Markets over reacted to China slowing concerns, and a tough year ahead for Queensland, creating the prospect for a robust recovery in prices through the rest of the week, according to Herston Economics Clifford Bennett.
Expect strong markets this week, with the Australian market unlikely to wait for the US to come back from the Martin Luther King Jr day holiday. Us industrial production gains in December confirm the resilience and broad based nature of the US recovery.
European nations continued to easily sell their bonds at competitive yields to recent market rates, confirming there is no sovereign debt crisis, according to Clifford Bennett, chief economist at Herston Economics. The US dollar continued its decline, oil remained bid, and Sterling the other market favourite of the week, continued to make strong gains.
Equity markets may well have seen their lows for the year, and this is no time to hesitate according to Clifford Bennett of Herston Economics. With ASXSP200 5,000 likely to be seen very quickly, and a year-end forecast of 5,600, the risk reward opportunity is outstanding.
It is all about the Queensland floods today, and the impact will be far reaching. Investors will be understandably distracted and liquidity could become an issue, even for the Australian dollar. Should the currency start to move to quickly, Clifford Bennett expects the Reserve Bank of Australia would have to intervene to support it. Meanwhile overseas developments have been positive with both Italy and Greece easily raising funds overnight. This fears about Europe have been exaggerated, and the outlook for equity and commodity markets is quite positive. The local share market looks set for steady gains from current levels, while the Australian dollar will remain under pressure for a couple of days.
Oil and the Australian dollar are the favoured markets to watch, while Sterling and Gold are building as well. The European sovereign debt crisis is on its last legs according to Bennett, who expects more positive than negative surprises out of Europe as Greece proves it can achieve and exceed the austerity targets it has agreed with other European nations.
Clifford Bennett provides a report on unemployment numbers and the impact on the outlook of the US economy, with the impact of the economy based on the majority of the population employed resonating a positive outlook. The Australian market looking up, particularly gold and oil, Clifford recommending to watch the Oil stocks closely over the next 72hrs for significant gains. Summarizing Clifford speaks about the local and international markets, briefly touching on the ASX, US, Euro and Portugal, as well as rumours over the media articles published over the weekend suggesting France and Germany wanting to pressure Portugal to request a rescue package from Europe, in which Berlin has refuted.
