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Glass half full

It appears that global markets have taken a lead from departing RBA Governor, Glen Stevens’ playbook. He reportedly left only one item in his office for the incoming Governor – a coffee cup labelled “half full”

This week’s Fed meeting has triggered a risk on move for global markets but the Australian stock market has opened with a surprisingly tepid rally this morning.

One of the impacts of the current low interest rate environment is that it has shortened the market’s time horizons when it comes to risk. A Fed rate hike looks likely in December but that’s months away and is not standing in the way of the market’s glass half full stance at this stage.

Perhaps more importantly, the latest Fed meeting gave investors’ confidence that the pace of US rate increases is likely to be very slow next year as well. This potentially leaves the Goldilocks environment for stock markets in place for some time to come.

Despite this morning’s subdued open, it seems likely that the ASX 200 index will ultimately retrace more of its recent losses even if there are some pull backs along the way. Recent dips have created value and now that upward momentum has been re-established buying could continue for a while yet.

TPG Telecom has benefitted from comments by Communications Minister Mitch Fifield on NBN pricing. After a torrid week, the stock has built on yesterday’s gains rallying another 3%.  TPG’s profit report this week highlighted its exposure to NBN as a monopoly provider. Mr. Fifield has provided general assurances that NBN is alert to this issue and its pricing will be reduced. While this provides some general comfort, the market is likely to price political risk for this industry until details of any NBN pricing changes are known. 

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