Flat start to equities market

12.50 AEST, Thursday 20 December 2012

Flat start to equities market
By Miguel Audencial (Sales Trader, CMC Markets)

The Australian equities market started the session relatively flat today despite notable losses from its US counterpart overnight. In spite of stronger crude oil prices, the energy sector is underperforming the local market in the session so far. This is most likely due to the future demand prospects of the instrument due to renewed concerns over fiscal cliff negotiations. The materials sector is also underperforming as risky assets appear to be out of favour by investors.

Volume is high so far today, but this is most likely due to the expiry of various futures and options contracts. I expect volumes will be subdued leading up to Christmas and all the way to the New Year unless there are any significant developments in the fiscal cliff negotiations.

Just the other day, the Dow gained more than 100 points based on optimism caused by President Obama’s announcement that his camp is willing to adjust the tax-revenue demand to start at $400,000 instead of $250,000. Last night, Boehner indicated the Republicans will stick to its $1 million threshold. This showed just how big the gap is. Investors quickly adjusted their risk profiles and the Dow got punished losing about 99 points.

European markets benefited from rosier news. The German Ifo Business climate index reported a higher than expected figure of 102.4 and Greek bonds got an upgrade from on its credit rating by Standard & Poor’s.

US unemployment claims, US existing home sales, and the Phily Fed Manufacturing figures are due tonight. However, expect these to be placed in the back seat of any fiscal cliff related news.

Web: http://www.cmcmarkets.com/

ENDS

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