In an unusual confluence of events Australian investors will receive updates on both the fiscal and monetary policies of the Australian government and the Reserve Bank in the next twenty four hours. This may mean a horror trading day for local shares as weaker commodity prices and a poor half year result from ANZ weigh on a market thinned out by coming events.
European and US shares shrugged off weaker Asian trading to post gains overnight. US manufacturing data helped. Although current activity was slightly subdued, the orders component of the index pointed to a lift in activity. The NASDAQ index outperformed as tech stocks rallied back from results inspired selling.
Weaker oil and copper prices could see yesterday’s market leaders turn to dead weight today. Combined with disappointment at ANZ’s aggressive provisioning and depreciation, there is a real prospect of traders kicking the daylights out of stocks at the opening. The key to today’s market performance may be whether or not investors are panicked into jumping ahead of the potentially market changing news.
The call on this afternoon’s interest rate decision is a genuine 50/50 proposition. Low inflation gives the RBA board capacity to cut if they wish, with some suggesting the lowest core inflation read in years demands it. Others point to strong job numbers and a desire to keep some stimulus capacity in reserve as reasons not to move.