IG Markets - Afternoon thoughts 31st October

IG Markets - Afternoon thoughts 31st October

Across Asia, regional markets are mostly weaker in a fairly quiet trading session. The Nikkei is the best performer in the region, surging 0.5% after the BOJ finally made good on its promise to intervene. Finance Minister Mr Azumi confirmed that Japan convened unilaterally in the currency market as it attempts to ease the pressure on its export industry The intervention has given a boost to the Nikkei. Looking at some of the big exporters, Toyota is up 2.2% while Isuzu has jumped 4.9%. Elsewhere in the region, the Shanghai is down 0.4% and the Hang Seng has declined 0.9%.

The Aussie market is lower on subdued leads from Friday night’s trading. Investors are also cautious ahead of some key economic news coming out this week. The benchmark S&P/ASX 200 index is down 0.9% at 4314, after futures had pointed to a slightly higher open. Tomorrow’s RBA interest rate is looking increasingly uncertain. The RBA is widely expected to cut rates, but a staggering number of economists still feel that the Central Bank may hold off. Qantas Airways shares have jumped 4% after Australia's industrial umpire ordered an end to its workplace dispute with unions. Qantas rival Virgin Blue Holdings is up 6%. Australia's big four banks are all weaker, while the big miners have turned lower after a fairly strong open.

We have certainly started the week off on a soft note. Tomorrow’s interest rate announcement and the RBA statement will be a pivotal point to the week’s trading. Should a rate cut not materialise, we feel we might see the market come off quite significantly while the AUD/USD would receive a boost. After last week’s relief rally, investors will be looking for some positive economic news which could be the key catalyst to another leg higher. As the European bailout plan is dissected, we are likely to get further updates on how flawed or iron-clad the plan actually is. Many feel that the mild interest in the Italian debt auction on Friday showed that bond investors are still sceptical that the EU debt deal will actually calm the crisis. The overall consensus seems to be that European leaders did enough to stabilise markets in the near term.

Some investors were not convinced by last week’s US quarterly GDP numbers and will be looking at non-farm payrolls later on in the week for some reassurance regarding the state of the US economy. Locally, we also have building approvals and retail sales data to look out for this week. In major company announcements, ANZ is set to report its FY11 results on Thursday. It is shaping up to be a very interesting week with all this key economic data coming out.

ENDS

© Scoop Media