A strange confluence of events saw both risk and safe haven assets rally into the end of last week. Softer than expected US jobs spurred buying in bonds and gold. However the potential for a slower than expected path higher for interest rates, dismissal of the poor read as a seasonal aberration and enthusiasm for tech shares saw market indices finish in the green. The conflict between these opposing market themes suggests either risk or safe haven assets, or both, are facing a tumble this week.
Futures markets are indicating a mixed opening round for the Asia Pacific region. Markets in Hong Kong and Australia are set for modest gains on the back of European and US stock gains, while shares in Japan are under pressure from a stronger Yen. Weaker oil and copper prices could contain Australian investor enthusiasm.
The week ahead is packed with potentially market moving events. China will see further PMI reads today and release trade numbers later in the week. The US has PMIs tomorrow night and GDP components – notably durable goods orders. In Australia investors will see inflation and consumer indicators today ahead of tomorrow’s RBA rate decision and GDP data for the first quarter later in the week.
Traders are now looking to the charts for an indication of the local share market’s medium term direction. After bouncing off support around 5700 last week the index is set to test key resistance at 5800 today. A breach of either of these “ lines in the sand” during trading this week could give a strong clue to where the market is heading.