Caution despite good leads

Published in the Daily Telegraph, July 2010

The Australian share market is likely to open the week flat to moderately higher today, after it received positive leads from major world markets on Friday.

ConmmSec chief economist Craig James said despite the gains overseas, the local market was expected to open only about 10 to 15 points higher today.

“We’ve had a good lead from the overseas markets, the European markets, US markets both higher at around half a per cent,” Mr James said. “You would think that may translate to a gain around about half a per cent for our market but I think some investors hit locally will be a little cautious ahead of the US profit reporting season, which gets under way [today].”

US stocks ended higher for the fourth straight day on Friday ahead of a keenly anticipated second quarter corporate earnings season.

The Dow Jones Industrial Average climbed 59.04 points, or 0.58 per cent, to end the week at 10,198.03.

The tech-rich Nasdaq composite index added 21.05 points, or 0.97 per cent, to 2196.45, while the S&P 500 index, a broader measure of the markets, was up 7.71 points, 0.72 per cent, to 1077.96. Earlier the local market had finished in positive territory, led by gains in the mining and energy sectors.

The benchmark S&P/ASX200 index closed up 39.4 points, or 0.9 per cent, at 4396.3, while the broader All Ordinaries index ended up 40.4, or 0.92 per cent, at 4414.5 points.

On the Sydney Futures Exchange, the September futures contract was up 37 points to 4384 points on turnover of 27,453 contracts.

Overall, Mr James believed today would be fairly positive.

“All commodity prices were higher and on Saturday we got some positive news from China that the trade surplus widened.”

Wealth Within chief analyst Dale Gillham said that over the last three days of the week, the market recovered most of the ground lost during the previous week.

“While on the surface this is a positive sign, it is too early to get exited just yet, as one day does not make a bull market,” he said.

“Until the market proves it will be bullish, which won’t happen until it rises above the previous short-term high of 4641 points in late June, we need to assume it is bearish.”

THE WEEK AHEAD: Today the Australian Bureau of Statistics will release sales figures of new motor vehicles for June and detailed labour force data.

Tomorrow, the Australian Office of Financial Management (AOFM) is set to auction $200 million of the August 2020 Treasury Indexed Bond line. On Wednesday, Treasury secretary Ken Henry will address the Committee for Economic Development of Australia on challenges and priorities for the nation. On Friday, the AOFM will issue the April 2015 Bond line worth $700 million.

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