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Market down following mixed leads from US

11.57 AEST, Thursday 31 January 2013

Market Down Following Mixed Leads from US

By Miguel Audencial (Sales Trader, CMC Markets)

The Australian equities market is currently trading lower endangering its impressive winning streak. Contrarians, who have been caught short in the past few sessions, expecting a pullback, may breathe a sigh of relief if this streak ends.

Our market received mixed leads from the US overnight. The three major US equities indices closed lower, the US fourth quarter GDP data was disappointing but the ADP employment reported higher than expected figures. The US Fed also confirmed it will continue its $85 billion a month of mortgage debt security and Treasury purchases. It was also verified that the US interest rates will remain at near zero levels.

Crude oil traded higher overnight despite a larger than expected rise in inventories. The confirmation that the Fed is going to continue its aggressive bond program is one of the reasons for this support. A slightly weaker US dollar also made the commodity more attractive. Tensions in the Middle East are still a concern, with violence escalating in Algeria, causing fears of supply disruptions.

Gold also traded higher overnight following economic data that showed the US GDP contracted in the previous quarter. This increased the precious metal’s appeal as a safe-haven. Confirmation that the Fed will continue its bond buying program also caused investors to use the precious metal as an inflation hedge.

There are a number of important economic figures still to be released this week. The weekly US unemployment claims figures will be released overnight and the US non-farm employment change is announced the day after. Several Manufacturing PMI figures are scheduled as well with the Chinese data, expected to be released tomorrow, being one of the most watched. If these figures report higher than expectations, the equities market’s momentum may extend to February.



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