Wait and see
By Ric Spooner (Chief Market Analyst, CMC Markets)
The stock market looks likely to open on a relatively steady, wait and see note this morning after a surprisingly robust profit taking session yesterday. Two of traders’ major concerns appear left open to question by international markets last night.
US 10-year bond yields closed with little change on the previous night. This is a more hopeful result than a continuation of full-throated bond sell-off many had feared. However, it does leave open the question of whether the downtrend in bonds has finished.
Similarly, US stock indices did yield to the forces of short-term gravity and closed lower after six consecutive days of gains. However, volatility was low and the declines were fractional. At this stage, there is no sign of the volatile pull back on evidence in local trading yesterday.
Expectations of a strong US profit-reporting season are limiting the potential for a pullback in US stocks. This was in evidence in last night’s trading as the financial stocks continued to rally in advance of profit results to be unveiled over coming days.
Firmer overnight metals profits are also likely to steady the ASX 200 this morning. However, the oil price is in wait and see mode after a strong rally. Oil found support from another solid drop in US inventories as well as lower production in the latest weekly report. However, as with local oil and gas stocks yesterday, the rally in the oil price paused last night, with the market now appearing prepared to wait on fresh developments