The XJO is expected to open lower this morning following an indecisive night of trading in the U.S which saw their market finish practically flat. Their futures are also flat.
Our weakness this morning is somewhat surprising with the flat close in the U.S. Our market has been anticipating U.S moves, happy to lead gains, but reluctant to price in any pullbacks or uncertainty in the news. Perhaps our resilience, in part, was due to our market anticipating the U.S would reach all-time highs once the conflict between Iran and Israel simmered down. Now that they are practically within arm’s reach, perhaps we are anticipating the pullback with all the headwinds that markets have been facing for a while now. It likely doesn’t help that Trump has turned his crosshairs onto Powell either. Though the U.S has not reacted, perhaps we are once again anticipating the selldown that happened last time Trump went after him (especially now the U.S is practically at all-time highs).
A tangible reason for our weakness this morning is also perhaps that both the Financials and Materials sold down in the U.S overnight. Indeed, their market was only held up by Tech, which is not nearly as well represented in our market. The Financials and Materials however are our two largest sectors that represent over half our index. With CBA being at prices that are extremely difficult to justify, it wouldn’t be surprising to see some profit taking and a well earnt pullback today.
For now, we continue to expect the market to consolidate at the top of the range. It is hard to know what will push us into all-time highs, or be the trigger for a turn around.
US Markets
US shares were fairly flat overnight, with prices failing to continue the bullish momentum higher. Perhaps some investors were cooled by Tuesday’s comments from Fed Chair Powell that that there’s still no rush to cut rates and from data showing that US consumer confidence continues to falter. Powell reiterated his view that tariffs would push inflation higher in the months ahead. The most important data point this week however, will be the PCE (inflation) data from the US on Friday. That PCE data will likely determine if US markets reach their all-time high or not in the short-term. Bullish investors will be hoping that the PCE continues to fall.
Only three of the eleven sector groups of the SP500 closed higher overnight, with only Technology stocks managing notable gains. Real Estate, Staples, and Utilities stocks saw the most selling.
Technically, the SP500 bounced from the key potential support level at 5,975 – 5,970. With a bounce from these levels the SP500 looks further bullish from here, perhaps all the way to the all time high at 6,150.
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