ASX surges as three of the big four banks hit record highs
This article by Sally Rose for the Sydney Morning Herald may be of interest to subscribers. Here is a section:
Fund managers are split on whether the promise of ongoing liquidity from global central banks is enough to justify a positive outlook for the big four bank stocks.
?On Wednesday evening at the conclusion of the US Federal Open Markets Committee meeting that voted to hold interest rates, Dr Yellen revealed the central bank had downgraded its economic growth forecasts, leading strategists to discount the possibility of a first rate rise as early as June.
But the Fed made another critical change to its official post-decision communique by dropping the word "patience" in relation to the need to wait until the economy is strong enough to absorb a rate hike, tempering the impact of the downgraded outlook.
In the United States bond yields and the dollar moved sharply lower, while equity markets got a boost. Investors were also cheered that global liquidity looks set to remain buoyant as Sweden's central bank became the latest to cut rates further.
On the local market three-year Australian bond yields fell to a record low, while the currency jumped to a two-week high against the greenback as shares rallied. Rate-sensitive high-yielding stocks were the biggest beneficiaries.
The S&P/ASX Financials Index has been leading the wider market higher for much of the last four years not least because of accommodative interest rates, reliable world beating yields, full franking and their relative performance particularly compared to the resources sector.
The pace of the banks’ advances has picked up and they are more overextended relative to their respective trend means than at any time in the last few years. However sustained moves below last week’s lows would be required to signal mean reversion is underway.
While the banks remain stalwarts in the wider market the leaders in today’s gain were to be found elsewhere.
Sigma Pharmaceuticals shares commonality with international generic pharmaceutical companies over the last year. The share bounced today from the region of the 200-day MA and a sustained move below 82¢ would be required to question medium-term recovery potential.
Newcrest Mining has benefitted from the weakness of the Australian Dollar in terms of its all-in cost base relative to its sales. The share found support today in the region of the 200-day MA and the upper side of a yearlong base.