Australian Investment Blog

Good morning everyone Overview Market Matters are a market leading advisory service, to subscribe to their free newsletter click here Two macro events are unfolding this week that are likely to determine the medium term direction of equities. Firstly, this morning the Reserve Bank of New Zealand (RBNZ) cut interest rates from 2.5% to 2.25% when most economists were predicting no change. They have also stated that further cuts may be required to increase inflation / economic activity. As a result the Kiwi dollar has slumped. Of course our own RBA is likely to watch the results of market action over the coming weeks very closely as the $A rises (against their wishes).....further rate cuts in Australia may still be a possibility. Market Matters are a market leading advisory service, to subscribe to their free newsletter click here Secondly, in less than 24 hours Mario Draghi is talking with virtually all economists expecting the ECB (European Central Bank) to cut rates; BUT European stocks have rarely responded positively to recent actions by the ECB. Nevertheless, the influence on global currencies is going to be fascinating to watch. 1 US equities US equities have enjoyed a strong 4 week (11%) rally but we believe some consolidation is now likely because the market has reached major technical resistance in the 2000 area. Our preferred scenario remains that US stocks advance to fresh all-time highs BUT a break by the S&P500 back under 1940 will turn us neutral / bearish i.e. 2.3% lower.