The positive overnight session in US markets has not been enough to fuel the Australian market’s animal spirits. The opening mood is brittle with the ASX 200 index clinging nervously to yesterday’s gains.

The rally in US markets reflects a situation where investors are being given no reason to sell. By the same token, valuations are full. Markets have been relatively capped, struggling to re-establish a strong uptrend.

The low momentum nature of the US uptrend and its weighting towards tech stocks has made it easier for local investors to ignore. The ASX 200 index remains inside last Thursday’s range and a break through the high at 5834 will be needed to re-establish the uptrend.

Moody’s downgrade of Australian banks reflects a known situation and simply follows S&P’s recent move. However after good recent gains, investors may soon become cautious ahead of APRA’s upcoming announcement on revisions to the banks’ capital requirements

Woolworths has followed the lead from Walmart in the US with a steady opening after yesterday’s sharp risk off response to Amazon’s bid for Whole Foods. The strong recovery in Woolworths’ share price earlier this year has made it vulnerable to increased threats of competition be they from Amazon or someone else.

Bargain hunters are not yet active in energy stocks with the sector remaining under pressure this morning. However, with stocks like Woodside Petroleum hitting new lows for the year, positive news on US inventories later in the week may begin to entice those looking for relative value

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