IG Markets - Afternoon thoughts 8th April

Good afternoon,
Across Asia, regional markets are finishing the week off with gains despite the flat overnight lead from Wall Street. News that a large aftershock of 7.4 on the richter scale in Japan had caused limited damage has helped spur buying. The Nikkei 225 is the top performer, up 1.5% while the Hang Seng and Shanghai Composite are both firmer between 0.5% and 0.7%. The Kospi is down 0.1% on the session.

In Australia, the ASX 200 is currently 03% firmer at 4924. This afternoon’s performance has been somewhat surprising given the slightly bearish leads from US markets overnight with investors not normally keen to establish fresh positions heading into a weekend. Gains on the day are relatively broad based with the energy, industrials, financial and materials sectors all seeing gains in excess of 0.5%. A mid-afternoon bounce for the risk currencies is also suggesting a bullish bias heading into tonight’s European and US sessions.

Today’s strength has taken a few by surprise, including us, especially given the flat overnight lead and big aftershock in Japan. Whilst the market is likely overbought in the short-term, it appears there’s just a lot of money flowing into equities. The ASX 200 hit a seven week high earlier, reaching 4941, only 3 points shy of fresh 2011 highs.

There’s probably some relief that there’s no serious damage in Japan, which is helping regional sentiment. The ECB decision to raise rates overnight could be another positive. The fact that the ECB believes the Eurozone is strong enough to withstand an interest rate rise is an encouraging sign. People have wanted these big economies to recover to this point; now that Europe is here is being viewed bullishly.

Outside that, there’s no specific news that has driven the strength today, rather just a continuation of the underlying demand that has seen the huge rally in recent weeks.

Elsewhere, we’ve seen an afternoon push higher in commodities and related currencies. The AUDUSD has once again surged to a fresh all-time high of 1.0526 while gold and silver have set new records as well. Silver has just touched US$40/oz, a 31-year high while gold has hit a record of US$1465.95/oz. Oil hasn’t been left out either, pushing through the US$111/bbl level. There doesn’t appear to be any specific news. It’s probably just the beginning of the European session.

Ben Potter
Market Strategist
IG Markets

ENDS

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