IG Markets - afternoon thoughts

IG Markets - afternoon thoughts

Across Asia, regional markets are all firmer after Wall Street managed to pare large early losses to finish flat to marginally lower. The Hang Seng is the region’s best performer, higher by 09%, while the Kospi is seeing a gain of 0.8%. Elsewhere, the Shanghai Composite and the Nikkei 225 are firmer by 0.4% and 0.3% respectively.

In Australia, the ASX 200 is currently 0.3% higher at 4284, just off its earlier session high of 4287. Despite Wall Street’s slightly lower finish, the local market is seeing broad-based gains with the telecoms, consumer discretionary and consumer staples sectors the biggest percentage gainers. A strong first-half sales update from supermarket heavyweight Woolworths, featuring a decision to scale back its Dick Smith consumer electronics business, has buoyed other names in the sector such as Harvey Norman and JB Hi-Fi. Elsewhere, the market-leading materials sector is seeing modest gains despite commodity prices easing overnight.

As expected, today has seen the local market muddle through the session in a relatively tight trading range. Globally, equities seem to be in a bit of a holding pattern. They have had a pretty good start to the year and appear to be consolidating around current levels, but now need some form of catalyst to move them beyond their current trading ranges. That catalyst could well be Greece and its private bond holders finally coming to an agreement on principal haircuts and coupon restructurings to avoid an involuntary default, and/or the US Federal Reserve stepping up to the plate and delivering a third round of quantitative easing.

Whatever the case, you certainly get the feeling that markets want to move higher. Trading action suggests this, as does the performance of risk currencies. Last night we saw the Dow claw its way back from a 131-point decline to finish down 6 points. Similarly, we saw the S&P bounce sharply off 1300 to close at 1313, on marginally lower on the session. Where 1300 had only a few weeks ago been seen as a resistance level, it now seems to be serving as support. Investors now appear to be buying dips as opposed to selling into rallies, which marks a noticeable shift in sentiment so far this year. This improved sentiment was also evidenced by the University of Michigan’s US consumer sentiment index hitting it highest levels in 11 months when it was announce at the end of last week. The resilience of risk currencies in the face of ongoing uncertainty out of Europe also suggests that investors are moving on from the woes of the last few years.

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