IG Markets Afternoon thoughts – Oct 11

Across Asia, regional markets are all convincingly higher following another extremely positive session on Wall Street overnight. The Hang Seng is the region’s best performer, higher by 3.4%, while the Kospi, Shanghai Composite and Nikkei 225 are all seeing more modest advances of between 1.8% and 2.1%.

In Australia, the ASX 200 is currently 0.6% firmer at 4225, down from its earlier session highs of 4245. Gains for the market are once again relatively broad based with cyclical sectors continuing their resurgence having been sold down heavily over the course of August and September. While the information technology and consumer discretionary sectors are seeing the biggest percentage gains, the heavyweight financial, materials and energy sectors are also enjoying solid advances of between 0.6% and 0.8%. The property trusts and consumer staples sectors are the only losers on the day.

With US markets seeing gains overnight of more than 3% on Europe’s “plan to hatch a plan” we posed the question this morning – “you’ve got to wonder when a bit of cautiousness (read profit taking) might kick in?” Early trade across the Australian market suggested many investors may have been asking themselves this very question.

Having once again jumped out of the blocks the benchmark index gave up its early gains falling almost back to the flat line before once again beginning to grind higher. Regardless of these unpredictable intraday moves, investors still need to remain vigilant in the way they approach these markets. They are still at the mercy of headline risk and extreme volatility and we need to remember – Europe still needs to actually deliver on its plan(s), whatever the case may be. There is also the risk that what the Europeans end up adopting is not well received by the market. There is still plenty of risk in the detailing and execution of any plan, hence the advice to investors to exercise caution and not get too far ahead of themselves. Let’s be honest, since the depth of the GFC in 2008 we’ve probably all been guilty of that.

Cameron Peacock
Market Analyst

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