Better than expected consumer sentiment boosts ASX200

While global markets continue to closely monitor developments in China and the spread of the Coronavirus, a breath of relief this morning for the local economy after the Westpac Consumer Sentiment Index defied fears of a more serious decline.

As Westpac Chief Economist Bill Evans pointed out the 1.8% fall to 93.4 in January was less than expected given the catastrophic bushfires that have swept the country in recent months and in light of the -5.8% fall the index experienced during the 2011 Queensland floods, albeit from much higher levels.

The survey was conducted last week, during a period of heavy rainfall that helped bring some of the major bush fires under control. The much needed rain, a booming start to the year for equities and a continued recovery in the housing market, helping to limit the fall in the headline index.

Notable within the details of the report, housing-related sentiment remains strong, with the number of respondents thinking it is the right time to buy a house up 5.7% to 118.8, near the long-run average of 120. The House Price Expectations Index also rose strongly and is up an astonishing 58% over the year!

After enjoying a breather yesterday, the ASX200 has been emboldened by the prospects of today's data being week enough to justify an RBA rate cut in February but not weak enough to suggest the economy will stall. The ASX200 is trading at 7119.1 up 0.75% at the time of writing and rapidly closing in on the trend channel resistance from the 2009 GFC low that comes in currently around 7150 on the monthly chart +/- 50 points.

When taking into account the magnitude of the 2020 rally (+6.50%) compared to the historical yearly returns for the ASX200 and the possibility that the ASX200 turns lower from the trendline resistance mentioned above, there is reason to consider moving to a more market-neutral position in coming sessions and waiting for a pullback of approximately 5% to re-enter.

Source Tradingview. The figures stated areas of the 22nd of January 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.