Bright start thanks to positive overseas lead

Friday 31 May 2013

Bright start thanks to positive overseas lead

By Niall King (Premium Client Manager, CMC Markets)

The local sharemarket has enjoyed a bright start to the final session of the week, following a positive overnight lead from overseas markets driven, once more by stimulus. Massive volatility in Japanese equities has been at the core of a general sense of unease around Asian markets in recent days and the Australian market was not immune. However, these fears have been shelved this morning, and while falls in Iron Ore prices were talk of the town yesterday, it's the materials sector which has led the rally this morning with RIO the notable performer in early trade.

Even with last nights' sub-par GDP and unemployment readings, the US remains the shining light in an otherwise confused global growth outlook. Inevitably, the US Fed will have to let the economy roll without the training wheels of liquidity but until that policy change becomes clear, short term equity market moves in either direction will be treated equally as profit taking and buying opportunities.

Having been boosted by yesterday's capital expenditure and building approval numbers locally, the Aussie dollar experienced a restless evening but has since recovered to yesterday's cruising altitude in high US 96 cent territory, thanks to a wobble from its US peer. As we near the next RBA rate announcement, the pendulum of sentiment has swung firmly in favour of the 'hold fire' scenario, helping to support the local currency. Regardless, if we've learned anything from recent weeks it's that the Aussie is still likely to be pushed around like a small kid in a school yard, bullied by sentiment in its US counterpart.

Cue the potential for another nervous night for the local dollar with a hoard of economics due from the US, including Chicago PMI. Locally, this morning's Private Sector Credit reading may influence market sentiment as we approach the weekend. Elsewhere, tomorrow's official manufacturing data from China shouldn't throw up too many surprises with much of that gloom already reflected in market prices. However, any serious deviation from the HSBC data is likely to be factored into the local market on Monday.

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