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Wall Street rally signals early pick-up

By Renee Barnes

October 16, 2005

 

The market should rally tomorrow after Wall Street made solid gains on Friday night.

 

US stocks broke out of a two-week slump as a decline in oil prices enabled investors to look past the biggest increase in inflation since 1980.

 

Better-than-expected figures on retail sales, excluding car sales, contributed to the rebound, cutting the market's losses from its worst fourth-quarter start in five years.

 

AMP Capital Investors chief economist Shane Oliver said the Australian market should rally by 30 to 40 points tomorrow as it takes its lead from Wall Street.

 

He said: "We will definitely see a bounce on Monday, but I would expect the rest of the week to remain volatile. It is too early to say that we have seen the weakest point: historically, corrections tend to last for more than two weeks."

 

He said all eyes would turn to the US as its profit reporting season ramped up.

 

Commsec chief equities economist Craig James predicted the market would rally by 20 to 25 points.

 

"The bottom line is that there is a lot of value out there. The price to earnings level is just over 15 and I think we will find a lot of investors out there encouraged by cheaper stocks," Mr James said.

 

With oil prices looking to be on the way down energy stocks might suffer, but this would be viewed positively for the broader market, he said.

 

Crude oil dropped 0.7 per cent to $62.63 a barrel in New York on Friday night on indications that prices were reducing consumption.

 

Mr James said: "This should help ease some of the inflationary concerns and therefore any concern about interest rates. Interest rates have remained stable and should continue to do so until next year."

 

 

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ASX likely to open in positive territory

October 16, 2005 - 1:59PM

 

The Australian share market should open in positive territory on Monday despite ongoing seasonal volatility, amid signs inflation in the United States is under control.

 

CommSec chief equities economist Craig James said he expected a positive start to the week.

 

"I expect the Australian share market to rise 20 to 25 points," he said.

 

"We have got a positive lead-in from the US, the Dow Jones up 70 points, and the inflation result should provide a degree of relief for investors."

 

Investors have been jittery in recent weeks about rising inflation and interest rates in the US, but the US Labour Department said on Friday its core consumer price index grew just 0.1 per cent in September.

 

Accounting for energy and food, which are excluded from core inflation, the CPI jumped 1.2 per cent. The result indicated that higher prices had so far been limited to the volatile energy sector.

 

Wall Street also brightened after September retail sales showed US consumers were still spending despite fears of a slumping economy.

 

The Dow Jones industrial average gained 70.75, or 0.69 per cent, to 10,287.34.

 

The Standard & Poor's 500 index added 9.73, or 0.83 per cent, to 1,186.57, and the Nasdaq composite index rose 17.61, or 0.86 per cent, to 2,064.83.

 

"Core inflation in the US is very much under control," Mr James said.

 

With valuation levels improving markedly in the past fortnight, there continued to be a lot of value in the Australian market, he said.

 

"The price earnings ratio is probably in the mid-to-high 14s, which suggests that there is a lot more value in the market now," he said.

 

"So, expect bargain hunters to be trawling through the market on Monday."

 

Energy stocks could weaken after oil prices dropped further on Friday, while mining stocks - hit hard on Friday by falls in commodity prices - were likely to be encouraged by reasonably stable gold and base metal prices, he said.

 

A barrel of light crude slid 45 cents to $62.63 on the New York Mercantile Exchange amid reports of the reopening of more Gulf Coast refineries, shut down due to hurricanes Katrina and Rita.

 

The annual general meeting season will kick into gear in the week ahead, with the Australian Gas Light Company stepping up on Tuesday, and Blackmores, GUD Holdings, Country Road, and the Reject Shop on Wednesday.

 

AGMs for Cochlear, Origin Energy and BHP Billiton will take place on Thursday, while capping off the week will be Rural Press, Boral, Billabong International, Amalgamated Holdings and News Corp.

 

The market will also be eagerly awaiting news of how the retail sector is faring when Woolworths delivers its first quarter sales results on Wednesday.

 

With a quiet week locally on the economic front, the market will also looking for guidance from earnings season in the US, with around 120 companies due to deliver profit results this week.

 

ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚© 2005 AAP

 

 

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IMO depending how deep is this "correction"...I can see 4.000 points approaching rapidly.

http://www.sharescene.com/html/emoticons/ph34r.gif

 

All Ordinaries 4289 -56.1

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In reply to: trader10 on Friday 21/10/05 10:29am

A bit of support in later trading brought the indices back up. I expect a bit of a bounce in the next week before heading back down to around 4200, maybe 4100. Once there I would expect pretty volatile trading before resuming a slow up trend, probably late November/December.

 

Basically, the fundamentals haven't changed in the market. It seems to me that the trigger for the correction was jitters over inflationary pressures. It has only been hawkish fed sentiment that has caused the downturn and the lemming effect has reenforced it. With interest rates still at historical lows, especially in the US, company profits at historical highs and unempoyment at historical lows there is a fair bit of room to move monetary policy to counter inflationary pressures without too great an impact on economic growth, If the result is a correction in asset prices that have had a strong run recently, this isn't such a bad thing. Most fundamental measures would put a lot equities as under-value at present, but technicals will probably force the market lower. You will see bargain hunters move into the market before long and the funds will have to start putting their money in soon, especially once the geared retail investors have rebalanced their positions. Just don't expect the +50% yearly growth of the last year.

 

AS I have said on other posts, buy on the way down, the fundamentals look good. They will be good value buys in the medium to long term. China is not going to stop growing even if the US does and Oz is becoming more and more linked to Asian demand.

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In reply to: fraser on Friday 21/10/05 04:49pm
QUOTE
Not dead yet

The local market dropped like a stone after the open, but a late comeback from select stocks in the banking, industrial and materials sectors saw the indices claim back much of the ground lost earlier in the day.

Offshore weakness and economic concerns ruled the roost and applied much of the the dayÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s pressure, but a steady stream of upbeat news eventually had investors whistling a slightly happier tune by the close.

 

http://www.tradingroom.com.au/news_researc...65800_0884.html

 

Aust stocks rally in late

Source: AAP

Published: October 21 2005, 4:58PM

 

http://afr.com/articles/2005/10/21/1129775950803.html

 

QUOTE
Stocks try to throw off slump
Oct 21 16:55
AAP


The sharemarket rallied in afternoon trade on Friday after falling more than 1 per cent due to inflationary pressures and interest rate concerns, as well as an overnight slump on Wall Street.

 

 

Well, thanks for the view and agree in various of the angles.....China definetely will continue their growth at least until 2008 - 2010 IMO.

 

It's difficult to analyse the data coming from US EU and then ours and Asia...it's a mix and a balance...

 

US is calling the shots atm and we are following.... I hope for a Great day at DOW tonight and a rebounce for us here on Monday....and the rollercoaster continues....

Well, Christmas is around the corner and I would think a rebound in November and December will be inevitable so, a quickly correction this month is not that bad.

 

cheers fraser and have a great weekend mate http://www.sharescene.com/html/emoticons/wink.gif

 

 

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Our market's getting sluggish again this arvo just like last week...friday ???

 

All Ordinaries 4309.3 -15.9 another 300 points to go ??? before Nov ? Don't think so JAN !

 

And US looking good for this week ????

 

Dow Jones +2.00 10242.00 10/24 0:49am

 

Seeking to rally

 

Next week is key for stock market investors, with earnings and reads on GDP and housing on tap.

October 23, 2005: 8:29 AM EDT

By Alexandra Twin, CNN/Money staff writer

 

NEW YORK (CNN/Money) - Having been knocked down to potentially pivotal lows, the stock market in the week ahead could be primed for a big snap back rally. Maybe.

 

http://money.cnn.com/2005/10/21/markets/su...ahead/index.htm

 

Any thoughts ???? http://www.sharescene.com/html/emoticons/ph34r.gifhttp://www.sharescene.com/html/emoticons/smile.gif

 

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Inflation reaches three per cent

Source: AAP

Published: October 26 2005, 11:38AM

 

The Australian Bureau of Statistics said the biggest increases by sector were automotive fuel (up 11.6 per cent), house purchases (up 1.2 per cent), domestic holiday travel and accommodation (3.4 per cent), property rates and charges (five per cent), beef (1.8 per cent), restaurant meals (1.4 per cent) and water and sewerage (three per cent).

 

But there were some price falls, with pharmaceuticals down 4.8 per cent, audio, visual and computing equipment (down 1.7 per cent) and telecommunications (down 0.7 per cent).

 

The bureau said if the sharp rise in fuel was taken out of the equation, inflation rose 0.5 per cent during the quarter.

 

 

Aust CPI rises 0.9 pct in Sept quarter

Source: SYDNEY, Oct 26 AAP

Published: October 26 2005, 11:31AM

 

Australia's consumer price index rose 0.9 per cent in the September quarter, for an annual rate of 3.0 per cent, the Australian Bureau of Statistics said.

 

In the June quarter, the CPI rose 0.6 per cent

 

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In reply to: trader10 on Wednesday 26/10/05 11:50am

Interesting article re Bernanke in smh this morning:

 

http://www.smh.com.au/news/world/dubya-sho...0239521953.html

 

Get past the nationalistic sentiment on Macfarlane and there is some interesting analysis of the role inflation is playing in world economies at present and the response of reserve banks.

 

Of interest is the affect of the so called labour cost arbitrage with Asia reducing the cost of manufacturing and therefore putting downward pressure on inlfation, especially on consumer discretionary items. This has allowed economies to absorb the rising input cost (energy) more effectively than they might have in the past.

 

The ABS figures are interesting. Pharmacuticals especially, they often rise with increased energy costs. Good to see it stick within the 3% mark for the year. However, I am more interested in the US figures. As I see it, US consumer demand is propping up Chinese manufacturing which is fuelling Chinese growth. Australian wealth is still very concentrated in resources (which is a great economic safety net, but this is another discussion) and we are currently very exposed through this sector to Chinese growth. If the US falls into recession, then this equation falls apart somewhat. Very macro-focussed, there are a lot of minor issues within this equation, but this is what I am looking to drive growth in the future.

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  • 1 year later...

Hello All;

 

I am curious if anyone has a view on the All Ord. current - 5/1/207 - state??

 

I have been picking up "weakness" since - believe it or not - late November 2006. Lately I am picking up strong signals that it is ready to fall.

 

does anyone have any comments on the All Ord."state of health"??

 

Cheers;

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In reply to: Vyking on Sunday 07/01/07 07:10am

it's currently showing weakness and you're always going to get retracements in a bull market. metal stocks may take a hammering. i fancy that by the end of this fin year, the AOI will put on another 20%.

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