27/08/10 - 15:30
Ben Potter, Research Analyst
Afternoon thoughts from the Trading Room – 3.30pm
Across Asia, regional markets are mixed following weaker overseas leads and ahead of tonight’s Q2 GDP read and Bernanke’s economic speech. The Shanghai Composite is the worst performer, down 0.3% while the Hang Seng is lower by 0.1%. On the upside, the Nikkei 225 and Kospi are 0.7% and 0.1% firmer respectively.
Locally, the ASX 200 has moved into positive territory in afternoon trade, currently 0.4% firmer at 4374. Consumer staples and discretionary stocks are adding most of the points, while the materials and energy sectors are still in red, although are well off their lows.
The move higher is a little bit surprising, especially considering it’s a Friday afternoon. One would usually expect selling pressure ahead of crucial economic data tonight and following weak US leads. Having said that, the market is in the red for the week, so perhaps we’re seeing some short covering.
Tonight will be crucial in determining who’s right in their argument. Will it be the bears that are calling for a double dip recession or will the bulls who are suggesting this is nothing more than a soft patch in a longer term recovery?
Looking ahead to European trade
Turning to Europe, the week's final session is likely to be defined by the GDP releases due out of both the UK and US, plus Bernanke's speech from the Fed's summer meeting in Jackson Hole. Any assessment of the economic outlook will potentially be grasped by traders. However, it would seem a big ask to try and convince what appears to be an increasingly skeptical market that the future is going to be all that bullish.
Earnings news from luxury retailer Tiffany, Spanish Airline Iberia and the UK's Rightmove will also provide some direction. Each of these offers an insight to a range of significant sectors, whilst takeover target Dana is also due to report. The long weekend in London could leave the UK market looking somewhat lacklustre in the hours ahead and may increase the defensive mindset further.
Ahead of the open, we're calling the FTSE down 19 at 5137, the DAX down 35 at 5878 and the CAC down 24 at 3451.
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