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Company reports and trade talks

A potential resolution of trade disagreements between China and the US by November helped lift market sentiment into last week’s close. After a soft European session for metals and stocks the reports rescued US indices from early losses. The US dollar eased back and bonds held steady as investors sought more concrete news.

The positive momentum is particularly important as the economic calendar is largely bare until Thursday, although corporate reports in Australia may influence trading.

Headline writers have fallen for a weak emerging markets narrative based on concerns around Turkey. However the market action in the previous two sessions on news from Beijing and Washington suggest trade concerns remain the key driver of short term market moves. While these two major players are still far from agreement any conciliatory announcements are likely to fuel risk appetites. The flip side is also true. A careless tweet could spark a sell off.

Around 40% of Australia’s top 200 companies report to shareholders this week. BHP on Tuesday is a stand out event, but the likes of A2 Milk, Wisetech, Oilsearch, Qantas and Nine Entertainment will ensure a sleepless week for analysts. The Australia 200 index has traded to ten year highs on the early company earnings releases, and a continuation of the stronger news may see the further moves towards the all-time highs around 6,850.

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