Fun and games to mark the end of month and quarter today have already begun. Once again Asia Pacific traders face mixed leads from European and American trading. Energy and other industrial commodity prices dropped overnight. As may be expected, Japanese stock futures are down, reflecting uncertainty, but Australia 200 futures are mysteriously higher.
European bonds sold off as shares rallied, reflecting a shift back to a pro-growth stance from continental investors. US investors moved in the opposite direction. Bonds rallied as shares came off, led by the formerly high-flying tech sector. The US dollar rose again, highlighting growing risk aversion among US investors.
The interplay of economic recovery and higher interest rates brings ambiguity to economic news, and explains the geographic divergence. Figures released overnight show German inflation, harmonised, is growing at 2.0% pa. This is enough to unsettle the most complacent of central bankers and illustrates the dark side of the economic recovery under way.
The overnight rally in Australia 200 futures is all the more curious given the pressure on commodity prices. The lower Australian dollar also indicates cautious sentiment. Yet somehow the local index futures closed the overnight session up 56 points, or almost 1% higher. Traders may decide this unexplained rise doers not pass the sniff test, and also see it as a warning that today’s trading may be subject to unpredictable movement.
Economic recovery in China is in focus. The official non-manufacturing and manufacturing PMIs for March are revealed around mid-session today. Its expected both will show accelerating expansion, with analysts’ consensus centred on readings of 52.0 and 51.2 respectively. Any upside surprise could support risk assets today.