IG Markets - Afternoon thoughts

IG Markets - Afternoon thoughts

Good afternoon

Across Asia, regional markets are mixed ahead of tonight’s non-farm payrolls report and concerns about what a sharp slump in Chinese property prices might mean for the nation’s banks. Among the region’s major indices, the Shanghai Composite has turned around earlier losses to be higher by 0.1%, while the Nikkei 225 is weaker by 0.2%. The Kospi and the Hang Seng are seeing gains of 0.1% and 0.5% respectively.

In Australia, the ASX 200 is currently 0.2% weaker at 4555, having traded as low as 4545 earlier in the session. The market is relatively defensively positioned with the consumer staples and healthcare sectors as the two standout performers while the materials sector is currently flat having clawed back from earlier losses. The financial sector is the biggest loser on the day.

Tonight’s private sector component of the non-farm payrolls report looms as a tipping point for investor psyche and the near term prospects of global equity markets. While equities had a reasonable rally over the course of July on the expectation of a pretty robust US earnings season (which we’ve had), there’s always been something holding back investors from unleashing the throttle – namely sketchy economic data. A decidedly bullish private sector jobs print could be just the catalyst “sidelined money” has been waiting for to enter the market and push indexes above their current trading ranges.

It will also be interesting to see if a strong jobs number is USD positive or USD negative. Before the European debt crisis kicked into high gear, positive US data saw the USD sold off with money moving into the risk currencies such as the Euro and AUD. At the peak of the European debt crisis money flowed out of the Euro and into the Yen, the USD and Gold. Now it’s not quite so clear. A poor US number could invoke fears of further quantitative easing and be USD negative or it could see the USD bought as a save have trade. Probably the purest gauge of the markets’ reaction to tonight’s data will be the USD/Yen cross A weak number will no doubt see the Yen rise against the USD while a strong number will see the opposite occur.

ENDS

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