After a good start, Australia 200 has bowed to international nerves by softening as the stock market heads towards an early close. Even so it is holding onto a fair bit of yesterday's outperformance of Asian markets
It remains to be seen whether this outperformance is a temporary phenomenon related to this week’s option expiries or whether it indicates ongoing buying interest in the Australian markets that could propel the ASX to yet another significant year-end rally next week.
Real Estate and Utility stocks are being supported again today, continuing a consistent theme for the week. However, the energy sector has led the way this morning. Iraq’s statement that it will adhere to production cuts next year provides further comfort that OPEC will comply with its production target providing a firm base for oil prices next year.
Weaker than expected US personal income and spending data in November provides a taste of one source of risk that could emerge for markets early next year. Markets have run hard on the theme of improved US economic activity and rising interest rates. The November data reverses recent strength leaving trend growth in both spending and income at moderate levels. More data like this would encourage the Fed to continue at a glacial pace with monetary tightening and could lead to a New Year correction in the US Dollar.