IG Markets - Afternoon Thoughts

IG Markets - Afternoon Thoughts

In afternoon trade, the ASX 200 is up approximately 0.25% at 4562, down from its session high of 4571. While the market got off to a solid start this morning, building on last week’s advance of 1%, a smaller-than-expected Chinese trade surplus, featuring anaemic export/import growth has seen sentiment deflate slightly this afternoon.

Expectations heading into the trade balance number was for a surplus of US$26.9 billion, so the actual print of US19.6 billion was an immediate disappointment. Perhaps more worrying was the 2.9% growth in exports, against expectations of 9% and flat growth in imports. In our earlier report we suggested that the key to the market maintaining its gains was the materials sector holding up.

While this sector, more so than any other could have been expected to fall on the weaker Chinese trade balance numbers, the reverse has actually played out. Materials names have consolidated their gains with BHP +0.9%, Rio Tinto +2.1% and Fortescue +7%, with the materials sector as a whole up more than 1%.

Some of the afternoon’s slippage can be attributed to selling across some of the defensive sectors such as healthcare and consumer staples, which have seen their losses accelerate into the afternoon. Overall, the day could be summed up as relatively pedestrian and uneventful, with traders still in two minds how to play the market heading into Christmas. Most immediately, the FOMC meeting and policy decision this Thursday morning (AEDT) will be a key influence over the week’s overall performance.

However, this meeting, like everything else, will take place in the context of the ongoing fiscal cliff negotiations which will dictate overall market sentiment heading into next year.

www.igmarkets.com

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