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Certainty bounce

A sentiment reversal on the back of encouraging US data should see positive momentum in Asia Pacific markets today. Despite negative futures markets the Australian share market is also set for a bounce. Bank stocks are likely to rally as the new levy on liabilities was arguably more than fully priced in the sell-off over the previous sessions. Overnight rallies in oil and gold should also provide support.

US Producer prices rose more than expected, suggesting expansion in the US economy is accelerating. Dropping alongside weekly jobless claims sustaining historic lows the numbers turned investors around. The S&P 500 index recaptured almost all of the 0.7% loss from the first hour of trading. However investors clearly have difficulty buying a market within 0.5% of its all-time high, favouring defensive utility and healthcare stocks. Late rallies in gold and bonds underscored the caution.

Local investors are facing another low data day. A report on Australian credit card purchases is unlikely to influence trading, nor are Japanese money supply numbers. Two days of gains in oil prices could support risk appetites. A realistic scenario is a start in the red for most indices, followed by a quiet bubble higher over the session.

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