IG Markets Afternoon thoughts
Across Asia, regional markets are mixed as traders remained cautious following the weaker leads from Wall Street and the
disappointment from the meeting between President Nicolas Sarkozy of France and German Chancellor Angela Merkel. The
Hang Seng and Kospi are 0.8% and 0.1% firmer while the Shanghai Composite is flat and the Nikkei 225 0.8% weaker.
In Australia, the ASX 200 is currently 1.2% firmer at 4301, just off its earlier highs of 4311. Earlier modest gains
have this afternoon given way to heavier buying interest with equity markets surging on rumours that President Obama
will unveil a very a specific plan to boost the economy, create jobs and control the deficit by mid September.
Gains for the day are broad based with the information technology and consumer staples sectors the biggest percentage
gainers while the heavyweight industrial, financial and energy sectors are all higher by more than 1%. The materials
sector is seeing a more modest advance of 0.7%.
It’s a particularly encouraging sign to see the market open lower and rally. The typical mentality of traders in bear
markets is to ‘sell rallies’; however we’re continuing to see buyers putting money to work. Volumes haven’t been
brilliant but at least the market is moving higher.
Although the domestic earnings season has only just begun, the market seems to be garnering some confidence from the
fact that most results so far have been pretty much in line with estimates. The market was obviously priced for
Armageddon last week so these results are coming as a bit of a relief to participants.
Tonight’s European session will be very interesting. European markets were closed when Sarkozy and Merkel announced
their latest plans to fix the European debt crisis. Markets had been hoping for the introduction of Eurobonds and more
funding for the EFSF; they delivered none of this, which could see traders pushing the sell button as soon as trade
recommences late this afternoon, although the short selling bans that have been implemented will likely help to limit
any potential damage.
ENDS