Better than expected consumer sentiment boosts ASX200
Tony Sycamore January 22, 2020 5:30 AM
While global markets continue to closely monitor developments in China and the spread of the Coronavirus, a breath of relief this morning for the local economy after the Westpac Consumer Sentiment Index defied fears of a more serious decline. As Westpac Chief Economist Bill Evans pointed out the 1.8% fall to 93.4 in January was less than expected given the catastrophic bushfires that have swept the country in recent months and in light of the -5.8% fall the index experienced during the 2011 Queensland floods, albeit from much higher levels.
While global markets continue to closely monitor developments in China and the spread of the Coronavirus, a breath of relief this morning for the local economy after the Westpac Consumer Sentiment Index defied fears of a more serious decline.
As Westpac Chief Economist Bill Evans pointed out the 1.8% fall to 93.4 in January was less than expected given the catastrophic bushfires that have swept the country in recent months and in light of the -5.8% fall the index experienced during the 2011 Queensland floods, albeit from much higher levels.
The survey was conducted last week, during a period of heavy rainfall that helped bring some of the major bush fires under control. The much needed rain, a booming start to the year for equities and a continued recovery in the housing market, helping to limit the fall in the headline index.
Notable within the details of the report, housing-related sentiment remains strong, with the number of respondents thinking it is the right time to buy a house up 5.7% to 118.8, near the long-run average of 120. The House Price Expectations Index also rose strongly and is up an astonishing 58% over the year!
After enjoying a breather yesterday, the ASX200 has been emboldened by the prospects of today's data being week enough to justify an RBA rate cut in February but not weak enough to suggest the economy will stall. The ASX200 is trading at 7119.1 up 0.75% at the time of writing and rapidly closing in on the trend channel resistance from the 2009 GFC low that comes in currently around 7150 on the monthly chart +/- 50 points.
When taking into account the magnitude of the 2020 rally (+6.50%) compared to the historical yearly returns for the ASX200 and the possibility that the ASX200 turns lower from the trendline resistance mentioned above, there is reason to consider moving to a more market-neutral position in coming sessions and waiting for a pullback of approximately 5% to re-enter.
Source Tradingview. The figures stated areas of the 22nd of January 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.