Yesterday’s heavy selling saw the ASX 200 finish on its low with sellers in charge. The index also inched below the support formed by its March low, although perhaps not by enough to represent a convincing break

However, US markets failed to validate this bearish mood, softening only marginally in what was essentially a steady trading session. The spot iron ore price was also steady removing another trigger for an early move lower this morning. Against this background, it’s not clear that selling will resume where it left off yesterday.

While major international stock markets remain relatively firm, the ongoing rally in bonds and gold plus the weak $US is interesting. It suggests caution ahead of this week’s major risk events and a view that the US Fed is going to be constrained by stubbornly low inflation as it moves into next year.

Recent gold strength and US Dollar weakness suggests these markets may be vulnerable to reversal if the Comey Senate testimony does not include significant revelations or the ECB indicates a more optimistic economic outlook at its meeting this week

While the expected weak GDP release today will be heavily influenced by adverse weather conditions in the first quarter, market focus will be on underlying trends including subdued consumer spending.