Originally published by CMC Markets
Doubts about the extent and timing of US fiscal stimulus will deliver a sharply lower opening for the Australian stock market this morning.
The nervousness of the past two days looks set to translate into full blown profit taking this morning as the investors respond to both the weak lead from US stock markets and substantially lower commodity prices.
As this market correction extends, investors may now get an answer as to just how much current stock valuations are actually dependent on the assumed boost from the Trump Administrations plans for fiscal stimulus, or whether recent gains have been mainly about improvements already evident in the US and other economies.
Nervousness in international markets last night was driven by concerns over whether the US Administration will be able to achieve the planned wind back of Obamacare and if not, what this means for its broader fiscal strategy. This concern means that the introduction of this legislation to Congress, which is planned for later this week, now looms as a key market event.
Milk and vitamin stocks like Blackmores Ltd (AX:BKL) and A2 Milk Company Ltd (AX:A2M) had a good day yesterday following news that China has indefinitely suspended new cross border e-commerce laws. This raises the possibility that when new arrangements are ultimately finalised, they will be more favourable to Australian exporters like Blackmores.
However, considerable uncertainty remains and while Blackmores’ shares closed up 13% yesterday, they were 5% below their high after approaching technical resistance around the 200 day moving average.