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Banking on solid results

A firm open this morning sees the Australia 200 index within a hair’s breadth of new highs for the year. Anticipation of solid bank profit reports and ongoing low interest rates have overcome weaker mining and energy stocks and a run of softer economic data.

Recent days have seen a number of softer than anticipated economic data releases including US first quarter GDP and China’s manufacturing PMI for April.  While this data suggests that some of the most bullish economic forecasts may be too optimistic, it has not been enough to shift mainstream investor thinking on the outlook for a steady, to gradually improving international economic outlook.

Bank stocks continue to push higher in anticipation of a solid profit reporting season which begins with ANZ tomorrow. Investors are anticipating solid results supported by low bad debt provisions and cost control. Yield investors continue to see banks as a relatively stable income proposition in the near term compared to Telstra which has significant competition issues.

Despite the firmer opening this morning, the market mood remains relatively cautious ahead of a big news week that will include the French election and US jobs data as well as reports from major domestic stocks including Woolworths; Qantas; ANZ; NAB and Macquarie Group. 

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