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

 

Scoop Business: RBNZ Starts Talks On Tougher Rules For Property Speculators

The Reserve Bank of New Zealand is stepping up preparations to restrict lending to residential property investors as it watches house prices, particularly in Auckland, continue to rise strongly. More>>

ALSO:

Research: ‘Ageing Well’ Science Challenge Launched

Science and Innovation Minister Steven Joyce today launched the Ageing Well National Science Challenge, confirming initial funding of $14.6 million. More>>

ALSO:

Scoop Business: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news