The stock market will open this morning contemplating the good-news-is-bad-news theme as far as the US economy is concerned. A reasonable CPI read and very strong housing sales in the US during February have the market thinking about US interest rate increases. This led to a decline in US stock markets and is likely to flow through to a soft start to local trading this morning.
Getting inflation on a trajectory back towards 2% is a key consideration for when the Fed will begin to lift interest rates. How US inflation holds up in the face of a stronger Dollar and potentially lower import prices will be one of the most closely watched features of the world economic landscape over coming months. Consumer prices excluding food and energy have increased at an annualised rate of 1.7% over the past six months and are so far holding up reasonably well.
Much better than expected new home sales in the US during February, despite very cold weather will also be encouraging for the Fed. It appears home buyers are responding to an improved job market, low interest rates and recent softness in the median price for new houses.
As has often been the case recently, whether or not we see buying of yield stocks like the big four banks may hold the key to how today’s trading pans out once the market settle s down after the initial opening period.
For further comment from CMC Markets please call 02 8221 2137.