Global nerves bring a swift end to yesterday's market euphoria

Fresh from the euphoria of yesterday’s 2% market gain, local traders are this morning confronted by the dampening influence of nervous international markets.

In a now familiar theme, traders are becoming concerned about the possibility that the next volatile market swing, in this case downward, may not be too far away. Both U.S stock market valuations and commodity prices have risen to levels that could be difficult to sustain against the ongoing reality of sluggish global demand growth.

A round of limp manufacturing PMI’s for April underscored weaker commodity prices last night and will put pressure on mining and energy stocks today.

The 10% trading range in ANZ yesterday, serves as an emblem of market volatility in recent months. While, the rate cut no doubt helped yesterday’s dramatic turnaround, it seemed mainly about differing assessments of ANZ’s profit result. At the end of the day its dividend cut and write downs were seen as prudent housekeeping in response to changed circumstances already well understood. Fresh news on the banks underlying business was if anything relatively positive, with bad debt provisions a little better than generally anticipated.

As is usually the case, the Budget is unlikely to influence thinking on the broader market outlook today. If anything it represents a slight easing of fiscal policy which will add to the stimulatory impact of yesterday’s rate cut and the sharp drop in the Aussie Dollar.