IG Markets – Afternoon Thoughts

IG Markets – Afternoon Thoughts

Across Asia, regional markets are all higher to start the new year after a dismal 2011. The Kospi is the region’s best performer, higher by 2%, while the Hang Seng and the Shanghai Composite are seeing gains of 1.8% and 1.2% respectively. The Nikkei 225 is seeing a more modest advance of 0.7%.

In Australia, the ASX 200 is currently 1.2% stronger at 4105, just off its session high of 4107. Returning for the first day of trading for 2012, the benchmark index is seeing broad-based gains after ending 2011 with three consecutive days of losses. Better-than-expected manufacturing data out of China over the weekend and a strong start to the year for the DAX and the CAC has provided positive momentum for today’s session. Pleasingly for the local market, the heavily-weighted materials and financial sectors are the day’s two best performers.

While it’s certainly nice to see the market 1% higher to start the new trading year (it sure beats being down 1%), you get the sense the market is really just going through the motions. To use some sporting parlance, we are essentially in ’junk time‘, and it will not really be until mid January at the earliest (as market players and money managers return from their festive season holidays), that we will be able to garner a real assessment of the market’s mood for early 2012. We also need to put today’s gains in context. We finished 2011 with three straight days of falls, and plenty of pessimism, so it was not going to take much to see a bit of buying interest come back into the market. Throw in some expansionary manufacturing data from China and a nice bounce from a couple of major European indices, and we were always likely to see a bounce. That said, the major global issues that dominated trade in 2011 (we all know what they are by now) still linger just below the surface, and everyone is acutely aware of this. The awareness of these issues, plus the lack of any near-term resolutions are likely to ensure a hesitant approach to the new year.

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