Markets in wait and see mode

Markets in wait and see mode

By Ric Spooner (Chief Market Analyst, CMC Markets)

The stock market is likely to strike a subdued tone in early trading as traders wait for data on China’s trade performance and US jobs growth.

The onset of the US quarterly reporting season also has investors in wait and see mode. The big increase in stock market price earnings valuations in developed economies over 2013 means that markets are now potentially very sensitive to misses on earnings expectations.

Alcoa has started things off on the wrong foot by missing expectations in its profit announcement released after the US market closed. This is likely to add to the subdued tone on the local market, particularly in the resource sector which will also be impacted by lower overnight commodity markets.

Investors are waiting on the release of China’s trade data after further moderation in the manufacturing PMI’s released at the beginning of the month. Recent softness in resource stocks has been at least partly attributable to growing concerns that the pace of economic growth in China has been softening.

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