30/08/10 - 15:30
Ben Potter, Research Analyst
Afternoon thoughts from the Trading Room – 3.30pm
Across Asia, regional markets are all higher in early afternoon trade following the strong overseas leads from the US. They were also helped by the news of an emergency policy meeting at the Bank of Japan, which saw the yen weaken and exporters bounce. The Nikkei 225 is the best performer, up 1.6%, while the Kospi and Hang Seng are 1.5% and 0.6% stronger respectively.
In Australia, the ASX 200 is currently 1.6% firmer at 4439.5 having earlier touched an intra-day high of 4456. Gains for the day are broad based. Materials, financial, industrials and energy sectors are leading the way, with risk appetite returning after calming words from Ben Bernanke over the weekend that the Fed stood ready to do whatever was necessary to stabilise the US economy.
Friday’s US session could be a real turning point in the market. Given the recent trend in underlying economic data, markets and traders were positioned for a worse-than-expected 2Q GDP reading. When the figure came in better-than-expected, short traders were forced to cover their position, hence driving prices strongly higher.
If that wasn’t enough, comments later in the day from Federal Reserve Chairman Ben Bernanke further buoyed sentiment and confidence. Participants saw Bernanke’s reassurances as a backstop to further deterioration in data.
Sometimes, all markets need are some reassuring words and Bernanke’s seem to have done just that. Price action following the announcement has been very positive, which is encouraging for further gains.
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