GDP upgrades provide support for ASX200

A positive start to the week for the ASX200 following the news over the weekend that the US Senate had approved Joe Biden's $1.9trn Covid-19 relief bill and following Friday's bumper US jobs report for February that shattered expectations.

Charts (4)

Learn more about trading indices

The latest US stimulus package, worth slightly over 8% of US GDP, returns to the House on Tuesday for final approval and is likely to be signed off by President Biden shortly after.

Its key features which include a $1400 payment for individuals with incomes of $75,000 or less ($150k for couples) are expected to see US GDP growth rise to 7% this year, the highest rate since 1984. Within that, Q2 2021 GDP is expected to rise by `11%, the biggest single quarterly rise since 1978.

Reinforcing the rapidly improving global economic outlook, Westpac’s respected Chief Economist, Bill Evans today raised his Australian 2021 GDP growth forecast from 4% to 4.5% following last week’s stronger-than-expected Q4 Australian GDP print.

Although the better GDP number reflects a broad-based recovery, it was consumer spending that provided the majority of the beat. This should ensure that another strong consumer sentiment survey (already near-decade highs) is released on Wednesday, as households draw on their large pile of accumulated savings.

The stronger Australian GDP profile is supportive of the ASX200. Additionally, the ASX200 is likely to weather a continued rise in global yields better than other countries' tech stock heavy indices. As noted previously, higher yields are supportive of the bank and resource stocks that are well represented in the ASX200.

Technically, the ASX200 continues to trade in a choppy fashion, within a well-established uptrend channel. An environment that is suitable for short-term traders, not so good for traders that prefer trending markets.

Trend channel resistance is currently coming in near 7000, where short-term traders may look to short the market in anticipation of lower prices to rebuy. Trend channel support is viewed 6660 area, where short-term buyers are expected to emerge in anticipation of further range trading ahead.  

GDP upgrades provide support for ASX200

Source Tradingview. The figures stated areas of the 8th of March 2021. 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

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.