Stocks’ rally ran out of steam

“The RBA minutes showed a relatively upbeat view of recent economic data, and the market may be starting to price in the outlook that we may be sitting at the current cash rate for a while,” said Gary Huxtable, client adviser at Atlantic Pacific Securities.

“We saw a sell-off in the likes of the banks and Telstra which have rallied since the last rate cut.”

In the cutthroat supermarket sector, Huxtable said Woolworths and Wesfarmers have been under pressure today. This came on the back of Metcash CEO Ian Morrice’s comments acting as a reminder that the supermarket industry remains very competitive for all parties and margin pressures are likely to remain.

Huxtable added, “Woolworths has been in a trading range over the last week, with the market indicating it’s not willing to pay anything about $21.40 for the share.”

According to Huxtable, the stock (WOW) found resistance once again this morning. “Despite being a household name and blue chip status (WOW), the market clearly wants to see more evidence of a turnaround story before classifying it as too cheap to pass up.”

He added that, “Once solid evidence is provided that they can turnaround their underperforming brands, and gain an edge in the supermarket business, there remains significant upside.”

Energy names such as Woodside, Origin and Santos have handed over much of yesterday’s gains, despite oil remaining relatively buoyant over the last 24 hours.

Whilst the price of the underlying commodity have impact on the performance of these stocks, there are other factors at play.

Huxtable said, “There is much incentive for those wanting to lock in gains and not hold equity risk leading into Friday morning’s UK referendum.”

He noted that along with currencies and European equities, oil is one market likely to experience much volatility later this week.

“This is both due to the long term impacts on the demand and supply dynamics should Britain leave, but also oil’s relation to the US dollar, which could act as a flight to safety if markets do panic following the release of the results,” he added.

                                                                                                               -        ENDS –

For more information or additional comments, please contact:

Eva Diaz

Mobile: 0421333763