ASX
The ASX 200 index rallied for the fifth straight day as investors remained optimistic about the recovery. The index, which exited a bear market yesterday, is trading at $5,865. It also ignored the growing risks between the United States and China.
The ASX rose partly because of the relatively positive capital expenditure data released earlier today. The second revisions of these numbers were slightly better than the initial numbers. For example, the private new capital expenditure declined by 1.6% in the first quarter. That was a better reading than the previous 2.8% decline. Also, building capital expenditure declined by 1.1% after falling by 5.9% in the previous reading. These numbers show that perhaps, the weakness in Australian economy was milder than earlier expected.
The rising tensions between the United States and China pose a risk to the ASX 200 index. That is because most companies in the index count China as their biggest trading partners. For example, Vale and Fortescue metals sell most of their products to China. Therefore, as the crisis between the two countries continue, the index could be affected.
Remember, a recovering China is part of the reason why the ASX 200 has done well. This is because Australia, through companies in the index, sell more than two thirds of its goods to China. And recent data from China has shown that the country is recovering. Exports, imports, and trade is rising. Also, remember that Australia is also facing tensions with China over its support for a coronavirus investigation.
The best-performing stocks in the ASX are Nearmap, whose shares rose by more than 15%. It was followed by Virgin Money, AP Eagers, Brickworks, and Resolute mining. All these shares rose by more than 5%.
On the other hand, the laggards were Jumbo Interactive, Beach Energy, Wisetech Global, Domain Australia, and Webjet. All these fell by more than 3.7%.
Download our Q2 Market Global Market Outlook
The ASX 200 index has made several milestones in the past two days. On the daily chart, it crossed the 50% Fibonacci retracement level of $5,802. Second, it moved above the psychological level of $5,800, which was the highest level since March 11. Third, and most importantly, it moved above the 100-day exponential moving average. All these means that bulls are now in total control and they will attempt to target the 61.8% Fibonacci retracement level of $6145.
On the flip side, a move below $5,583 will invalidate this prediction. This price is along the 50-day exponential moving average and slightly above the 38.2% Fibonacci retracement level.