Encouraging US jobs data and a firm lead from US markets provide no obvious reason for sellers to extend Friday’s losses in the ASX 200 index.
The more likely scenario is for the index to consolidate within recent ranges as traders wait on the profit reporting season to get under way in August. This will leave the Australia 200 index inside a triangle pattern. Pattern traders will be looking for the direction of the break out of this triangle to indicate the next trend in Australia 200
The strong rebound in US job growth during June confirms a favourable macro background for stock markets. Job growth is underpinning moderate gains in consumer spending and supporting revenue growth for companies. At the same time low wage growth is helping contain costs and interest rates.
Low wage growth in the US is another symptom of the moderate; drawn out nature of the global recovery cycle. Wage growth is being constrained by global competition; moderate productivity growth and the large pool of unregistered unemployed gradually returning to the workforce as conditions improve.
Bellamy’s shareholders face a difficult day following Friday’s surprise announcement that its recently acquired subsidiary Camperdown Powder has had its license suspended in China. This is a reminder that the potential benefits of selling product to China’s vast market often involve substantial development risk for investors. While Bellamy’s does not intend to can its products at the Camperdown facility until the second half of 2018, investors will be unsettled by this news given the company’s chequered history in the Chinese market.
Bluescope shareholders will cheered by this morning’s press reports that the US government may agree to exempt Australia from any proposed steel tariffs. This will dodge a bullet for BlueScope’s US subsidiary although investors will be conscious of the fact that these are as yet unconfirmed reports which remain subject to much political risk.