Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Potential for more volatility

10.33 AEDT, Monday 25 February 2013

Potential for more volatility
By Ric Spooner (Chief Market Analyst, CMC Markets)

The rally in the Australian market since last November has been remarkable for its orderly progression and low volatility. However, investors are starting the new week conscious of the increasing risks that this behaviour pattern may change. Last Thursday’s high turnover, 2% decline provides an insight into the market’s potential for a sharp decline. There is now more potential for significant market moves in either direction.

The rally since November has been more about adjusting valuations to a lower risk; lower interest environment than improved earnings outlooks. The forward PE on the S&P/ASX 200 index has risen to about 15.25. Given the low yields on fixed interest investments, this is by no means an unreasonable multiple. On that basis there remains plenty of scope for market valuations to move even higher.

However, the forward PE is now well above the long term average. Thursday’s decline provides an insight into the scope for a sharp pullback if there is any change to the consensus outlook for a low rate; low risk environment.

The Italian election result and the outcome of Congressional negotiations on the automatic US budget cuts are the major risk events for this week. Both have the potential to influence consensus attitudes toward global risk. Australian markets are likely to remain relatively cautious before these events.

From a technical perspective, we begin the week with the uptrend intact. Thursday’s big drop was not enough to take us below the zone of support around the trend line that has defined the rally since November. Any break below the zone of support around 4973/4951 could indicate that a correction to this uptrend may finally be underway. This support is made up of the 20 day moving average and the early February peak. Last week’s high at 5106 represents initial, minor resistance.
http://www.cmcmarkets.com/


_________________________________________________

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Keep Digging: Seabed Ironsands Miner TransTasman Tries Again

The first company to attempt to gain a resource consent to mine ironsands from the ocean floor in New Zealand's Exclusive Economic Zone has lodged a new application containing fresh scientific and other evidence it hopes will persuade regulators after their initial application was turned down in 2014. More>>

Wool Pulled: Duvets Sold As ‘Premium Alpaca’ Mostly Sheep’s Wool

Rotorua business Budge Collection Limited (Budge) and sole director, Sun Dong Kim, were convicted and fined a total of $71,250 in Auckland District Court after each pleading guilty to four charges of misrepresenting how much alpaca fibre was in their duvets. More>>

Reserve Bank: Labour Calls For Monetary Policy To Expand Goals

Labour's comments follow a speech today by RBNZ governor Graeme Wheeler in which Wheeler sought to answer critics who variously say he should stop lowering interest rates, lower them faster, or that inflation-targeting should no longer be the primary goal of the central bank's activities. More>>

ALSO:

BSA Extension And Sunday Morning Ads: Digital Convergence Bill Captures Online Content

Broadcasting Minister Amy Adams has today announced the Government’s plans to update the Broadcasting Act to better reflect today’s converged market... The Government considered four areas as part of its review into content regulation: classification requirements, advertising restrictions, election programming and contestable funding. More>>

ALSO:

March 2017: Commerce Commission Delays Decision On Fairfax-NZME

The Commerce Commission has delayed its decision on the proposed merger between NZME and Fairfax Media's New Zealand assets, saying the deal is complex and it needs more time to assess the impact on both news content and the advertising market. More>>

ALSO:

Plan Plan: Permanent Independent Hearings Panel Proposed For Planning

The Productivity Commission recommends creating a permanent independent hearings panel like the one that cut through local politics to settle Auckland’s Unitary Plan, for the whole country. More>>

ALSO:

Statistics: NZ Jobless Rate Falls To 5.1% Under New Methodology

New Zealand's unemployment rate fell more than expected in the second quarter as Statistics New Zealand adopted a new way of measuring the labour market to bring the country in line with international practices, and while a growing economy continued to support jobs growth. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news