After a brief spike, volatility in US stock markets has settled again, providing a steady as it goes lead for the ASX 200 index.
US stocks have unwound the discount for last week’s concerns over the stability of US Government. This puts US markets back in the mode of maintaining steadily high valuations in expectation of solid earnings growth; relatively low bond yields and a benign risk environment.
The chink in the armour for US stock indices is that they are yet to clear recent highs, leaving them vulnerable to a negative chart outlook should selling resume in the near future
The US Dollar also showed signs of risk on moves last night, rallying off lows. Markets will be looking for tomorrow’s release of the FOMC Minutes to confirm expectations that the Fed will lift rates in June.
Aussie Dollar traders will have a watching brief on today’s release of data on first quarter construction work done. This has been a weak spot for the Australian economy in recent years, reflecting the wind back in mining infrastructure development. There has not been a positive read on construction work growth since September 2013. Markets are anticipating another moderately negative figure in March, with Cyclone Debbie and heavy rain having a negative impact.
Energy stocks will be in focus today, with the oil market having rallied strongly in advance of the Vienna meeting on production cuts. Focus will be on confirmation of an agreement to limit production for 9 rather than 6 months.
However, oil prices could also be influenced by the US weekly production and inventory data tonight, with markets likely needing establishment of a significant trend reduction in inventory over the US summer to maintain current prices. While oil market focus will be on the Vienna meeting, the US proposal to reduce its strategic reserve is potentially a medium term negative for the supply balance and a threat to the already diminished ability of the Opec/Russia cartel to control markets.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.