15.09 AEDT, Wednesday 30 January 2013
Onwards and upwards theme continues for financial markets
By Tim Waterer (Senior Trader, CMC Markets)
Buying momentum continues to be on the side of higher yielding assets, with traders clearly liking what they are seeing
in terms of both macro indicators and corporate earnings. Apart from the occasional blip such as the most recent US
Consumer Confidence reading, by and large the economic indicators are building a strong case for global economic
recovery and the prices of risk assets are responding accordingly. However, the case for economic recovery faces stern
cross examination in the form of the US Non-farm Payrolls report come Friday.
The bar is set almost embarrassingly low for the vast majority of key macro indicators for the US, and anything mildly
positive is serving to feed more buying enthusiasm. The prevailing market psyche is easily pleased, with traders
relieved to see evidence of mild US growth rather than worrying about the headlines from 2012 mostly revolving around
Greece. The major US indices are hitting multi-year highs and there could still be more to come while ever data is
supportive of the ‘growth’ narrative, which has been the central theme of financial markets so far in 2013.
The Australian sharemarket operated in nonchalant fashion today, with the local bourse touching the 4900 level while
also consolidating Tuesday’s bumper gains. Today it was the turn of Materials stocks to push higher with commodity
prices having enjoyed a positive offshore session overnight. Meanwhile, banking stocks took what looked like a rest day
after their recent push. The story for the ASX200 so far in 2013 has been ‘onwards and upwards’, and while history tells
us that the golden run will eventually end, in this instance we could be seeing the 5000 level reached on the index
before a pullback happens. Trading conditions remain conducive to the search for yield and this is likely to continue
while macro indicators globally show signs of progression.
Tuesday’s NAB Business Confidence reading came at just the right time for the AUD which had looked likely to again slip
below 1.04. Confirmation today of an Australian election in September had little impact on the currency with the AUD
mostly spending time in the 1.0450-1.0470 range. While the AUD has enjoyed a solid 24 hours based on the more positive
outlook from domestic businesses, the fate of the AUD for the remainder of the week could well lie with how US jobs data
pans out on Thursday and Friday, and more specifically, by how the US Dollar reacts to the data.
ends