Originally published by CMC Markets
Recent stock market action has seen increased volatility in some market sectors and this was in evidence over the past 24 hours. After suffering brief bouts of profit taking, the US info tech and Australian healthcare sectors have proven difficult to resist for trigger happy investors in search of relative value.
The US profit reporting season looks likely to be a key market driver over the next couple of weeks. Full valuations suggest that the market is yet again going into this reporting season anticipating results to outperform consensus analyst expectations.
Another good US profit reporting season will be very supportive for stock markets and continue the current bias against being too trigger happy in response to potential risk events. However, full valuations mean there’s not a lot of margin for error. Stocks that underperform are likely to be dealt with harshly
Three major US banks will report profits tonight and may set the tone for the international finance sector following a rally by financial sector stocks in US trading last night.
Iron ore stocks are getting good news in terms of both price and volume. The spot iron ore price rose again yesterday while China’s imports for the 6 months to June were up 9.3% on last year. The question for investors is whether this will be about as good as it gets, given the strong gains in share prices over recent weeks.
Good news on iron ore helped a strong session for the Australian dollar which rallied against most major currencies. Against US dollar it is pushing through trend line resistance that has contained it since April last year and into a resistance zone that extends up to about .7835. This means next week could be a key week for Aussie dollar, with a lot of news and data releases on the calendar. Key amongst these could be the employment data. Despite signs of ongoing strength and good employment conditions in business indicators like NAB’s Business Conditions Index, Australia’s notoriously volatile employment data is due a bit of mean reversion.