Soft data produces mixed results

Twenty four hours of weak economic news around the globe puts Asia Pacific investors in two minds today. Further weakening in China and Europe could bring on stimulus efforts, and weakness in the US defers Fed tightening. However, an ongoing sell off in global bond markets suggests investors are looking through the worse than forecast numbers and taking a bad news is bad news approach.

Twenty four hours of weak economic news around the globe puts Asia Pacific investors in two minds today. Further weakening in China and Europe could bring on stimulus efforts, and weakness in the US defers Fed tightening. However, an ongoing sell off in global bond markets suggests investors are looking through the worse than forecast numbers and taking a bad news is bad news approach.

A day of digestion in Australia may see recently elevated volumes investors comb through the details of a softer global outlook and the Federal budget. A lower opening may be a harbinger of further sentiment decline, as the market tempers yesterday’s enthusiasm for budget stimulus for small business with the realpolitik of passing a hostile Senate.

A weaker USD on the back of lower than expected US retail sales sees the AUD trading above 81 US cents.  This effectively kicks international support for local share to the sidelines – another cause for concern. Two of the four big banks are now ex-dividend, and NAB will attain the same status tomorrow, adding further weight to concerns above dividend yield related positions in the face of a bond market rout.

For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.

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