IG Markets - Afternoon thoughts

IG Markets - Afternoon thoughts

Across Asia, regional markets are mixed, despite a strong performance from European and US equities overnight. The Nikkei is the region’s best performer, stronger by 1.1%, while the Hang Seng is firmer by 0.2%. The Shanghai Composite and the Kospi are both lower by 0.1%.

In Australia, the ASX 200 is currently 0.1% stronger at 4047, having fallen well back from its earlier session high of 4074. The earlier gains had been relatively broad based, but it seems ongoing scepticism ahead of tonight’s EU summit and end of year tax-loss selling have gained the upper hand. Among the major sectors, materials have pared earlier gains after a better overnight performance across the base metals complex, while energy names have slumped into negative territory, despite crude prices rebounding more than 1.6% in US trade. The financial sector is now essentially flat on the day.

Today we have seen the local market trade like one bereft of any confidence or positive sentiment. This morning’s rally, on the back of a strong US session, proved nothing more than a nice opportunity to sell into, allowing investors to lighten exposures ahead of today’s EU summit. End-of-year tax-loss selling is no doubt playing some part in the afternoon slump, but it would seem to be more about confidence levels. They are clearly shot and frustration is building in the investment community that we can’t move beyond the same old European issues.

The question investors are now asking themselves is - where to for Europe? Nearly three years have come and gone and Europe is no closer to solving the mess it is in. Stubbornness, philosophical differences and structural impediment have prevented a solution thus far and make it nearly impossible to see one in the future. Not an overly appealing thought!

www.igmarkets.com.au

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