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Markets steady ahead of quarter end

Tesla, man and machine

Asia Pacific markets are trading steadily this morning ahead of the looming month and quarter end next week. Any enthusiasm today will be tempered by two key factors; another night of diverging performances, and the tendency of markets to reverse at the end of a calendar period.

Professional investors regularly drive markets into reverse at the quarter end as they lock in performance, good or bad. Most regional share markets are higher than their close at the end of 2020, meaning they are vulnerable to selling next week.

This makes today’s opening gains of around 1.75% in Japan remarkable. This morning’s read on CPI showed core inflation in Tokyo is slightly stronger than forecast at 0.3% in March, a positive result given three missing decades of economic growth. Share markets in the rest of the region are more subdued. Rises of around 0.25% to 0.5% are more common, and the New Zealand market is in the red.

European and US markets diverged again overnight, increasing the challenges for regional traders. Continental investors showed little appetite for shares, switching into bonds instead. In contrast, US investors pushed major indices higher and shunned bonds after PMI’s confirmed a solid expansion in March and fourth quarter GDP growth was revised upward to 4.3%, from 4.1% previously. Currency traders seemed impressed, and pushed the US dollar higher again, creating an uptrend on charts.

Crude oil is trading modestly higher this morning after a 4%+ tumble overnight. The fall suggests oil traders now view the blockage in the Suez canal as a temporary market interruption, with little long term effect. However all is not well with industrial metals, and copper volumes are above average as the red metal sheds around 1%.

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