Stocks rally hard as Australia deemed a bargain by European Hunters
Lonsec last night issued client advice stating the Australian market was reaching a capitulation point and that a great long-term buying opportunity was opening.
Equities moved strongly to the upside in Australian morning trade, building on yesterday’s stunning stock market rebound with experts predicting further volatility but rating Australia a bargain.
The morning gains build on the back of what was reportedly the biggest one-day swing in 35 years of Australian stock market history yesterday.
William Keenan, senior equity strategist for research house Lonsec, said the massive turnaround in sentiment had been due to the market hitting levels that were just too oversold.
"(Stocks) were down 20% from the April high at the low, so buyers came in and forced it up," he said.
Keenan said US futures had been down in the morning but during the day had started to recover and acted as a catalyst to turn market sentiment.
Sellers retreated and traders shorting the market had to scramble to cover their positions by buying stock, causing equities to snap back hard.
"It’s too risky to stay on a short market that’s down 20%," he said.
Lonsec last night issued client advice stating the Australian market was reaching a capitulation point and that a great long-term buying opportunity was opening.
"Our debt to GDP ratio is less than 20%, compared with Europe and the US where it is generally greater than 80%," he said.
"We have monetary and fiscal levers, a strong balance sheet and population growth … of three to four million people in the next 10 years," he said.
US equities rose overnight with Wall Street posting 4% gains after Federal Reserve chairman Ben Bernanke said the Fed would keep US interest rates at "exceptionally low levels" for at least the next two years.
In a statement released after the closely watched Federal Open Market Committee meeting overnight, a divided Fed said it would keep rates close to zero until the middle of 2013 due to US economic weakness
