In a well telegraphed move the US Federal Reserve lifted official interest rates in the US overnight. Although bond yields rose, most markets defied economic convention. The USD fell and shares eased lower despite the vote of confidence from the Fed.

The mild response contrasts with a slamming of Australian share market futures. Oil prices tanked following the release of weekly inventory data. Crude reserves fell by less than half the average estimate, weekly production climbed and gasoline supplies increased. The 3.5% fall in oil prices infected other industrial commodities, with copper a notable casualty. A stronger AUD and weaker commodity prices spell trouble for local investors.

However there are a number of potential circuit breakers. Forecasts of employment data today are centred around the creation of 10,000 jobs in May and unemployment steady at 5.7%. A stronger than expected number could soothe nerves.

A sell off today would also reverse current positive momentum. A number of traders attributed the surprising strength this week to investors pumping up superannuation accounts ahead of June 30 rule changes. If this thesis is correct the traders driving futures lower may experience an “in your face” market rise.