Share catch up on US rates

Published in the Daily Telegraph, February 2010

Our sharemarket is likely to open higher today as investors ponder the last major week of local profits and Wall St’s gains on the weekend.

The US stock market ended a strong week with modest gains on Friday after investors found good news in the Federal Reserve’s decision to raise the rate it charges banks for emergency loans, known as the discount rate.

The Dow Jones Industrial Average rose for a fourth day with a 9-point rise, its best week in more than three months, closing at 10,402.35 points.

Earlier, the local market took the discount move hard, along with speculation that interest rates here would continue to rise. The All Ordinaries index closed the week 17.5 points down at 4656.3, while the S&P200 fell 19.8 points to end the week at 4635.1.

CMC Markets market analyst David Taylor said trading volumes were also likely to rise this week as China came back from New Year public holidays.

“With China back online and positive reactions to the change in the [US] discount rate so far the stars are aligning for a positive start to the week,” Mr Taylor said.

Wealth Within chief analyst Dale Gillham said he believed the market would top 5000 in June or July.

“That said, there is potential for the market to rise further than my anticipated targets but the probability is not high. Right now there are some great opportunities to take advantage of in the market.”

Commodities including copper, oil and gold also gained, which was likely to prompt buying among equity investors.

Still, Mr Taylor also warned of significant risks for markets because of the large amount of sovereign debt.

“The worries about Greece’s debt position haven’t gone away,” Mr Taylor argued.

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