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Warning bulls missed signs in great US growth hope

The Australian sharemarket pared early gains but finished in the black as bargain hunters moved in on the major banks and commodity prices supported miners.

The S&P/ASX 200 index climbed to a 0.5 per cent gain but dropped back to close up 13.8 points, or 0.24 per cent, at 5799.6 on volume 18 per cent below average as the index eyed the technical resistance of a double-top at 2017 highs around 5833 points.

The Australian dollar was steady at US76.90¢ but government 10-year yields bounced 4.5 points to 2.861 per cent as some economists warned bullish markets had misread signal when the US Federal Reserve hiked interest rates yesterday and rates would still rise steadily.

The Fed failed to point to a quicker pace of rate hikes this year, sparking equity buying, but others have countered that the recovery remained fragile.

“The Fed seemed to hike in response to stronger equities, narrower credit spreads and a weaker US dollar this year — easier financial conditions — rather than on any additional confidence in the outlook for US growth and inflation,” AmpGFX currency strategist Greg Gibbs said.

Hopes for an earnings boost from US President Donald Trump’s fiscal spending plans have been the catalyst for the surge in markets since November, but his tabled policies have continued to run into staunch resistance, especially his Budget announced on Thursday.

“While the outline is just a proposal for spending measures with the revenue side and incentives (such as corporate tax cuts ) still to be announced, the fact that there was nothing on infrastructure spending goes against the big moves in markets since Trump’s presidential election win,” National Australia Bank strategist Tapas Strickland said.

“Of course, Congress still needs to approve any proposal, but at the minimum the Budget outline suggests Trump’s actions are going to be a belated and diluted version of his pre-election rhetoric and, at worse, it could suggest that not a lot will come from his actions.”

The Shanghai composite index was down 0.2 per cent at the close of the ASX.

Spot iron ore jumped 1.5 per cent to $US92.61 a tonne yesterday and Dalian futures were down one per cent.

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