US markets consolidate after holiday, Aussie dollar back above 69c, ASX futures down 15 points

After rallying 44 points yesterday in the face of a falling futures market, the ASX 200--following a 30 point intra-day stumble on news of slightly softer-than-expected Chinese GDP--rallied quite bullishly into the close, putting on around 35 points in the last two hours. The Aussie dollar followed suit and bounced from US$0.6837 to US$0.6956 after initially selling off on the same Chinese figures, in a sign that buyers are ready to pounce on any reversal of a major low, which would also have been fuelled by traders covering bearish short bets placed in anticipation of disappointing Chinese growth.

There were no material bounces in markets overnight, but a lift in European equities (up between 1%-2%), a lift in copper (+1.4%) and the mixed moves in WTI (-3.67%) and Brent (+0.84%) crude markets will at least give markets a chance to begin consolidating. As you'll see in today's second chart, S&P 500 volatility futures (VIX) remain elevated and there are few observers that expect the velocity of price fluctuations in markets to disappear quickly. Has the market flushed out the fear associated with this poor start to the year? It is feeling more that way, but it is best for all close observers to expect weeks more of this type of behaviour so not to be disappointed if and when it arrives. Just like a property investor collects rent and would never have a professional valuation conducted every weekday, so too investors should focus on the ability of the companies in their portfolios to generate earnings and either grow in value or distribute value, without worrying too much about the daily market valuation of those companies.

Locally, year-on-year New Zealand CPI has just been released and came in at 0.1% versus expectations of 0.3%, which immediately sent the NZDUSD pair 70 pips lower to US$0.64, and will probably strengthen bets that both the Reserve Banks of New Zealand and Australia will ready the market for rate cuts. Westpac consumer confidence for Australia will be released at 10:30am, Sydney time.

*****Please note I will be travelling for the next three trading days, during which time the Morning Market Wrap will not be published*****


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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