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Rethink on US fiscal stimulus indicates a cautious end to a cautious week

International markets adjusted to more moderate expectations on the timing of US fiscal stimulus overnight. Local markets look likely to follow suit with a cautious opening driven by lower base metal prices.

US Treasury Secretary Mnuchin’s remarks on tax reform have served as a reminder of the scope of the task ahead of the US government in introducing major tax changes. Markets are reacting to the risk of delay in fiscal stimulus and unwinding some of the recent optimism that followed President Trump’s phenomenal tax package remarks.

Gold was a winner in the market’s adjustment to caution on the risks and timing surrounding US fiscal stimulus. Gold stocks are likely to find support on the local market today

However, caution about the prospects of near term stimulus has softened the outlook for demand growth in base metals. This change of attitude coincided with remarks from Chinese authorities on plans to develop a property tax which could also soften demand growth for metals. Weaker iron ore and copper prices are likely to see profit taking in mining stocks continue today creating a headwind for the Australia 200

Cautious trading today would  round out a week of nervous drift for the Australia 200 as investors have digested a mixed bag of company results and lacked the macro drivers needed to lift the index past resistance at 5827. 

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