Local market expects weak start

09.48 AEST, Thursday 28 March 2013

Local market expects weak start
By Miguel Audencial (Sales Trader, CMC Markets)

The Australian equity market is expected to have a weak start in today’s trading due to an uninspiring session from its US counterpart. Renewed political concerns and a weak bond auction from Italy are also likely to weigh down on the market.

Just as investors were about to completely assess the impact of the cost of the Cyprus bailout, an Italian politician makes a statement that would remind them of the other political risks present in Europe. Pier Luigi Bersani, the head of a centre-left alliance said “only an insane person would want to govern Italy and the country is a mess”. This raises the probability of another Italian election soon. The result of the Italian bond auction also puts a concern to investors with the five year notes yielding the highest since October of last year.

The flight to safety mentality was also evident last night with the safe haven assets performing well. The greenback and gold posted gains, while the yields of US and German debt instruments dropped.
Crude oil performed well overnight despite a higher than expected increase in inventories and a stronger US dollar. The market appears to be pricing in an expectation of an increase in future demand due to the release of encouraging US economic data. The most recent was the higher than expected durable goods orders reported yesterday.

Two US FOMC members made a statement last night where both indicated that the Fed’s $85-billion-dollar a month bond buying program is providing the desired effect of boosting the pace of economic recovery. Their statements support the expectations that the Feds’ current quantitative easing program is likely to continue until the end of the year.

We can expect low volumes in today’s Australian equities trading session as investors count down towards the Easter long weekend.

http://www.cmcmarkets.com/

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