The XJO is expected to edge higher on open this morning following a small push higher overnight in the U.S. Their futures are flat.
Markets are fairly quiet at the moment. Yesterday we opened lower but retook much of the intraday losses to finish only marginally in the red. Our RBA kept rate on holds and kept to their messaging – and so our market’s reaction was lukewarm.
Materials both locally and in the U.S overnight closed firmly higher thanks to China announcing stimulus for their economy. This could be the beginning of the rotation from the banks into the materials that we have been expecting for a while. Of course, at this stage it is speculation and our miners will want to see higher prices in key commodities like iron ore.
The shorter-term indicators like the stochastic and Bollinger bands have started to normalise. We are also flirting with key support at roughly 8,100. This morning we should edge higher and continue the consolidation and it wouldn’t be surprising to see both our market and the U.S finish the week in similar fashion.
US Markets
US shares saw relatively modest gains overnight, with each of the three major indices finishing slightly in the green. US shares were helped by stimulus announcements from the Chinese government yesterday, which helped materials stocks to be the best performers on the night. There was little in the way of fresh economic data for US markets to consider, though a report did show a drop in consumer confidence. US data will be pretty sparse until the GDP revision on Thursday night (which probably won’t be too important) and then the PCE inflation data on Friday night, which will be quite important. US shares look toppy after a year of gains but up until now, the impending rate cuts have been enough to drive prices higher. Will that continue being the case?
Five of the eleven sector groups of the SP500 closed higher overnight, with Materials the strongest performers after Chinese stimulus was announced yesterday. Technology and Discretionary also fared well. Financials stocks saw the most selling, followed by Utilities stocks.
Technically, the SP500 closed right around potential resistance at 5,730 overnight. Movements since the break higher last week have been quite small and instead we are waiting for a clear break in either direction to call the next directional move.
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