Stocks on track in hectic week By Liza Kappelle November 7, 2005
AUSTRALIAN stocks should rise this week but investors could face a volatile week's trading amid a deluge of economic data.
Economists say the recent correction is over, and tip the local stock market to keep rising.
But they also warn it will remain volatile amid uncertainty about inflation and interest rates.
CommSec chief equities economist Craig James said the stock market was back on track after the October correction.
"But we expect that the market will take the stairs rather than the elevator to higher levels over coming months," Mr James said.
"While not ruling out fresh record highs for the sharemarket by the end of 2005, we believe it is more likely to happen in the New Year."
AMP Capital Investors head of investment Shane Oliver said profit growth was still likely to be reasonable, albeit slower.
"Strong growth in China is continuing to provide a strong backdrop for our resources stocks and the underlying net demand for shares remains strong," he said.
The market had a roller-coaster ride on Friday as investors focused on a plunge in BlueScope Steel shares after the company downgraded its earnings outlook.
But the S&P/ASX200 Index clawed back ground to close 5.8 points higher at 4519.5 while the All Ordinaries rose 7.4 points to 4468.3.
On Friday, the US indices also rose, setting the direction for Australian stock traders today.
The Dow Jones lifted 8.17 points to end at 10,530.76, the Standard & Poor's 500 Index rose 0.2 of a point to 1,220.14 and the Nasdaq advanced 9.21 points to 2169.43.
Local investors will have a busy week with many company announcements and release of key economic data expected, including the Reserve Bank's statement on monetary policy today.
Other data expected to be announced includes figures on job advertisements, tourist arrivals, the cashcard retail index, housing affordability, consumer sentiment and lending finance figures.
Company events slated for the week include CSR's interim results tomorrow, National Australia Bank's annual results on Wednesday, James Hardie's interim results on Thursday and News Corporation's first quarter report on Friday.
Mr James said market observers would also watch the Australian dollar which was under pressure from all sides.
The pressures included the narrowing of the interest-rate differential with the US, with Australia still on 5.5 per cent while the US was expected to lift its rate to 4.5 per cent in the new year.
The US economy had solid momentum but the Australian economy was affected by the softer housing sector, he said.
"And finally, lower commodity prices were causing the Aussie dollar to lose friends," Mr James said.
"We believe that the Aussie dollar is at risk of falling into a US71-75¢ range over the next few months, holding through early 2006."
Dr Oliver said low bond yields suggested low returns for bond investors.
