The Australian benchmark suffered the effects of a large sell order yesterday and ignored positive Chinese data. After broad gains on Wall Street, expect a bounce.

In US action overnight, the major indices all had a good session as participants were buoyed by a swag of stronger-than-expected economic data and a continued recovery in the aftermath of Hurricane Sandy.

The tech-heavy NASDAQ was the stand-out performer, currently up 1.3 per cent while the S&P 500 and Dow Jones Industrial Average added 0.9 and 0.8 per cent respectively.

Yesterday’s price action in Australia was a bit odd. We had been thinking that if we get a half decent night’s trade offshore then we should see a pretty big snap back rally, and its looking like that’s going to play out.

There was almost certainly a large portfolio sell order in play yesterday as there was absolutely no reason why we should have underperformed regional markets by so much. More staggering was how we completely ignored the great data out of China was, which showed upside momentum is returning to their economy. Assuming that portfolio order is now complete, we should see a pretty good day’s trade today.

So far, SPI futures are calling the local bourse to unwind around the 4490 level or approximately 35 points higher than yesterday’s close. With gains in the US widespread, we’re expecting broad-based strength locally with the cyclical materials and industrials likely to lead the rebound higher.

Following yesterday’s weakness and assuming the seller is out of the system, there is a good chance for a real snap back rally in China-facing stocks like materials as the market finally takes notice of yesterday’s figures.

In economic and corporate action today, the ABS is due to release quarterly producer price index data at 1130 AEDT. As it stands, the market is expecting a reading of 1 per cent. Elsewhere, Qantas is due to hold its AGM which will no doubt bring plenty of headlines following the Virgin announcements this week.



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