No inspiration from US Fed Minutes

09.46 AEST, Thursday 12 July 2012

No inspiration from US Fed Minutes
By Miguel Audencial (Sales Trader, CMC Markets)

Expect a flat start to the Australian equities market today after the release of the US Fed’s Meeting Minutes last night failed to inspire investors to buy into the market. Traders were disappointed because the minutes did not provide an indication that another round of quantitative easing is on the way unless economic conditions worsen.

I would also anticipate another session of dismal volumes in the local market today as I cannot see those who have been sitting on the side-lines to come out of their comfort zones. The Energy sector may outperform the market because crude oil posted strong gains last night after reports that inventories were lower than expected.

The three major exchanges in Europe last night were mixed with the FTSE virtually flat, the DAX 0.25% stronger but the French CAC weaker by 0.57%.

The Spanish market reacted positively to its Prime Minister’s announcement of Austerity measures. The result was that Spanish Equities Index rallied 1.2% and its yield on the 10 year bond fell 23 basis points. It would be interesting to see how long this announcement can put the Spanish bond yield below the 7% barrier.

Crude Oil displayed strong gains last night after data was released that inventories decreased more than expected. It was also reported that refinery utilization was higher by 8.9% indicating that more margins are being earned. If the utilization continues to rise expect stock piles to increase as well which would naturally put a limit to any potential upside in oil prices.

Australian employment figures are due later today and the Chinese GDP number is due tomorrow. Really strong numbers are needed to encourage investors back into the market. If the figures disappoint, expect the low volumes we have been seeing during the past days to continue.

ends

© Scoop Media