Greek Polls Will Support Australian Share Market

Greek Polls Will Support Australian Share Market This Morning

By Ric Spooner (Chief Market Analyst, CMC Markets)

Australian investors are likely to be encouraged by the latest opinion polls from Greece. These show that the pro bailout party, New Democracy has a 5.7% lead over the left wing anti-austerity party Syriza. Poll results in Greece have the potential to be the key driver of investor strategy over the next two weeks. If a realistic possibility of an effective pro bailout government emerges, we are likely to see risk being re-priced and a rally in equity markets.

On the domestic front, the release of statistics on private sector credit growth, building approvals and retail sales will all provide an insight into the strength of economic activity. Credit growth and building approvals have both been weak for some time and investors would want to see clear evidence of improvement over a number of months before getting too optimistic. However, a retail sales figure significantly below expectations would feed concerns about consumer caution. It would also increase the potential for a rate cut at next week’s RBA meeting.

While good news from the Greek polls may cause some re-pricing of short term risk, investors will remain relatively cautious until there is clear evidence that Greece will comply with conditions enabling it to receive ongoing funding. The first resistance hurdle for the S&P/ASX 200 index will be the 200 day moving average at around 4210. Investors are likely to need more good news to take the index above that level. Near term support is represented by the November low around 3970.

ENDS

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