Business confidence down putting pressure on local market

Business confidence down putting pressure on local market

By Ben Taylor (Sales Trader, CMC Markets)

Despite the S&P500 escalating to its seventh winning day in a row our market has come under pressure from the latest NAB business confidence and conditions reads.

There seems to be a switch out of the miners and energy stocks into yield plays today as traders find it necessary to stay invested. The switch between the miners and banks is being elevated by speculation that the new BoJ Governor will fast-track monetary easing before its first policy board meeting in April.

As downward pressure on the Yen mounts the US dollar continues to appreciate causing our mining and energy sectors to come under pressure. The early easing speculation has the Japanese market now higher for the ninth day.

The fall in confidence from 3 to 1 came as a surprise to the market today. While the confidence reading is still slightly positive, it is sitting below its long run average and has given the market a reason to take profits.

The fall in the VIX to lower levels overnight is seen by some traders as an indicator for compliancy and providing a reason to believe a pullback could be nearing especially in our market as local momentum slows. However, I believe the fundamentals are supportive of a higher market here and in the US unless the quantative easing program is adjusted or the market pre-empts a change in plan based on a continuation of better than expected US jobs numbers.
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