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IG Markets - Afternoon thoughts

IG Markets - Afternoon thoughts

Good afternoon,

Across Asia, regional markets are mostly lower on the back of a poor session on Wall Street and the continued fallout from the escalating tensions between North and South Korea - although the major indices are well off their opening lows. The Nikkei 225 is the region’s worst performer, down 0.8% (having been on holiday yesterday), while the Kospi is down 0.6% with geopolitical concerns a major focal point. Elsewhere, the Shanghai Composite is 0.2% weaker while the Hang Seng is bucking the trend to be 0.5% higher.

In Australia, the ASX 200 is currently 0.2% weaker at 4577 but well off its earlier lows of 4551. While the market is broadly lower with all but the defensively-orientated telecoms and healthcare sectors in negative territory, losses across the “risk” sectors such as materials and energy have been greatly pared, with investors on the lookout for cheap entry prices into quality names that have been beaten down in recent weeks.

Recent weeks have been dominated by the re-emergence of European sovereign debt concerns and fears of further tightening measures from China. Last night’s flare up of tensions between North and South Korea may have proved one too many a headache for the market to handle so a further selloff almost seemed inevitable. That said, last night’s rout and the early weakness across Asia may have seen a bottoming in short-term sentiment with investors this afternoon appearing to be wading back into the market on the lookout for bargains. Sentiment is a funny thing and can change like the flick of a switch and this afternoon’s trade may in fact be signalling the start of a new upwards leg.

While investors are likely to stay cautious and volumes are likely to remain thin ahead of the US Thanksgiving Day holiday, the bounce in risk currencies such as the Euro and AUD supports the notion that the recent market slide (since post the FOMC meeting) may be coming to an end.


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