Support for gold and the Japanese Yen has been relatively limited since news of the latest Korean missile launches broke. This suggests there may not be a major “risk off “response this morning. Even so, markets are likely to be relatively cautious today, preferring a wait and see stance in case of any further near term developments in this situation.
The ASX 200 index will not be helped by another selling session in industrial metals overnight. Mining stocks are likely to open lower this morning. However, yesterday’s data indicating further softening in the growth of China’s infrastructure spending suggests bargain hunters may wait on pullbacks rather than being aggressive buyers of mining stocks at this stage.
The same may not apply to oil and gas stocks which should benefit from rising optimism about oil prices as demand improves and supply finally looks to be constrained around current levels for a while.
The market response to stronger than expected US inflation data suggests traders are also going to adopt a wait and see attitude on inflation and Fed rate hikes for a while yet. The reaction of US Dollar and bond markets following this news was relatively contained
It’s true that the better the US labour market becomes, the more encouraging any signs of improved inflation are. However, markets are also conscious that US inflation data has provided several false dawns in recent years. Goods inflation has remained persistently weak under the influence of a variety of factors ranging from the advent of online shopping to excess global capacity. The current situation is further clouded by the impact of the hurricanes, with the latest data already reflecting a temporary boost in hotel accommodation rates