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Stock markets see out the year end in a confident mood

Stock markets look like seeing out the year end in a confident mood.

By Ric Spooner (Chief Market Analyst, CMC Markets)

Friday’s news that 3rd quarter GDP growth in the US has been revised higher to 4.1%pa has set the scene for world equity markets to see out the year on a positive note.

Although US markets are by most measures already pretty fully priced, investors are being given no reason to sell. As is often the case in the early stages of central bank tightening cycles, next year’s economic outlook is for improved growth especially in the light of reduced drag from the government sector. This creates a sweet spot for markets. While the Fed has begun to taper, interest rates are likely support both the market and economic activity remaining below normal levels for some time to come.

With little on the agenda for domestic news, the local market is likely to be led by international markets between now and the New Year.

Technical resistance around 5285 in the S&P/ASX 200 index might give traders a clue about near term prospects for our market. Resistance around that level consists of both the 50 day moving average and the late November low. A break above this level could be a sign of near term strength and indicate a rally towards the October peak at 5457. However, unless the index can take out this 5457 peak, from a technical point of view, there remains a possibility that the downward correction that began in October has more work to do before it’s completed.


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