US markets and the FOMC minutes have combined to provide a soft macro setting for this morning’s opening. However, with twenty ASX 200 index stocks reporting today, the key focus is on the outlook for individual stocks. Ongoing price adjustments for yesterday’s results and some good releases today have helped the index open on a positive note.
If the US economy performs as the Fed currently expects, the benefits of increasing interest rates at least three times this year will outweigh the costs.
With economic growth expected to be above the Fed’s estimate of its sustainable long run pace and the US Dollar weak, the Fed is unlikely to do much harm by continuing its program of gradually lifting interest rates. On the other hand, there will be considerable benefit in minimising the risk of a sharp future adjustment to rates and the associated disruption to the economy and financial markets. This scenario may see and ongoing rise in bond yields which will be a headwind for stock valuations.
The FOMC minutes and rising bond yields put further upward pressure on the US Dollar and led to selling in gold.
It’s been a good day for travel. Qantas; Flight Centre and Webjet have all rallied hard this morning after favourable profit reports. An improving domestic economy and building business confidence are a positive for this sector.