Firm tone likely for today’s market

09.54 AEDT, Tuesday 12 March 2013

Firm tone likely for today’s market

By Ric Spooner (Chief Market Analyst, CMC Markets)

The performance of US markets which managed to grind higher, led by financial stocks in the absence of significant news may be a guide to local investors today.

The S&P/ASX 200 index has recently been grinding higher. Volatility has increased but the uptrend has lost momentum since 20 February. At this stage we look like seeing more of this behaviour.

The key to this lower momentum has been the divergence between high yielding banks and industrial stocks on the one hand and resource stocks on the other. Since 20 February the two biggest stocks in the index tell the story. CBA has risen 5% while BHP has declined 6% after adjusting for its dividend.

Resource stocks are being weighed down by an outlook for increased supplies and concerns over signs of moderating growth in China. Unless resource stocks form a base and begin to recover, we are unlikely to see the overall index regain the strong momentum seen earlier in the year.

Investors in domestically focussed stocks will be looking for NAB’s Business Confidence Index to reflect signs of improvement in consumer confidence in evidence since the New Year. These include stronger retail sales and the housing market showing definite signs of being on the move.

http://www.cmcmarkets.com/

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