Australian market set to creep higher today

09.43 AEDT, Tuesday 18 December 2012

Australian market set to creep higher today

By Ric Spooner (Chief Market Analyst, CMC Markets)

Although there was little news to change the market outlook last night, local investors are likely to respond to the positive tone set by US markets. In the current low interest rate environment and with many investors still underweight equities, buyers are conscious of the possibility of a stronger year end.

Despite current low interest rates, price earnings multiples are not demanding compared to long term averages. Those investors underweight equities are becoming more anxious about being left behind if there is a reasonable outcome to the US fiscal cliff negotiations. Democrats and Republicans are showing signs of inching towards middle ground on this issue with the Republicans conceding the principle of tax increases (albeit to the very wealthy) and President Obama reportedly considering concessions on cost of living increases for social security.

The local market will also be supported this morning by another positive day for iron ore which rose to $132.30 yesterday. Despite a likely firm beginning, last week’s index high of 4603.5 will be a technical resistance level for traders today. Chances are this resistance will contain the market. However, a break into clear ground above 4604 could trigger increased buyer momentum.
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