Varied leads from overnight markets

09.40 AEST, Thursday 26 July 2012

Varied leads from overnight markets

By Miguel Audencial (Sales Trader, CMC Markets)

Varied leads from overnight markets point to marginal gains to start the Australian market today. Disappointing US New Home Sales Data erased early gains in the US equities markets, while comments from a European Central Bank policy maker that there are arguments in favour of giving the European Stability Mechanism a banking licence gave European markets a boost. Stronger commodity prices will provide support to the Australian Materials sector.

The three major US Equity Indices had varied results with the DOW gaining 0.47%, the S&P 500 marginally lower by -0.03% while the NASDAQ lost -0.31%. This suggests the technology sector underperformed the market last night, with Apple being one of the most notable where it reported revenues less than forecast. The higher DOW also indicates that Blue Chips are the choice of equity investors at present.

The market’s reaction to Nowtony’s comments about arguments present in providing the European Stability Mechanism a banking licence shows how much reliant it is on stimulus. This also provided some breathing room to the Spanish Government as the yield on its 10 year bond dropped. I would expect the boost to be short-lived as there is no current indication that this licence would actually be granted soon.

The price of Crude Oil dropped after data showed that inventories were a lot higher than expected. The price made a recovery finishing up in positive territory due to escalating concerns about the tensions in the Middle East and a weaker US Dollar. There is a good chance we would see a pull-back in the price of Crude Oil in the next few days with production reported to be on a 13-year high and overall supply is currently at elevated levels.

We could see a volatile session in the US equities market tonight as Core Durable Goods, Unemployment Claims and Pending Home Sales are released tonight.
ends

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