Risk is on after deal, but watch for a fall
The buy the rumour sell the fact response to the signing of the Phase 1 trade deal did not immediately materialise after the deal was signed on Wednesday. Instead we saw a strong move in equities and the the Australian Index benefitted on this return to risk appetite soaring above 7000.
Trouble ahead for the ASX 200?
The bloomberg piece I read yesterday made a good case for further trouble ahead for the ASX 200 citing these reasons
- US-China truce is not going to turn around weak earnings per share (this EPS figure is income divided by number of shares and shows a companies bottom line profitability)
- Nation sadly weighed down by the tragic wildfires, which are still ongoing
- Profits turned lower in the middle of last year
- Economy was struggling badly enough for the the RBA to cut rates to 0.75%, which shows the central bank is running out of ammo to help
- Economists are looking to previous natural disasters and forecast a mild downturn, followed by a rebuilding rebound.
Added to this the chances of an RBA rate cut are presently at greater than 50% for February's meeting. See table below
With the fires still raging, we could see worse than expected fall out from these fires. A weakening ASX 200 is certainly an index to watch, so set yourself a reminder with a link to this post to check out price action in the following days. I know I will be !
