Markets dominated by position squaring before German court

Published: Tue 11 Sep 2012 11:44 AM
Markets dominated by position squaring before German court decision
By Ric Spooner (Chief Market Analyst, CMC Markets)
11 September 2012
Precautionary book squaring in advance of the German court and Fed decisions later this week was the dominant theme of US share markets last night. Australian investors are likely to follow suit over the next two days.
After the large rallies of recent weeks, investors face risks in both directions with these decisions. Although a favourable ruling on Germany’s ability to fund the Euro bailout funds and a large Fed monetary initiative would be positive for markets, there is now plenty of scope for markets to fall if either of these decisions disappoints in a material way. In these circumstances, many traders will prefer to wait for the outcome before deciding how to position themselves in the market.
Resource stocks with exposure to copper may be a highlight today. Investors will be encouraged by the rally in copper prices over recent days. The demand/supply balance in the copper market is relatively even leaving it is well placed to benefit from demand improvements that may flow from China’s infrastructure stimulus program and additional monetary easing by the US Fed.

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