IG Markets - Afternoon thoughts 13th April

Good afternoon,
Across Asia, regional markets are mixed following the bearish overnight leads from Wall Street as further falls in the price of Crude Oil weighed on energy and commodities names. The Nikkei 225 is the best performer, up 0.3% after Japan said this morning that the nuclear situation is stabilizing despite yesterday upgrading it to the same level as the Chernobyl disaster. Both the Hang Seng and Kospi are 0.2% higher while the Shanghai Composite is 0.2% weaker.

In Australia, the ASX 200 is currently 02% higher at 4907, well off its session lows of 4876. As expected, it is the materials and energy sectors that are dragging on the market, with the overnight pull back in commodity prices giving investors reason to lighten their exposure to these sectors. Aside from these two sectors the remainder of the market is in positive territory with the industrial sector in particular benefitting from the continued retreat in oil prices.

The local market has impressively ground its way higher from the lows seen this morning. It seems the selling seen on US markets overnight was mainly in response to Asia’s weak session yesterday; hence the reason we’re not seeing any follow through selling to the downside.

The last few days has simply seen the market take a bit of a breather following the very strong move in the last month. It’s just a case of healthy profit taking. The big question going forward is can the market maintain its recent momentum or do gains slow. Much of the direction in the next few weeks will come from the US Q1 earnings season.

The general feeling is that Q1 earnings will be pretty solid. The big question will be whether or not they are strong enough for the market to press higher or hold its ground? The market is up more than 4% YTD and very strongly from the lows so there’s an argument to say the market has already priced in good earnings. Given this, the market may be vulnerable to some selling pressure in coming weeks if earnings merely meet or miss expectations. It looks like a lot of traders are happy to take a ‘wait and see’ approach heading into the earnings season.

In currency markets, it’s been a pretty quiet session, with the AUDUSD trading in a 60 pip range as it recovers from recent selling. Although it been relatively quiet session, there’s been some buying interest come back into the AUD which is an encouraging sign. It will be interesting to see if risk currencies continue to be supported heading into the European session.
Ben Potter
Market Strategist
IG Markets

ENDS

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