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Bargain hunters get a confidence boost

A confidence boosting rally in US stocks over night should add to the resolve of bargain hunters who began to chip away at our market yesterday. The ASX 200 looks set to build on yesterday’s gains today. For chart followers, this should see Westpac confirm trend line support

Yesterday’s liquidity injection by China’s Central Bank provided another justification for trader optimism. It is being taken as a signal that Chinese authorities still have a relatively modest pain threshold when it comes to the trade-off between credit reform and economic growth. While China’s GDP growth is expected to moderate a little, it will remain relatively robust next year. Markets are confident that China will, continue to play its part in the synchronised world growth that is helping to support stock market valuations at present.

A strong rebound in US industrial production also helps support the outlook for global growth. US industrial production is now benefitting from the post hurricane reconstruction effort. With the notable exception of inflation, it’s hard to find weak links in the US economy which looks to be setting up for solid 4th quarter GDP growth.

Despite encouraging economic news, oil and metals markets were soft overnight and mining stocks may prove to be a laggard in this morning’s trading. Commodity traders appear to be nervous that the positive outlook for ongoing world growth has been more than baked into current pricing. 

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