Strong US performance expected to boost local markets

09.53 AEST, Thursday 11 April 2013

Strong US performance expected to boost local markets
By Miguel Audencial (Sales Trader, CMC Markets)

A strong performance from the US equities market overnight is likely to provide a boost to the local Australian share market at the open.

The release of the US FOMC minutes, which was released earlier than expected, displayed the divergent views of committee members regarding the appropriate time of when the current quantitative easing program should end. The market saw this as a sign to take on more risk in their portfolios and increase the allocation into equities because the market priced in an earlier end to the stimulus program. As a consequence, US treasuries yielded higher overnight. Another positive that can be inferred from the FOMC minutes is that some committee members are confident that the US economy has improved since the current quantitative easing program was initiated late last year.

The US equities market also received some support from China’s trade balance data, which showed imports increased by 14.1 per cent compared from a year ago. This figure, which smashed expectations of a 6.1 per cent increase, is showing that current demand from China is strong. The weakness of the Japanese Yen has also contributed to the strong performance of US shares.

Australian employment figures, which are due at 11:30am, may provide some volatility in the local market if the number is far from expectations. Analysts currently anticipate a decrease of 6,700 jobs which is consistent with the drop of 1.5 per cent in ANZ Job Advertisements announced earlier this week. However, this data has historically proven really hard to predict after expectations missed actual figures by 62,000 jobs last month.

James Bullard, a member of the FOMC, will make a statement tonight and the US Fed Chairman will also make a speech the following day. The market will be paying close attention to their comments in an effort to gain some insights on the lifespan of the US Central Bank’s current bond buying program.

http://www.cmcmarkets.com/

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