Morning Report Monday 15th February 2016
On Friday night the US S&P Banking Index surged 6.2% and the European banks were not far behind, rallying 5.4%.
The obvious question people are asking is “have they bottomed, should we be buying the Australian Banks?”
Market Matters believes the local banks are building in some bad news on the economic front but until the spreads, which determine the cost of corporate borrowing narrow, caution is warranted - they are historically a lead indicator for stocks.
When we look at the technical picture for the major banking indices, a 2 month bounce / consolidation appears likely for the European banks whereas the American banks may be more positive. The correlation between our local banks and these larger international banking indices is significant implying our banks will rally for 1-2 months.
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