There was strong support for the major Australian mining stocks yesterday. The extent to which that carries over will be one of the key features of today’s trading. Early indications are for further gains on the open and this should provide early support for the ASX 200 index within the vicinity of its May high.

Yesterday’s support for mining stocks was offset by selling of bank stocks. NAB shareholders followed the precedent of their ANZ peers by selling after release of yesterday’s profit report. This may have been partly about nervousness as to whether NAB’s planned expenditure on restructuring and technology will in fact achieve the future cost savings forecast by management. But yesterday’s selling may also have been a case of “buy the rumour, sell the fact”. NAB had rallied 9.5% since early August, leaving traders underwhelmed by a profit result broadly in line with consensus.

Currency and stock markets have adopted a largely “wait and see response” both to news that Jerome Powell will be nominated as Fed Chair and to the release of US tax reform proposals. The announcements were largely as expected and the impact of both will depend on further developments. The character of a Powell, Fed will be dependent on who fills the 4 vacancies on the Fed Board. The implications of tax reform for both the US economy and interest rates will depend on what is finally passed into law.

The Aussie Dollar had a good day yesterday on the back of stronger than expected trade and building approvals data. This leaves it open to volatility following release of September retail sales  this morning. Markets are expecting some mean reversion after 2 weak months in July and August. Weaker than expected data would be concerning and reverse some of yesterday’ Aussie Dollar gains.