Volatility has traders alert to all possibilities

Bank sellers are back in action in early trade today offsetting buying in materials and energy stocks to push the ASX 200 index lower.

This follows on from yesterday’s market action, where despite a generally firm tone to international equity markets our market was sold off with major bank stocks finishing on their low as sellers took charge. Whether this selling in major bank stocks extends after this morning’s soft opening or whether buyers step in to take advantage of this counter trend move could be the key today’s overall market direction.

Tonight’s US Non-Farm Payroll report may dictate some trader caution today. The major risk appears to be if the outcome is a strong jobs number. Given that the Fed is comfortable with the broad trend of job growth, a strong number would improve the atmosphere for a September rate hike. Conversely it would take a really weak report and/or significant downward revisions to past data to create a situation where the labour market became a barrier to the Fed making its first move this year.

Mario Draghi’s comments last night were taken by markets as affirmation that the ECB has a clear easing bias. This provides a counterpoint to the Fed’s tightening bias and led to Euro Dollar weakness. The Aussie Dollar however, is managing to cling to the 70c zone at this stage helped by stronger commodity prices last night