03/09/10 - 15:30
Ben Potter, Research Analyst
Afternoon thoughts from the Trading Room – 3.30pm
Across Asia, regional markets are mostly higher following the stronger-than-expected US economic data overnight. Although, there is some caution ahead of tonight’s non-farm payroll numbers. The Nikkei 225 is the top performer, up 0.5% while the Hang Seng and Kospi are both 0.1% firmer. The Shanghai Composite is bucking the broader trend, down 0.5%.
Locally, the ASX 200 is hovering around the flat line, well off this morning’s high of 4558. Strength among industrial, material and consumer staples names are being offset by selling pressure among the big banks. It didn’t take long for the profit taking to start this morning.
It’s been a very strong week, up 4.1% at this morning’s high. It’s hardly surprising at all to see people taking some profit off the table, especially given the non-farm payrolls release tonight and Monday’s Labor Day holiday in the US. Also, the fact that September is historically one of the weakest months for equities would make taking profits even more tempting.
Looking further ahead, it appears the outlook for equity markets has improved considerably. Everyone had been pricing in a double-dip recession in the US. Given the uptick in economic data this week, which now seems to be pointing towards a soft patch, rather than another recession, it feels like there’s a bit of a re-rating going on.
A lot traders with short positions short have been squeezed this week. With sentiment still poor, it wouldn’t surprise me at all if markets continue to move higher throughout the month, especially coming off the back of one of the worst Augusts in recent times.
Ahead of the European open
It may be shaping up to be a rather muted session in Asia as traders await the key non-farm payroll data tonight. However, the sustained run of buying on Wall Street in the last few minutes of trade yesterday is poised to help lift the major European indices again at the open.
There may be a few other fundamentals on the agenda today - notably Eurozone retail sales. However, it's going to be all eyes on the BLS and although the overall backdrop may be one of downbeat economic data, we saw a marginally better-than-expected weekly jobless reading yesterday, and anything with a bit of gloss on it could help again lock in confidence for equities. Another risk, however comes with the US Labor day holiday on Monday. Any uncertainty could add to the temptation to take money off the table, ensuring traders don't get caught on the wrong side of any big move lower in Asia or Europe at the start of next week.
Wednesday's gains may well have put some froth back into the market so there are still some healthy short-term profits out there that can be booked. With limited earnings news, those payroll numbers will remain very much the centre of attention through the UK's morning session. Ahead of the open we're calling the FTSE up 8 at 5379, the DAX up 13 at 6097 and the CAC up 7 at 3638.
Regular Feeds
Chris Weston, Market Analyst, is the face of our video market updates and presents live from our trading floor daily. His expert commentary can also be seen regularly on Sky News Business Channel, plus Bloomberg, ABC2 and the Australia.
Plan your day
More in-depth market news is available within our PureDeal platform, as well as a range of free charting and research tools.
Disclaimer: The above material does not contain (and should not be construed as containing) personal financial or investment advice or other recommendations. The information provided does not take into account your particular investment objectives, financial situation or investment needs. You should assess whether the information provided is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision based on the material above. You can either make this assessment yourself or seek the assistance of an independent financial advisor. IG Markets Limited accepts no responsibility for any use that may be made of these comments and for any consequences that result.
SHARE: