Markets brace for upsteady opening

Published in the Daily Telegraph, March 2009 by Jenny Dillon

Unimpressive is the word being used to describe how the markets will open in Australia today.

The mood won't be helped by the admission yesterday by Prime Minister Kevin Rudd that it is virtually impossible for Australia to avoid slipping into recession, even if he didn't actually mention the r-word.

But for those looking for crumbs of hope among the debris, Friday's close, while down, was still up on the previous Friday's close.

In New York, analysts realised it had taken the US market 10 months to achieve similar back-to-back gains. But it was only in January this year that the local market also rose for eight consecutive days.

It then fell quite heavily over the next 11 days.

This time the difference is the volumes were up, chief analyst with Wealth Within Dale Gillham said.

"Given that increased volumes is supporting the current move up I believe this is the start of the rise up into May or June," he said.

But given also that the market had been rising for eight days we need to expect it will fall away for a short period before rising again."

On Friday, the S&P/ASX200 dropped 14 points, or 0.4 per cent, to close at 3466.2, while the All Ords fell 11.4 points, or 0.33 per cent, to 3405.4.

CommSec chief economist Clive James said the prime mover in the market this week would be the US response to the Treasury's attempts to heat up the economy, especially an announcement expected Monday night (AEDT) by US Treasury Secretary Timothy Geithner.

"That would be an extremely positive development, but we'll have to wait and see what those proposals are," he said.

'I think it will be a very tame start to the week. The Aussie dollar's given back some of its gains on Friday as well, and that would be seen as a positive for the export oriented areas of the markets, particularly in terms of mining stock.

But really it will be a pretty unimpressive start to the week." Despite a new-found caution in the US after days of almost euphoric-like trading last week, US sentiment is still optimistic.

"As the market has already experienced two periods of panic selling November and early March we believe the downside risk is limited," Wachovia Securities market strategist Al Goodman said.

Merrill Lynch said investors were at their most optimistic about the global economy since December 2005. "Investors want to believe in an economic recovery," Banc of
America Securities-Merrill Lynch co-head of international investment strategy Gary Baker said.

"However, caution on banks is firmly capping risk appetite."

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