IG Markets - Afternoon thoughts

Across Asia, regional markets are mixed despite the positive leads from the US overnight and the continuing tensions in Korea and the Middle East. The Nikkei 225 and Shanghai Composite are the best performers, up 0.8% and 0.4% respectively. However, on the downside, the Kospi and Hang Seng are 1.2% and 0.1% softer respectively.

In Australia, the ASX 200 is currently 0.1% firmer at 4836, but well off its earlier highs of 4856. Gains for the day are being seen across the materials, consumer staples and industrials sectors while downside pressure is evident across the healthcare, financials and energy sectors. As expected, the RBA left the official cash rate on hold with the market having next to no initial reaction to the accompanying statement.

The local market seems to be in a state of limbo at the moment. There’s a lot of uncertainty clouding the investment decision; whilst we’ve seen no real new developments out of the Middle East or the Korea’s, safe-haven assets are continuing to be well supported, indicating markets are still worried about the geopolitical tensions. These situations could turn, for better or worse, on a dime; this is probably the reasons there’s still a lot of “upside risk premium” priced into precious metals and oil.

On the domestic front, all of today’s data was basically smack bang in line with expectations; there were no surprises from anywhere. There had been some rumblings recently that rate hikes could be back on the agenda soon; however, the RBA minutes did not indicate this whatsoever. The statement was almost identical to last months and indicates the RBA is very comfortable with policy settings. It probably sees itself as a little ahead of the curve.

The market had fallen to session lows ahead of the RBA announcement, indicating a level of cautiousness. Given the lack of hawkish comments, we thought the market may have recovered some of this morning’s lost ground. So far, it’s unchanged.

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