Overnight US markets closed slightly lower after a very weak start. Nasdaq stocks lead the move lower with the Nasdaq finishing the day 1.03% down. The is S&P500 just consolidating below the all-time high.
Strong jobs data and services PMI numbers in the US are showing strong signs of an economic rebound. But Investors are still worried that the FED may taper. So many investors could remain on the sidelines until the next FED meeting.
We are starting to see a divide in the FED, some members are starting to suggest that they should start to taper Bond buying. This kind of talk could see them hold back until mid-June where they are set to meet. We will see FED Chair Powell speak tonight which could help sentiment if he ensures that tapering bond buying is not on the agenda.
Locally our market has disconnected from the US pushing into all-time highs. A combination of strong economic data and Iron Ore prices jumping have investors jumping back into the Aussie market.
Metals got hit overnight including Gold, Silver, and base metals like copper were sharply lower. Copper is back to key support at 4.46, Gold came back to the uptrend line. So, the moves are looking technical in nature for the moment. We will be watching this space closely in the coming sessions.
Australian Outlook
Our market continues to surprise as it holds strength in the face of a sideward U.S market. Indeed, the U.S even fell last night and our market is expected to open flat.
Our market’s strength is unsurprising from a broader perspective though, as we are far cheaper than the U.S from a PE perspective. The welcome surprise is that in the short term we would typically need permission from both the U.S and their futures run as hard as we have seen over the past week, but instead we have been boldly making headway in almost spite of them.
It would be reasonable to expect some profit taking to come in and pull us back for some respite. When this happens though could be anyone guess as we are now in blue sky territory and have no resistance to target. Typically, a Friday and Monday would see our market uneasy and with today’s soft open we could see the market remain flat going into the weekend. If we do see a meek pullback today, perhaps from red U.S futures or organic profit taking, then we would expect 7200 to hold.
The AUD fell against the greenback, but a few base commodities got whacked overnight, with copper and gold of note. Iron Ore futures actually increased though, so we may have mixed miners today.
US Markets
US shares fell overnight, with tech stocks again faring the worst. Prices were trading significantly lower at points after US President Biden floated the idea of a minimum corporate tax rate, but strong economic data pulled prices back towards opening levels.
Jobless claims were lower than expected and there were more jobs created than expected, on top of this was strong manufacturing data, and a further drawdown in US oil inventories. Tech, Consumer Discretionary, and Materials stocks fared poorly, while Utilities and Consumer Staples were the strongest performers overnight.
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Tim Michaelides is the Head Trader at Emerald Financial Group.
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