Bears dominate US session overnight

09.45 AEST, Thursday 6 June 2013

Bears dominate US session overnight

By Miguel Audencial (Sales Trader, CMC Markets)

The Australian equities market is poised to display weakness at the open after the bears dominated the US equities session overnight.

The further slide of the Australian dollar is likely to provide additional pressure in the local stock market as overseas investors are prone to show concern about the negative currency yields. The market’s increased expectation about another rate cut from the RBA could also further weaken the Australian dollar and consequently weaken the near term prospects of the Australian equities market.

The Australian Trade Balance is due to be released later today and the Australian dollar desperately needs a strong figure for a recovery. Expect further weakness if the number is below expectations.

In the US, underwhelming ADP Non-Farm Employment Change figures sparked negative sentiment in the market. A slightly better than expected ISM Non-Manufacturing PMI number was not enough to turn the tide.

A larger than expected decline in crude oil inventory provided support in the price of oil but the poor employment data caused demand concerns and suppressed any significant gains. Traders have been concerned about the high levels of total oil inventory and the recently reported 6.3 million declines in stockpiles are likely to be a one-off incident. The investors that have demand apprehensions are likely to have the same mind-set in the short to medium term.

The European Central Bank is scheduled to make a decision on interest rates tonight. All eyes are now on Friday’s Non-Farm Employment figure, which will be an important indicator in determining when the US Fed will start to slow down its asset purchase program.
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