The XJO is expected to continue yesterday’s fall on open this morning despite a small rise in the U.S on Friday. Their futures are in the green overnight.

The U.S was mainly driven by tech overnight, which is not as well represented in our market. Furthermore, their financials were the worst performing sector overnight. Our two biggest players are our financials, led by the major banks, and the materials, led by our major miners. The banks are very expensive, and have largely been the drivers for our market to follow the U.S higher. The materials on the other hand have lamented with strong pullbacks in iron ore over the past couple of weeks. Our sell down yesterday was exacerbated by continued falls in the materials space, but also on overheated banking sector that likely couldn’t justify their elevated position – regardless of the U.S holding ground.

With tech being the main driver overnight, it is not surprising to see our market’s meek response. We also settled on the 50 day MA yesterday, a point of comfort for our market at the moment as we grapple with the push and pull of the current market forces. On one hand, we typically want to follow the U.S, which has managed to hold strength recently and even finish at all-time highs last night. On the other hand, our own local economic environment is heading towards stagflation, our banks are expensive, and iron ore continues to fall.

US Markets

US shares closed slightly higher overnight, with a huge jump in tech-giant Apple driving markets higher. Overall markets were fairly flat ahead of the major events of the next few sessions, with the US CPI (inflation) reading tonight and the Federal Reserve meeting tomorrow night. The events of the next few days are likely to determine whether we see further upwards movement from here, or whether we see markets dip lower. Markets have been strong with the hope of rate cuts, and we are getting to the pointy end of things, with many expecting US rate cuts to start from September. Any change to these expectations from the events of the next 48 hours are likely to be big for share price movement.

Only two sectors of the SP500 closed higher overnight, with Technology the strongest performer, and with Communications also closing higher. Every other sector closed lower to some degree, with Financials the worst performer, followed by Utilities and Industrials.

Technically, the SP500 recently broke above the previous all-time high though has struggled to continue much higher. Its hard to say where this movement may stall as these are level that have never been seen before. However, the index seems to be stalling around 5,375 given the past three sessions of movement. Should the index fall from here, it would have to break below 5,320 before it would look like falling further.

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