Wave of optimism lifts market confidence

15.13 AEDT, Thursday 18 October 2012

Wave of optimism lifts market confidence

By Ben Taylor (Sales Trader, CMC Markets)

Market confidence seems to have turned a corner today. US housing data is improving, Spain has avoided junk status and Chinese GDP has come out in line, while its industrial production, retail sales and fixed asset investment has all come out better than expected.

The wave of optimism has ensured all sectors, bar the defensive healthcare sector, have enjoyed a rise today with the miners leading the charge.

The first signs of stabilisation in China are coming through. While it may be some time before growth starts to turn higher, many Chinese sectors are now showing evidence of a turnaround. This should hopefully stabilise Chinese growth reducing the risk of a hard landing and give us reason to buy up risk assets.

Avoiding junk status has affirmed Spain’s investment grade bond rating at BAA3. If Spain debt falls from investment grade they would be forced into a bail out, something they are desperately trying to avert. This is a big piece of today’s rally and continues to provide confidence to the market that Spain is somewhat contained for now.

The Aussie dollar is defying the markets upcoming expected cut and rallying as risk on takes hold. The Chinese data and reduced risks in Spain have given our dollar wings.
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