IG Markets - Afternoon thoughts 6/1/12

IG Markets - Afternoon thoughts 6/1/12

Good afternoon

Across Asia, regional markets are mostly lower after Wall Street finished marginally firmer, despite ongoing concerns about the prospects for Europe. The Kospi is the region’s worst performer, lower by 1.1%, while the Hang Seng is seeing a loss of 1%. Elsewhere, the Nikkei 225 is 0.9% weaker, while the Shanghai Composite is bucking the trend to be higher by 0.1%.

In Australia, the ASX 200 is currently 0.7% weaker at 4114, just off its earlier session low of 4112. Investors today appear cautious ahead of tonight’s non-farm payrolls report, with broad-based losses being witnessed across the market. Consumer discretionary is the only sector in positive territory, while the materials and energy sectors are the day’s biggest decliners.

Yesterday we suggested the market would be closely looking at the US ADP private sector jobs report as a means of confirming the upwards trajectory in the US economy, and specifically that of the US jobs market. It is also clear that this improving US economic data is serving as a balancing act to the almost seemingly endless list of concerns out of Europe. Last night it was rising French bond yields and escalating fears about the ability of European banks to raise fresh capital in light of UniCredit’s poor first up effort. Had it not been for last night’s US economic data, it is fair to say that global equity markets would have fared far worse than they did.

Today’s local market reaction is typical of a hesitant market muddling along with a clear negative bias. While the overnight US economic data was better than expected, and there are high hopes for an upside surprise to tonight’s non-farm payroll report, nothing at the moment can trump the multitude of European issues. With so much debt to refinance this year, at escalating costs and against wavering demand, everyone in the market is on edge and hence the path of least resistance for the foreseeable future is down. Sadly, even an amazingly strong payrolls report tonight is unlikely to change that.

ENDS

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