Investors Encouraged by Hopes of Europe Solution

Investors Encouraged by Hopes of Europe Solution

By Ric Spooner (Chief Market Analyst, CMC Markets)

The Australian market will open higher this morning as global markets continue the process of establishing a base level from which to await further clarity on how the Greek crisis will be resolved.

Investors are encouraged by the German Finance Minister’s statement that Europe would find solutions in order to strengthen sustainable growth. Traders are likely to see this as indicating increasing unity with France and others on the potential for some form of spending stimulus. It is, however, only a small step and leaves open the question of how any such activity will be funded especially the extent to which Europe generally might take the credit risk on any funding.

The resource and energy sectors are likely to be supported today following ongoing consolidation in commodities such as copper and oil over the past two days.

However, today’s rally is likely to be fairly muted. After yesterday’s bounce and likely higher prices today, the S&P/ASX 200 index is still unlikely to retrace the large decline on Friday. From a technical point of view, the current rally would have to move quite a bit higher to suggest the possibility that a significant retracement of May’s losses is underway at this stage.

ENDS

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