Afternoon trading Feb 27

Thanks Oscar and morning crew.


Half-time round-up:

Australian shares all but erased the start-of-month correction as a fifth day of gains pushed the market within 40 points of its pre-collapse level.

The ASX 200 rallied 39 points or 0.6% to 6081, positioning the index for a re-test of 6121, where it closed the day before fears of an acceleration in US interest rates sparked a global sell-off. The benchmark index has been in recovery for three weeks, with the rally picking up speed over recent sessions as Wall Street brushed off an increase in bond yields and the domestic earnings season exceeded expectations.

"Consensus earnings have been revised higher of late and we see consensus EPS [earnings per share] now at the highest levels since 2012 and this has eased the 12-month P/E [price/earnings] ratio somewhat lower into 15.74x," IG's Chris Weston told Fairfax. "There is scope to push into 16x and that would result in the ASX 200 trading into 6100 to 6150. That said... if we see the Aussie index wearing a multiple of 16x it becomes vulnerable to pullbacks and with that in mind, I still see the higher conviction to short the index into this range. For now, though the bulls are in charge."

The twin pillars of the local market, miners and banks, led this morning's advance. The metals & mining sector put on 1.2%, materials 0.9% and financials 0.8%. Select defensive sectors took a hit, including utilities -0.5%, telecoms -0.4% and gold -0.3%.

Asian markets were mixed. While China's Shanghai Composite dropped 0.26%, Hong Kong's Hang Seng improved 0.76% and Japan's Nikkei 1.23%. S&P 500 futures were recently up 1.5 points or 0.05%.

Crude oil futures inched up eight cents or 0.13% this morning to US$63.99 a barrel. Gold futures advanced $5.10 or 0.38% to US$1,337.90 an ounce. The dollar was buying 78.61 US cents.


The repair work on the index is almost complete. Locally, earnings have been mostly solid-to-good and Wall Street has remembered it could be years before higher interest rates really bite. In the meantime there is Trump's tax sugar hit to offset any effects. The spec sector is coming back to life, but volatility has fallen back to pre-correction levels. That's making it hard for me, personally. Sometimes my approach is in sync with the market, other times it offers next to nothing. Right now I'm struggling for entries. Placing plenty of orders but not getting the hits. Patience, dear boy, patience.