The previous day’s sell off in US tech stocks produced a mirror image reaction on Australian markets with a sharp rally led higher by banks stocks..

At this stage it would be difficult to conclude that last night’s recovery in US tech stocks was anything more than a “dead cat bounce”. Compared to the high impetus of Friday’s selling, the rally in tech stocks has so far been a relatively tepid counter trend move.

It will be interesting to see if bank stocks produce a similar pause today or whether the buying continues. Yesterday’s bank buying appeared to have a degree of urgency that’s often associated with short covering or FOMO buying (Fear of Missing Out). Bank share prices produced large rallies on increased volume yesterday, closing on their highs.

The spot iron ore price continued its descent yesterday and may be a negative influence for the ASX 200 index today. No sign of a dead cat bounce here, with the iron ore downtrend firmly in place at this stage.

However, release of China’s economic data for the month of June could influence thinking on the outlook for commodities today. Recent data, including lower interest rates and robust exports are pointing towards a sound base in China’s economy over coming months. Given this context; better than expected industrial production data today could provide a confidence boost.

Despite stubbornly low inflation, the Fed is widely anticipated to lift its interest rate tomorrow. In a further sign that the Fed is leading a gradual global exit from monetary stimulus, Canada’s Central Bank Governor last night surprised markets with hawkish comments, producing a sharp drop in USDCAD.  This adds weight to the view that in this global context, the RBA will be unlikely to cut rates without strong indications that the domestic economy requires it.