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Stimulus boost

The stock market looks set for a positive session this morning with investor confidence buoyed by the prospect of ongoing international stimulus.

ECB President Mario Draghi buoyed investor confidence  combining  last night’s announcement of reduced  bond purchases with a decision to leave the QE program open ended and assurances that the Bank’s interest rate would be left near zero for as long as necessary. Together with the Bank of Japan’s easy policy, this ensures that world equity markets will benefit from liquidity support for some time to come.

Added to this mix is growing market confidence that the US Government will add extra fiscal stimulus to this mix in the form of tax cuts. Although not directly relevant  to Australian investors,  better than expected results by Amazon and Alphabet announced after the market will help equity market optimism.

Last night’s relatively moderate taper announcement by the ECB draws a sharper distinction with the US Fed which is beginning to run down the size of its balance sheet and will be contemplating  recent solid economic data including new home sales and durable  goods orders. This difference led to a sharp jump in the US Dollar; a weaker gold price and another rise in US bond yields.

This week’s CPI data indicates that the RBA will be another central banks that’s likely to be well behind the Fed in beginning to tighten monetary policy and a drop in the AUSUSD exchange rate this week has been the result

Macquarie Group will help the ASX 200 with a profit result that beat consensus expectations; announcement of a share buyback and a lift in guidance indicating F18 net operating profit will be slightly higher than last year. This was a solid result that combined revenue growth with lower expenses and should please the market. 

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