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Ring of Confidence returns

09:10 AEST, Wednesday 8 January 2014

Ring of Confidence returns

By Ric Spooner (Chief Market Analyst, CMC Markets)

The ring of confidence returned to international equity markets last night after an ambivalent start to the New Year. This looks set to support a firm opening on our market this morning.

An improving trade balance looks to be joining housing, manufacturing and consumer spending as supportive elements for US economic growth. Equity markets were encouraged by the lower than expected US trade deficit for December. The fact that this improvement has a structural element in the form of the weakest oil imports for three years, as shale oil production increases, leads to optimism that this will be an ongoing positive for US growth.

Increasing confidence about Southern European economies also helped restore New Year confidence with Spain’s IBEX up 2.9% last night.

Last night’s confidence will need to translate into a move past the New Year high of 5384 if it’s to be more than a temporary blip and more upside work would be required over coming days to achieve this.

Despite the European and US inspired confidence supporting this morning’s opening, China may be crucial to how the market closes. Iron ore stocks fell significantly yesterday as spot prices faltered and the iron ore price will be closely watched today. China’s trade balance also has the capacity to impact markets, with steady growth prospects in emerging markets recently balancing improved optimism for developed economies.


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