It seems that neither the bulls nor the bears can concentrate long enough to develop a decent trend in the Australian stock market at the moment. In keeping with the recent pattern, the market is now enjoying a few days rally after a brief burst of doom and gloom. This is a useful situation for short term traders, adept at taking advantage of quick oscillations within the recent range.
The stock market will open higher today, helped by the coincidence of sharp rises in copper and oil prices with solid iron ore gains lending support. The rally in copper appears to have been triggered by reports that China will ban scrap containing copper while the oil market is reacting to the possibility of a sharp drop in US inventories.
It’s not unusual for market news events to be clustered within a short time frame. That’s the situation for currency traders who face a potentially big 24 hours that sees release of Australia’s quarterly GDP data; a speech by the RBA Governor and the results of a Fed meeting. In these circumstances, markets can be guarded in their response to the earlier events. The recent rally in the Aussie Dollar makes it potentially more vulnerable to bearish news in the form of weaker than expected underlying inflation or a relatively hawkish stance from the Fed on the timing of its balance sheet reduction.
Yesterday’s news that Woolworths will reduce the range of Mount Franklin water products it stocks represents another incremental blow to Coca Cola Amatil in its efforts to diversify its revenue base away from sugar based and carbonated drinks in Australia. The sharp decline in the stock price yesterday creates the possibility that CCL is set for another test of support around $7.90
