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Balancing the macro and the micro

This morning’s weak opening by the ASX 200 reflects investor response to rising bond yields and caution ahead of significant macro data releases over coming days. Principal among these could be Janet Yellen’s final FOMC meeting as Chair. A hawkish Fed response to recent strong US data could extend selling in the bond markets and amplify the nervousness evident in US stock markets last night.

Set against any such macro jitters, will be the prospect of a healthy upcoming profit-reporting season. The Australian half-yearly profit reporting season gets under way in earnest next week and investors are focussing on the micro of individual company results. The confession season has been benign, providing comfort that for most sectors, revenue conditions have been favourable compared to expectations.

The trade-off between minor macro nerves and expectations of a solid profit-reporting season is reflected in the chart of the Australia 200 index.  Lower prices today leave yesterday’s high as a short term peak at the 61.8% Fibonacci retracement level. However, it would take a break below last week’s low at 5987 to suggest serious downward intent.

The Aussie Dollar has faltered at the resistance of its September high around .8125. After a steep and protracted rally since December, the Aussie is vulnerable to profit taking should the net effect of this week’s macro news be neutral. In addition to this week’s Fed meeting, upcoming data releases include the Australian CPI, international manufacturing PMI’s and the US Non-Farm Payroll data.

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