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China trade numbers to underline market risks

The announcement of a trip to Washington by China’s top economic adviser to continue trade talks is a positive for markets. However trade data due today may disrupt sentiment if it demonstrates a widening gulf between the globe’s two major economies. Ahead of the release Asia Pacific markets are likely to benefit from firmer industrial commodity prices and rallies in European and US shares.

In the market background US dollar strength is ongoing. This important change in currency market behaviour is increasingly likely to drive investment changes the longer it persists. Bond markets are curiously quiet, caught between the current low cash rate environment and increasing growth and inflation data. The rising dollar makes Asia Pacific shares more attractive, and futures markets are pointing to opening gains today, with the exception of Japan.

Australian retail sales data due mid-session is forecast to show a 0.2% increase in March, making the Q1 increase 0.6%. This subdued outlook is reflected in short selling activity. Domino’s Pizza, JB Hifi, Myer and Retail Food Group are all in the top ten most short sold stocks on the ASX. Any upside surprise on consumption could see disproportionate rallies in these stocks.

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