At this stage, stock markets appear to be holding the line despite the correction of the post US election moves in the US dollar and bond markets that is now well and truly under way.
Although, leading US stock market indices were a little weaker in overnight trade they remain above recent support levels. The Australia 200 has taken a cue from this on the open with a relatively firm open. While US stock markets rose in tandem with the $US and bond yields after the election, they will actually benefit from the current correction in those markets.
The sharp rally in the Aussie Dollar overnight was all about $US weakness. The Aussie actually weakened against other major currencies like the Yen and Euro. The US Dollar Index rose 5.5% after Donald Trump’s election. This gives traders plenty of profit to protect and selling gathered momentum last night as the Dollar began to break chart support levels. This dynamic overrode another strong read on the ISM non-manufacturing index which points to solid growth in the US economy.
Australian gold stocks had a good day yesterday and this is likely to be repeated today after another good session for gold in overnight markets. Gold is benefitting from selling in the US Dollar and lower bond yields. Short covering in gold is driving prices higher; however it is also likely to be benefitting from jewellery demand given lower prices and the lead into China’s New Year holiday.