Australia’s top share index has faced an initial rejection at the same level that capped gains in October.
AUS 200 – Daily Chart
The AUS 200 has found resistance at the 9,114 level, which halted the index back in October, before a steep correction. This will be a key moment to determine the index’s next path.
Aussie shares powered higher as commodity prices boosted miners and energy stocks, while banks celebrated strong earnings.
“We’re seeing very good support for metals and mining, and there does seem to be a dawning realisation that supply is constrained across the commodity space and demand has been underestimated,” analyst Michael McCarthy said.
“And, that ongoing growth in demand for energy in particular, but also industrial metals and concerns that have seen investors fly into precious metals, means commodities could be the area of focus for at least the first half of this year”.
Commonwealth Bank remains at a high valuation, but all four of the big banks that have reported December earnings or quarterly updates have beaten analyst expectations. Meanwhile, the big miners that make up around 20% of the AUS 200 index have held on to a rise of about 20% cent since the last record highs in October.
This week was strong for the NAB and Westpac banks as investors continued to allocate more to the sector. The Australian market remains expensive, relative to its history, with the 1 year forward price-to-earnings multiple rising to more than 18 times. That puts the index at around 27% above its long-term average.
The current levels will be a key test for the Aussie share market after a sweet spot environment in the key mining and banking sectors.
