Eyes on Canberra as political uncertainty overshadows markets

August 23rd, 2010  by Cale McCulloch

Closing Data

US stock markets continued to slide on Friday night, but did close significantly off the lows made earlier in the session. The downward slide continued on light trading volume and on-going concerns about the economic recovery. At the bell the Dow was off by some 57 points, having fallen by more than 100 points earlier in the session. The S&P 500 slipped 4 points but the tech heavy NASDAQ bucked the trend to finish the session higher by about 1 point.
 
The Energy, Industrials and Telecom sectors led the slide, while some strength in utilities, technology and Consumer staples drove the bounce from the sessions lows later in the afternoon. Trading in Gold was fairly tight, but the precious metal did manage some modest gains of about USD 2.50 a troy ounce, but more importantly has held onto the recent gains as it attempts to use 1220 as a stepping stone higher. Base metals traded broadly lower for the session, down by between 0.5 and 2.5%, while Crude also came under selling pressure, falling almost USD 1 per barrel to close out the week at 73.46 per barrel, representing a slide of USD 10  over the past two weeks of trading. Interesting to note though, that despite the wide spread weakness on the markets, the Volatility index (VIX) dropped about 3.6% on Friday night, showing a lack of conviction in the sell-off, the light volumes and lack of conviction coincide with the summer holidays which have seen hedge fund managers and traders alike move away from the screens and towards the beach.
 
The US market will be watching key data due out on housing, durable goods, jobless claims, and the revised look at second quarter GDP this week for some guidance on the future direction of the economy following a relatively strong reporting season that failed to bring any buying conviction. Domestically for us, all eyes will be on Canberra following the weekend Election that has failed to bring a winner
 
However, for the markets… it will be an interesting week as the uncertainty surrounding the future Government could really go either way in terms of market sentiment as the policies each party represents will have very different implications for Mining, Business and the Australian Dollar (which came under pressure first thing this morning, slipping some 0.7% as of 9am AEST). It is a bit hard to speculate what will come in the next couple of weeks but I have absolutely no doubt that the negotiations between the parties, the Independents and Green member that were elected will see some “changes” to election campaign “promises” even before the Government is formed.
 
Keep a close eye on the miners this week, as political uncertainty may not bode well for them, but having said that any traders/investors wanting to speculate on a Liberal Government will probably support the big guns on the market like BHP and RIO. We are  in for a bumpy week, let’s hope that a swag of domestic earnings due out this week from the likes of BLY, TSI, AWE, FGL, MCC, OSH, ORG, BHP, LGL, SUN  along with a market update from WBC (along with many, many more) can offer some stability to the market in the midst of such political uncertainty.
 
The SPI has us opening just 9 points lower, but I would say that today’s opening level is up for grabs… but likely to be significantly lower without any new news.

Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.

< Return to Market Fox home