The Australian sharemarket snapped a losing streak on Tuesday, but cautious investors have seen the market open slightly lower on Wednesday. Investors are largely waiting for the release of key economic data, such as unemployment figures today, which will give more details on the state of the economy.
While some investors took profits after this week’s gains and others stood on the sidelines, the wider question is: has the market got enough steam to continue its climb?
Other global markets, such as the US and UK markets, have both had good weeks so investor sentiment is broadly more positive.
After hitting highs in early 2015, the wider market – as measured by the All Ordinaries Index – fell into a hole early this year and has spent the rest of the year clawing its way back. To put is in perspective, the All Ordinaries began Wednesday at 5511.70. Compare this with the high of 5936.30 in March 2015, and then the fall to 4816.60 in February this year.
Driving the market higher this week have been mining stocks, which have been severely out of favour lately.
Commodity prices, which have drifted for some time, now seem to be moving higher again. Oil, coal, iron ore and copper are all firmer, and that has been good news for stocks such as BHP Billiton and Fortescue and Oil Search.
Retailer Woolworths has also been hammered by the market lately, but rebounded more than 5 percent on Tuesday on the news that Caltex would buy its petrol stations.
James Packer’s Crown Resorts, which was punished on Monday on news of the company’s troubles with Chinese authorities, also made gains.
Stocks to look out for on Wednesday are Origin Energy, the Reject Shop and glove and condom maker Ansell, all of which have their annual general meetings.
On currency markets, the Australian dollar is buying US77 cents today, but according to a report from private equity firm Caryle, it will climb to US85 cents in five years and could go as high as US90 cents due to low US interest rates.
Remember when the AUD and USD were at parity in around 2010. That made for some nice holidays, but also some headaches for Australian exporters.