Positive economic drivers few and far between

15.41 AEDT, Friday 26 October 2012

Positive economic drivers few and far between

By Tim Waterer (Senior Trader, CMC Markets)

The cupboard is starting to look a little bare when it comes to positive economic drivers for financial markets, and the effect is a stalling of upside momentum. US corporate earnings continue to deflate investor confidence and cause a reassessment of where major stock indices are currently at and where they should be, which is sapping the market of buying impetus at present. In short, traders are starting to get desperate for a feel good economic indicator from somewhere, and if one does not arrive soon the soft patch in markets witnessed this week could develop into a more pronounced downturn.

Commodity prices continue to be stifled by global demand concerns with US Corporate earnings season not exactly painting a picture of economic health for the coming year. As such, oil remains particularly vulnerable given the absence of demand concerns from seemingly anywhere around the globe at this stage and the price movements in the last week reflect this.

The AUD was in sliding mode today with investors across Asia taking on a defensive mindset after the earnings miss by Apple, as well as the fact that the US GDP print tonight could create an extension of the current risk-off environment through to next week if we get a result lower than the forecast. Generally today, the AUD followed Asian bourses lower with traders instead opting to buy the lower yielding Greenback. This evening I expect the AUD to track a path similar to US equities. If we have another session of apprehensive trading the AUD will likely lose grip of the 1.03 handle.

Australian equities were in reverse gear to end the week with traders adopting a guarded approach after another round of disappointing US corporate earnings. The ASX200 was unable to maintain its status above the 4500 level given the negative headwinds which hit our market from offshore this week. How US GDP data shapes up this evening will likely shape sentiment heading into next week, but if recent indicators are anything to go by the result on US growth will likely not be fantastic so the recent weakness may extend to next week.
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