China Data To Support Firm Tone To This Morning’s Trading

10.14 AEDT, Monday 10 December 2012

China Data To Support Firm Tone To This Morning’s Trading
By Ric Spooner (Chief Market Analyst, CMC Markets)

The Industrial Production and Retail Sales data China released over the weekend build on the picture painted by recent data which suggests that China’s economy has turned the corner and is growing at over 7.5%pa. This is an encouraging development for the Australian economy, particularly the resource sector and is reflected by an increase in the iron ore price to around $121 in recent days.

The improvement in China’s economy together with better than expected employment growth in the US reinforce the probability that world economies can grow at moderate levels next year if confidence can be maintained by a reasonable outcome on the US fiscal policy negotiations.

News that Greece is likely to be successful in buying back around €30 bn of its bonds will also assist market confidence by removing Greece as a short term source of risk. The political situation in Italy may temper this confidence though. The prospect of an election next year being fought on the issue of fiscal policy will be unsettling for bond and equity markets.

The coming week is shaping as a defining one for the technical outlook on S&P/ASX 200 index. A clear breach of the mid October high at 4582 would be a bullish development for the medium term signifying that the correction of the June/October rally is complete. The 50 day moving average at around 4470 represents near term support for the market this week.

Web: http://www.cmcmarkets.com/

ENDS

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