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Drift or drop?

The week lead from US stocks has translated into a soft start to the New Year for the ASX 200

In the absence of any significant macro news, history will probably see today’s trading session as another in the sideways range that has contained the ASX 200 index over the holiday season. The index has not made a significant move since 19 December.

However if there is a risk today, it may be to the downside. The index is close to its low since 19 December. Any concerted move lower could attract selling momentum and be seen as a sign that the market is setting up for a period of profit taking.

Despite weaker metals prices on New Year’s Eve, there is some support for the materials and industrial sectors this morning. The mining sector has been assisted by support for gold stocks.

However, the co-ordinated global growth theme also sees many investors favouring mining and industrial stocks for 2018. That may continue to attract New Year support for these sectors.

Weekend news of yet another positive read for the Chinese Manufacturing PMI, supports the outlook for manufacturing and commodities in the early part of 2018. China’s manufacturing sector continues to benefit from global demand; domestic infrastructure spending and the government’s incremental approach to debt reform.

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