11.57 AEST, Thursday 31 January 2013
Market Down Following Mixed Leads from US
By Miguel Audencial (Sales Trader, CMC Markets)
The Australian equities market is currently trading lower endangering its impressive winning streak. Contrarians, who
have been caught short in the past few sessions, expecting a pullback, may breathe a sigh of relief if this streak ends.
Our market received mixed leads from the US overnight. The three major US equities indices closed lower, the US fourth
quarter GDP data was disappointing but the ADP employment reported higher than expected figures. The US Fed also
confirmed it will continue its $85 billion a month of mortgage debt security and Treasury purchases. It was also
verified that the US interest rates will remain at near zero levels.
Crude oil traded higher overnight despite a larger than expected rise in inventories. The confirmation that the Fed is
going to continue its aggressive bond program is one of the reasons for this support. A slightly weaker US dollar also
made the commodity more attractive. Tensions in the Middle East are still a concern, with violence escalating in
Algeria, causing fears of supply disruptions.
Gold also traded higher overnight following economic data that showed the US GDP contracted in the previous quarter.
This increased the precious metal’s appeal as a safe-haven. Confirmation that the Fed will continue its bond buying
program also caused investors to use the precious metal as an inflation hedge.
There are a number of important economic figures still to be released this week. The weekly US unemployment claims
figures will be released overnight and the US non-farm employment change is announced the day after. Several
Manufacturing PMI figures are scheduled as well with the Chinese data, expected to be released tomorrow, being one of
the most watched. If these figures report higher than expectations, the equities market’s momentum may extend to
February.
ENDS