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The party's not over yet

Despite a moderate start, the prospect of lower for longer interest rates should provide a supportive background for the stock market this morning. Over the next couple of days, the ASX 200 index might yet find itself rising to test the upper boundary of the triangle pattern that has contained it for the past month.

In the perennial battle for forecasting honours between the bond market and the Fed Governors’ dot plots, the bond market was looking good after Friday’s data. Persistently low inflation and soft retail sales in the US are raising legitimate concerns about whether the likely resting point for the Fed Fund Rate might be well below the 3%, the dot plots are forecasting for the end of 2019. In what may be a supportive environment for equity markets, current low bond yields may not have as far to rise as many anticipate.

Major US banks reported better than expected profit results on Friday; however share market reaction was interesting. Although the S&P 500 index finished higher, bank stocks finished a little lower. This could be a reporting season where the markets need profit results to exceed expectations just to stay firm

The Aussie Dollar has had a volatile couple of days, rising to test key chart resistance around .7835. Today’s data on China’s economy may determine whether or not the Aussie breaks above resistance. If the data comes in as expected, the Aussie will have the benefit of steady and dependable data from China in the near term while $US suffers from weaker than anticipated data

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