Australian stocks rebounded from four-straight losing sessions on Wednesday, supported by a strong performance in the financial sector which reacted positively to strong demand for the country’s 30-year bond auction. The S&P/ASX 200 closed higher, finishing up 19.92, or 0.4 percent, at 5227.70.
The index did not get much guidance from U.S. stock indices so it was up to the domestic shares to provide the support. The major support came from the financial sector which was influenced by a strong performance by the so-called “Big Four” banks, which gained between 0.6 percent and 1.5 percent.
Telstra Ltd., a telecoms giant, reversed early losses to finish 2.6 percent higher, posting its biggest daily percentage gain since early May.
The upside was limited by losses to mining giants BHP Billiton Ltd and Rio Tinto Ltd, which slipped 1 percent and 1.3 percent respectively. These stocks were reacting to this week’s weakness in the energy sector.
Despite the higher close, the S&P/ASX 200 is expected to open about 15 points lower due to mixed results in the U.S., led by another steep decline in the energy sector.
Domestically, investors will be monitoring the release of Australia’s employment report. It is expected to show the economy added 15,000 jobs in August, with the unemployment rate remaining at 5.7%.
We could see some volatility today since this is options and futures expiration day. However, accompanying the increased volatility is expected to be sizable volume which may mean we won’t see the wild swings we’ve grown accustomed to seeing.
Although the index is called lower, BHP Billiton and Commonwealth Bank’s American Depository Receipts (ADR) are called higher. In addition, Goldman Sachs upgraded CBA. This is causing come confusion for investors ahead of the opening so we may see some interesting price action.
At this time, investors would like to see some stabilization in the market. Uncertainty over the timing of the next Fed rate hike, next week’s Fed interest rate decision and a possible return of the bear market in crude have been wreaking havoc on investor confidence.
The S&P/ASX 200 trend is down and volatility is relatively higher. This likely means we’ll still see some weakness over the next week, or at least a sideways trade because I don’t believe anyone wants to step in front of the Fed at this time.