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Not firing on all cylinders

A continuation of yesterday’s bargain hunting momentum and more good news on the US profit-reporting season should deliver a solid opening for the ASX 200 index this morning.

However, the index will need have to battle the headwind of selling in mining stocks.  Rising inventories in copper and iron ore have dented short-term confidence in industrial metals after strong gains. This means the Australian market will not be firing on all cylinders.  Some active traders are likely to be rotating out of mining stocks, looking for better value in other sectors.

Bank of Japan Governor Kuroda’s emphatic commitment to quantitative easing lent support to the stock market yesterday but was swamped by concerns over trade protectionism in currency markets.

Moves by the US to impose tariffs on solar panels and washing machines are likely to make trade protection a risk factor for the US Dollar leading into President Trump’s speeches at Davos and next week’s State of the Union Address. However, falling metals prices are also a headwind for the Aussie Dollar and have kept it oscillating around 80c against a weaker $US

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