Both yesterday’s local trading session and the last 2 sessions on US markets, were all about investors searching for relative value, switching between market sectors.  Minor movements in market indices were simply the residual rounding effect of this switching activity.

This morning’s market looks different. There is selling across all sectors outside materials.

The soft lead from the US financial sector with selling of bank stocks has not helped the ASX 200 with yesterday’s support for banking stocks being reversed. Profit taking in healthcare stocks which has been a feature of the market recently also continues this morning.

A soft opening in Tokyo this morning also suggests that Asian markets are being a bit defensive in reaction to release of the Trump emails implying a preparedness to accept information from Russia to achieve electoral advantage.

Markets have recently been reluctant to take defensive action against possible, as opposed to probable, risk events. This reflects the supportive macro back ground for shares created by low interest rates and improving world economic growth. However, there are concerns that the US Administration is becoming increasingly mired in day to day difficulties, diminishing the political capital it needs to achieve difficult economic reform and stimulus.

The recent rally in the oil price indicates a growing recognition that US shale oil production is price elastic and that this may help create a floor in the US oil price around the low $40 range.