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Australian shares open higher but WOW and WES still under pressure

Announcement posted by de2 Communications 27 Jul 2016

27 July 2016: SYDNEY -- The local sharemarket has opened higher today, shaking off a weaker oil price overnight.

"The Materials sector is leading the way on the back of stronger iron ore prices,” said Tim Nicol, private client adviser at Atlantic Pacific Securities.

“Mixed leads from overseas and expectations of inflation data have largely kept a lid on gains in early trade,” he said. 

According to Nicol, “The key theme we are seeing is that it is very much risk on, the market is finding ways to eke out gains amidst a mine field of data and uncertainty.”

“We expect to see a rate cut in August on the back of today’s inflation data which we have seen the market price in over recent weeks,” he said. 

Nicol added that if further rate cuts proceed, investors will look for interest rate arbitrage plays.

“If we do see a further rate cut investors will look for interest rate arbitrage plays, banks and higher yielding stocks will be favoured in the near term,” said Nicol. 

However, Nicol also noted that stocks in the consumer staples sector are dragging as Woolworths (WOW) gave back a lot of its gains after the recent report. 

“All the recent WOW report has stated is what they intend to roll out, nothing material will be seen from this for some time and investors should be weary of piling in,” said Nicol. 

“There is still no confirmation of the turnaround story, only good ideas and with competitors like Aldi and Costco moving in, it’s likely Wesfarmers (WES) and WOW will continue to come under pressure,” he said. 

Over to miners, production reports have been mixed. 

“Production reports to date have been mixed for the big miners, there are a number of positives to take from recent announcements, particularly lowering costs of production and continuing cost-out stories,” said Nicol.

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For more information, visit:  http://www.apsec.com.au/