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Shanghai drop amplifies falls elsewhere

15.01 AEDT, Monday 4 March 2013

Shanghai drop amplifies falls elsewhere
By Tim Waterer (Senior Trader, CMC Markets)

With this week’s global economic calendar looking stacked with potentially market-moving events, investors across Asia were largely exhibiting caution rather than optimism to kick things off today. However, the mind-set of negativity was not uniform across all Asian bourses, with the Japanese market liking what they heard from (BOJ Governor nominee) Kuroda in terms of his game plan to tackle deflation.

While the Nikkei was in good spirits to start the week, sliding property stock prices on the Chinese market caused higher yielding assets elsewhere across the region to retreat. The sharp drop on the Shanghai market had an amplifying effect on the negative performance of the ASX200, with the Australian market having commenced the day with losses far more modest in nature.

Ex-dividend trading from BHP played its part in the ASX200 slide, while lower trading on commodity markets to end last week set the stage for a weak showing by the resource stocks in general. A decline in base metals left the key miners on the Australian market particularly susceptible today, as illustrated by the clear underperformance of the Materials sector. That is not to say there was much joy elsewhere on the market today, with index pullbacks in the order of 1% or so becoming noticeably more common place in the past several weeks.

Trading conditions and events today were clearly not conducive to a good performance from the AUD, with support at 1.0150 being called into question following poor local building approvals data as well as Chinese equity market woes. Throw into the mix the upcoming RBA interest rate decision and general US Dollar strength and it is apparent that the Aussie Dollar has its work cut out at the moment. The AUD may be relying on the RBA striking a hawkish tone on Tuesday if the currency is to halt the slide.


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