After three weeks of range trading, buyers have been compelled to push the ASX 200 index into new high ground today. A combination of strong gains in US stocks and commodities will be hard to resist. Those waiting to climb aboard the co-ordinated global growth train will fear missing out now that the index is breaking out of its recent trading range
The fact that the financial sector led last night’s rally in the S&P 500 might be a defining factor for the ASX 200 this morning. It could see the local banks lend support to cyclical stocks, which are benefitting from ongoing signs of co-ordinated global growth.
In recent years, we have been used to markets assessing the US employment data through the prism of what it means for Fed monetary policy. Tonight may be a different. Global growth is currently the dominant theme for equity markets. If the latest US employment data beats expectations, it could validate this theme and lend weight to the stock market rally.
Strong gains in the Aussie Dollar may be one headwind for some sectors of the stock market today. The Aussie Dollar continues to benefit from stronger commodity prices and solid Chinese economic data. AUDUSD has rallied an impressive 4.8% in an uninterrupted rally that began on 11th December. Further strength in the iron ore price yesterday also led to a sharp jump in the Aussie Dollar against the Yen.
Oil posted only modest overnight gains despite news of a healthy decline in US inventories over the past week. This may suggest mounting caution while traders wait to assess the extent of shale oil supply increases induced by current higher prices.
