Australia’s index of 200 top shares hit 9019 on Monday, marking another record.
AUS 200 – Daily Chart
The price of the AUS 200 index has defied gravity lately and has a risk of a pullback to the 8,631 level.
Gains in the market were driven by food company OMG Group, which surged more than 100%, printing and technology firm 333D, which jumped 55% and battery technology firm Janus Electric Holdings, up more than 46%.
Asian shares are rising despite the increase in yields on Japan’s 20-year government bonds, which hit 2.645%, after reaching a 26-year high earlier in the session. Yields on the 10-year government bond also moved higher to a 17-year high of 1.61%. There is a risk of contagion if that move is not contained, but the BOJ will be watching closely.
The Australian market slumped into the April lows on tariff fears, but the move was quickly reversed on trade deals. Mining stocks have been a big factor in the rally, but the broader market is also involved, in areas such as banking stocks.
Fund manager Roger Montgomery said huge amounts of liquidity continued to boost global markets, related to the central bank moves of the financial crisis and COVID-19.
However, he was not involved in the recent surge in price for the country’s Commonwealth Bank.
“We’ve been underweight the CBA simply because the weighting of the banks is so high that it’s illogical or irrational,” he said.
Australia’s central bank cut interest rates recently for the third time this year and signalled further policy easing might be needed to meet its inflation and employment goals.
“Forecasts imply that the cash rate might need to be a bit lower than it is today to keep inflation low and stable and employment growing, but there is still a lot of uncertainty,” the central bank chief said of the move to 3.6%.
Global markets continue to stretch higher despite some background risks and would be risky to buy and hold at these levels.
