Markets softer overnight, buying support for S&P 500 remains in tact, ASX futures down 30 points

The Australian stock market was looking to recover from earlier falls in the session yesterday before investors focused on the negative aspect of Chinese trade data. The data looked good from a net trade balance perspective for China itself, but the imports were considerably weaker than expected (-20.4% year on year versus expectations of -15.9%), which, for an exporter country like ours, confirms the falling value of Chinese demand for commodities. It's nothing that we didn't already know, but the magnitude of the drop will dent the otherwise-positive sentiment that we've seen in the resources sector of late.

You can see on today's first chart that this shaved 30 points or so from the ASX 200 from where it was previous to the announcement; however, it close higher for the session suggests that the market didn't read too much into these figures. There's a good chance that the ASX 200 will close below a point of support at 5,195 today and this might give a bit of a bearish tone to trading today.

Today's second chart shows the US S&P 500 equity index futures which are still sitting above buying support that has been holding it above the 2,000 level. This will be taken into account by local traders and if the US futures market remains buoyant throughout today's Asian session, then we could see some better-than-expected trading on the ASX. Rivkin Trader clients can monitor this market by entering 'US500' into their platforms and pulling up a one-minute chart. If you'd like a free Rivkin Trader demo account, just email customerservice@rivkin.com.au.

Lastly, the Australian dollar has pulled back following the Chinese data out yesterday, despite the US dollar remaining steady. The last chart today shows the behaviour and this clearly marks the short-term trend as one that is Australia-specific. Weaker Chinese imports means less requirement for the Chinese to buy Aussie dollars to procure the goods, so this is pretty logical. As to whether the market will see it as reason to drive the Aussie even lower will likely depend upon Chinese CPI figures, which are out 12:30pm Sydney time - a low read will give the Chinese government the ability to implement worry-free stimulus, but will also suggest that the economy there is lagging a little. A tough one to read into, but expect a bit of FX and index volatility at around that time.


Source: Rivkin, Saxo Bank

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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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