A weaker open this morning, suggests the ASX 200 index might maintain its recent record of oscillation as it drifts broadly sideways, constrained by fairly full valuations.

This morning’s soft opening comes courtesy of the Fed minutes where Governors appeared to begin the process of signalling that a real possibility that the Fed will kick off the task of unwinding its QE program later this year. In the same way that a weaker US Dollar has made it easier for the Fed to lift rates this year, stubbornly low bond yields might make it easier to begin running off its bond holdings.

 Market reaction to this news has so far been fairly limited, perhaps because of the view that if the Fed does begin to reduce its bond holdings, it will be more moderate in the pace of rate hikes.

Bank stocks may be a key to the ASX 200 today as investors assess the possibility of banks being required to increase capital to support housing loans. There may be limits on the extent to which banks could fully pass the cost of extra capital requirements on to mortgagees to the extent that they are already lifting rates to reflect wholesale debt costs and previous regulatory constraints.

The oil market has managed to withstand last night’s news of another lift in US inventories as traders assume that high refinery utilisation runs will reduce pressure on inventories over coming weeks as the summer driving season approaches.