IG Markets, Afternoon Thoughts

Across Asia, regional markets have started the week mixed following the supportive US leads and the general feeling that the worst of European sovereign debt crisis is behind us. The Nikkei 225 and Kospi are the best performers, up 0.3% and 0.1% respectively. On the downside, the Hang Seng and Shanghai Composite are 0.3% and 0.1% weaker respectively.

In Australia, the ASX 200 is currently 0.5% firmer at 4780, right near its highs of the session. Early market weakness has been overcome with a turnaround in the performance of the major miners while the financial sector is showing leadership to be the standout performer for the session. Laggards for the day include the energy sector and the consumer staples sector, which has been dragged down by an earnings downgrade from Woolworths.

There been a bit of action among in the food and beverage space today, beginning with this morning’s surprise downgrade to full year profit from Woolworths. This was weighing on the market until speculation broke of a possible bid for Foster’s beer operations, boosting its stock by more than 4% and helping offset the negative impact from Woolworths. Corporate activity involving Fosters has been bandied around for years, with little ever emerging from the rumours. Will this be the case again?

As the day’s progressed, we’ve seen buying support come into the market which is certainly an encouraging sign. Sentiment seems to be relatively buoyant with concerns over Chinese growth and the European crisis largely abating. This is evidenced by the money flowing out of safe-haven assets, namely the precious metals. It looks like it’s being put to work in the equities space, with investors happier to take on more risk

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