mixed reporting season, at this stage, the majority are missing expectations in the face of COVID-19 related issues. Out of 65 companies that have reported only 37% have beat expectations and only 29% have seen EPS growth. The sectors that are doing well so far are Tech, Staples, and Discretionary.
Iron Ore jumped again overnight sitting at 129.09 US at Chinese ports, yesterday we didn’t see miners go up and that could be due to the AUD also rising.
At this stage, sentiment remains strong around certain sectors and companies but uncertainty is holding the market back. We need the banks and other financials to recover if we want to see the kind of push up the US has experienced.
With negative leads from the U.S last night, our market is set to open lower. Yesterday we reached our post fall highs and stalled, and with this morning’s expected negative open, it seems we are rebounding off of it.
It is starting to appear that unless the U.S can break into fresh all-time highs, our market will be reluctant to push through our post fall highs. This could change if our earning season is positive enough, giving our market incentive to play catch up with the U.S, which basically sit at our equivalent of roughly 7000.
The market continues to digest conflicting news and sorting out the local winners and losers from the epidemic. Stimulus remains the main tool to fight the recession, with our government reluctant to push any further comments about when stimulus will end or be tapered. Indeed, the rhetoric has shifted slightly as nations start to realise that this virus will be around longer than what we perhaps first thought. Instead, like Ben Kenobi, our only hope lies in a vaccine, or more realistically in the shorter term, an alleviating medication. Watch as the media focuses more and more on this as it gives hope to markets and business of an eventual return to the good ol’ days of January 2020.
US shares pulled back overnight, ticking down a little from their all-time highs. Stocks were perhaps weakened slightly by the release of the Federal Reserve meeting minutes, which showed that the Fed was somewhat optimistic about economic growth in the second half.
There was strength in the US dollar, which did not help shares overnight. We also crude inventory numbers overnight, which showed a smaller draw-down than expected. Every major sector closed slightly lower, with Oil & Gas stocks experiencing the greatest falls.