IG Markets Afternoon thoughts

IG Markets Afternoon thoughts

Across Asia, markets are mostly weaker after picking up a negative lead from US and European trade. In US trade, markets retreated on the back of disappointing durable goods orders and a plunge in oil prices. While durable goods orders rose 2.2% in March, the increase was less than the 3% gain economists had forecast, and a larger-than-expected rise in crude oil inventories had some commentators interpreting this as a sign of softening demand and confirmation of a global slowdown. Risk appetite was generally subdued with commodities and risk currencies losing ground. Stocks were choppy throughout most of the European session, until the durable-goods orders data triggered the sharp move lower.

For the second successive session, the Aussie market is outperforming the region supported by a weaker Australian dollar. The ASX 200 is a touch higher (+0.1%), while the Hang Seng and Nikkei have dropped around 1% each. In continuation of the trend we saw yesterday, the Aussie market is trading at fresh highs for the year. We are likely to see some follow-through selling in US and European markets at the open, with mild losses expected.

Softer-than-expected data, weaker equity markets and lower commodity prices have all served to underpin the US dollar, which has managed to shrug off Ben Bernanke’s comments from the other night. Jobless claims will be the key US data attraction later today, with investors hoping they continue their downwards trajectory. Apart from revised Q4 US GDP figures, Mr Bernanke will continue his college lecture series today; investors should also keep an eye on Fed speeches from Mr Lacker, Mr Lockhart and Mr Plosser. The euro’s resilience yesterday is a good indication of improved optimism around Europe. Eurozone sources overnight commented that there is absolutely ‘no need’ for an ESM programme for Spain and dismissed any such conjecture. The EU also commented that the private sector will meet most of the funding needs for Spanish banks.

Despite early weakness, the Aussie market was well supported today and managed to outperform the region yet again. After recent consolidation at around 4300, the Aussie market now has a solid support base at those levels. As a result, we are likely to see traders buying any dips into the 4300 region. Most of the money flowed to high USD earning stocks following the strength in the greenback. Some of the best performers today were CSL Limited, Cochlear and Computershare. The disappointing earnings cycle in Australia surfaced again today with Leighton Holdings shares hammered after a massive downgrade. The Aussie dollar has had a tough week, with AUD/USD collapsing from a high of 1.05579 to a low of 1.0341 printed this morning. The pair is looking increasingly bearish and the bulls will be hoping last week’s low of 1.03365 will hold through US and European trade. Tomorrow’s session brings us new home sales and private sector credit data. Investors will continue to look for any hints on what the RBA might do with interest rates next week.

www.igmarkets.com.au

ENDS

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