15.13 AEST, Friday 28 September 2012
Non-defensive assets enjoy reversal of fortune
By Tim Waterer (Senior Trader, CMC Markets)
Non-defensive assets have enjoyed a reversal of fortunes late in the week, with traders thankful for ‘small mercies’
such as the Spanish budget result. While the budget result from Spain was undoubtedly a step in the right direction, we
are still far from reaching the ‘End Game’ on the entire Eurozone saga. Investor spirits may be buoyed momentarily but
the budget result could soon be forgotten if Spanish yields start escalating again.
With the emergence of some good news stories in recent days, the US Dollar has given way to higher commodity prices.
Gold is now appearing primed for a run towards US$1800 and it could get there either through a continuation of the
general bounce in commodities or via an inflation-hedge trading approach. Given that gold can be pushed higher via
either of two different trading strategies it would almost appear that a move north of $US1800 is more a case of ‘when’
not ‘if’.
The Aussie Dollar story this week has closely mirrored that of both international equity markets and commodity prices.
The headwinds against risk assets earlier in the week have receded in recent days, and this has opened up a path for the
AUD to make its way back to 1.0450. Investor penchant towards safe haven currencies as we round out the week will decide
whether the AUD has a legitimate look at 1.05 or conversely if it subsides to the 1.0375 region.
Trading appeared to be largely of the non-committal variety on the Australian sharemarket to end the week, with
investors appearing unconvinced by the rally on US equities. With more time having elapsed since news of the Spanish
budget was first announced, our market seemed to have a more measured reaction as evidenced by the trading pattern of
the ASX200 today which was anything but jubilant. The fact that the Australian market did a u-turn yesterday to end
higher also contributed to the indifferent showing of the local market today.