China's solid export growth to help opening market tone

Weekend news of better than expected growth in China’s exports last month should support a steady open to share market trading this morning.

Investors will be encouraged that ongoing improvement in exports remains a source of growth for China’s economy. This adds credence to weekend comments by President Xi Jinping that the risks to China’s economy can be controlled and that it remains stable even if growth rates were to slip slightly towards 7%.

While the headline US jobs growth was a little below expectations, there were upward revisions to past months data and overall growth was good enough to support another decline in the unemployment rate. The overall picture remains one of steady improvement in the headline unemployment rate against a background of still unacceptably high underemployment. This steady as it goes scenario was enough to see some profit taking on long positions in $US after recent steep gains.

Some $US selling and steady economic reports from China and the US have supported commodity markets. The gold sector is likely to be bid in early trading while minor gains in iron ore, copper and oil should help the wider resource and energy sector.

With valuations in the major banks and other “yield” stocks having been dramatically restored in recent weeks, the ASX 200 index has arrived at potential chart resistance. This consists of the old trend line support dating back to June 2012 as well as the 78.6% Fibonacci retracement level around 5560. At this stage, the 200 day moving average provides potential support around 5440.

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