The old dictum about markets being forward looking is certainly likely to apply to this morning’s opening. A relatively subdued opening looks likely as traders wait on the outcome of key news events over the next day
Foremost among these is President Trump’s much anticipated address to the joint session of Congress. Markets are hungry for detail on the new Administrations economic policy but at the end to the day will probably be prepared to settle for a confident outlining of the general agenda at this stage.
US inflation and the potential for Fed rate hikes could also play a key influence on the next day’s trading. Yesterday’s speeches from Fed Governors reinforced market suspicions that a rate hike at the Fed’s March meeting is a live option. Tonight’s release of the US Core PCE inflation data could have a material impact on market thinking at this stage. A significantly higher than anticipated lift in Core PCE is likely to increase expectations that the Fed could move in March leading to bonds being sold and the US Dollar being bought.
Markets will also have a watching brief on Australia’s GDP data. The expected improvement should help boost confidence in the local economy and the outlook for the next 12 months.
Early signs of support for materials stocks dissipated yesterday with profit taking continuing in anticipation of a down turn in commodity prices. A soft opening this in this sector this morning could prove an early headwind for the ASX 200