IG Markets - Afternoon thoughts March 9th 2011

Across Asia, regional markets are all higher in afternoon trade following the positive leads from Wall Street and the comments from OPEC overnight. The Nikkei 225 is the best performer, up 1% while the Shanghai Composite, Korean Kospi and Hang Seng are all up between 0.1% and 0.5%.

In Australia, the ASX 200 is currently 0.5% lower at 4784, just off its earlier session lows of 4777 Once again the local market is trading contrary to offshore leads with investors seemingly unwilling to hold protracted positions – a sure sign of a jittery market. Despite positive offshore leads, the materials sector is the biggest drag on the market with losses of more than 1.2%, while the financial, industrial and energy sectors are seeing more modest declines.

There’s no rhyme or reason why we are down so much today. It was the same story on Monday and Tuesday. We underperformed significantly on Monday and then outperformed yesterday. Overnight leads don’t seem to mean anything at the moment in terms of where our market is headed.

A weaker oil and gold price has usually meant equities find support as it shows an easing of tensions in the Middle East. But, for whatever the reason may be, we’re seeing no buying support in our market today. Perhaps yesterday’s strength was on the back of a few big buy orders. Now that they’ve finished, there’s nothing to support the market.

We’re also starting to see some comments re-emerge about the state of the European sovereign debt crisis; yields have been rising dangerously in the last few days. It wouldn’t surprise us at all if the market starts to get worried about this situation again, especially if a solution isn’t decided upon at the upcoming EU summit.

ENDS

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