The ASX 200 index fell 0.5% yesterday. While this is a modest decline, it’s the largest move since Thursday last week. This morning, the index may open moderately higher. The net result will be a continuation of the low trading ranges and broadly sideways movement that has characterised the overall market for nearly two weeks.
Trading is being dominated by response to individual profit results. Results continue to be mixed but good enough to support the index around current levels. Yesterday, positive results dominated with Treasury Wine Estates and Webjet producing handsome pay days for shareholders. However, the index was held back by ongoing selling in response to the previous day’s results from QBE and CSL.
The international macro environment continues to be broadly supportive for stocks. News of stronger than expected retail sales in the UK is a case in point. The first economic statistics relating to the period after the Brexit vote are now beginning to filter through. While it’s early days the picture so far is quite positive. Strong retail sales in July followed good results on employment.
The Aussie Dollar is struggling to gain much traction against a weaker US Dollar following yesterday’s local employment report. The ongoing trend of a skew towards part time jobs is likely to keep wage growth and inflation subdued. This reflects the types of new jobs being created as the economy transitions away from mining and will keep the possibility of another RBA rate cut in focus.
Energy stocks are likely to be supported again today after another strong session for oil over night. While high inventory levels and recent production increases may cap the oil rally before too long, producers now seem likely to achieve higher average prices over the coming period.