Watchful investors up periscope
BARGAIN hunters are being enticed out of their bunkers after the massive volatility that has rocked world markets in recent weeks.
On Friday, the benchmark S&P/ASX200 index closed 30.3 points, or 0.58 per cent, higher at 5263.6 points.
The broader All Ordinaries index was up 32.1 points, or 0.61 per cent, at 5274.7.
AMP Capital’s chief economist Shane Oliver said the Australian market finished last week down 16 per cent from its 2015 high as part of a broad global sell-off led by worries about China and the possibility of a US rate hike in September.
“We have seen fairly sharp falls on markets, between 10 to 20 per cent in the major developed markets and in the emerging world the falls are even steeper, and we have seen value return to some degree,” Dr Oliver said yesterday.
“I think it is too early to say the volatility is completely over but there are some positive signs out there.
“... and that will probably provide some opportunity for investors to hunt for bargains.”
The futures market (up 12 points) indicates a 10- to 15point rise at today’s local open.
It follows an Australian profit reporting season that was “a little disappointing”, with only 43 per cent of companies revealing better than expected results, he said.
In a busy week ahead for data, key figures on the strength of the Chinese and US economies are due out today and tomorrow.
On Friday, there will be US payroll employment data for August, which will be pivotal to the Fed’s decision on whether to raise US interest rates.
Australia’s Reserve Bank meets tomorrow and is widely expected to keep rates on hold.
Australian GDP data is due on Wednesday and Dr Oliver says if this undershoots the consensus 0.4 per cent, it will add to the case for a further cut to interest rates, possibly in November.
The Australian dollar closed on Friday at US71.67 after plumbing US70.5 during the week.
“The broad trend in the Aussie dollar is likely to remain down, particularly if those GDP numbers are weaker than expected on Wednesday and expectations of another interest rate cut start to strengthen,” Dr Oliver said.
“We could be headed into the 60s (US cents). It’s just a question of when.”