Firm open expected

09.45 AEDT, Tuesday 23 October 2012

Firm open expected
By Ric Spooner (Chief Market Analyst, CMC Markets)

The Australian market is likely to open firm today. Positive momentum at the end of the US market and a better than expected result from Yahoo should lead to a mildly positive sentiment in the local market this morning.

Today looks like being a news free day for the market with little on the calendar to change investor opinion. Market action in China could be an exception.

China’s stock market has been growing in confidence recently. From a technical point of view it has been encouraging to see Chinese stock indices push through resistance recently. In similar fashion iron ore prices are nudging through resistance at $117 per tonne. With plenty of cash sitting on the sidelines looking for a chance to join the equities rally, a positive tone in China today may encourage local buying and overcome the negative lead from weaker overnight commodity prices.

Traders are likely to remain cautious on the banking sector today ahead of tomorrow’s CPI release and Thursday’s profit report from ANZ. Although a benign CPI figure is anticipated, a higher figure could threaten the outlook for the now much anticipated pre-Christmas rate cut. An ANZ earnings report that equals or exceeds market expectations would be a bullish development for the banking sector, potentially reigniting the yield hunt by investors who were a bit rattled by NAB’s disappointing pre-announcement last Friday.

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