IG Markets: Afternoon Thoughts for 30/08/2011
Good afternoon,
Across Asia, regional markets are mostly higher following the stronger leads from Wall Street overnight.
Stronger-than-expected US consumer spending data helped boost sentiment while a big jump in financials is buoying Asian
names. The Shanghai Composite is the best performer, up 1% while the Kospi and Nikkei 225 are 0.6% and 0.3% firmer
respectively. The Hang Seng is seeing some selling pressure, currently down 0.9%.
In Australia, the ASX 200 is currently 01% firmer at 4267, well off earlier highs of 4308. After another session of
strong gains on Wall Street it was highly probable today would be another fairly positive session for the local market.
While the advance might not have been as strong as we had been hoping for this morning it is nonetheless encouraging to
see our market-driving financial, materials and industrial sectors among the day’s best performers. The only losers on
the session are the defensives, with the healthcare, utilities, telecoms and consumers staples all lower between 0.1%
and 3.8%.
After a couple days of gains we’re starting to see some caution return to markets. Last night’s gains on Wall Street
were on very light volumes, which many market participants are noting. We’ve got a big couple of days worth of data in
the US so it looks traders are beginning to close out positions and take profits.
Locally, that has been the order of the day after the ASX 200 ran into technical resistance north of the 4300 level It
tried to test the August highs of 4324 this morning but could only get as high as 4308 before the bulls were overwhelmed
by the sellers. The last six trading days has seen the XJO put on nearly 5% so it is hardly surprising to see some
profit taking coming into the market.
With consumer confidence, the ADP jobs report, ISM Manufacturing, jobless claims and the nonfarm payrolls report all due
in the coming days, there is going to be a lot of nervousness around. One or two below expectation numbers and we could
easily see a return of the fear and panic that gripped markets a few weeks ago.
The market could also be seen as vulnerable given it has rallied ahead of these big economic reports. We think a lot of
participants will be employing a ‘wait and see’ approach as we navigate through the next few days.
ENDS