Despite a lack of significant macro news, markets over the past 24 hours were characterised by volatility spot fires.

Two of these will be major considerations for Australian traders when markets open this morning. One was the explosive rally in electronics retailers in response to Amazon’s Australian launch. The other was the high momentum sell off in copper as traders moved to protect profits after the major rally that peaked in October continues to wilt under pressure from growing inventories. These moves may have opposing influences on the ASX 200 today

It seems likely that yesterday’s rallies in JB Hi-Fi and Harvey Norman were fuelled by short covering. Both stocks had significant short positions. Amazon’s initial pricing may have disappointed short sellers. A key rationale for selling these stocks was the extent of the margin pressure that competition from Amazon was likely to deliver. While the competition from Amazon and established retailers will be a long game, JB Hi-Fi and Harvey Norman finished on their high yesterday. This means that traders will be alert to the potential for yesterday’s rally to be extended over coming days, even if not today.

Bank stocks will also be a focus today, with CBA showing some signs of establishing trend line support around yesterday’s lows. The question of whether Royal Commission induced selling of bank stocks continues remains a key question for the Australian index.

Today’s GDP release has coincided with the sell-off in base metals. Weaker than expected data today could pressure an already vulnerable Aussie Dollar. 

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