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IG Markets: Afternoon Report

Across Asia, regional markets are mostly firmer in light holiday trade following mostly higher leads from the US. The Hang Seng is the biggest gainer, up 0.7% while the Nikkei 225, Kospi and Shanghai Composite are all stronger between 0.2% and 0.3%.

In Australia, the ASX 200 is 0.2% lower at 4766 after fading from an early high of 4784 to hit an intra-session low of 4754. Unsurprisingly, trading volumes are extremely light as early broad-based strength gave way to mostly red trading screens.

The material and financial names are detracting the bulk of the points, down 0.5% and 0.2% respectively while energy and industrial names are modestly lower too. The defensive healthcare and utility sectors are bucking the broader trend, both higher by more than 0.5%.

The big story of the last few days was China’s decision to raise interest rates on Christmas Day. There’s no doubt this is having a negative impact on the mining sector, particularly the big diversifieds. Nonetheless, it’s very difficult to gauge to what extent given the near non-existent trading volumes.

If electronic base metal trade on the LME is anything to go by then it’s unlikely to have too much of a lasting impact after copper quickly traded to a new record high of $9437.50/ton on reasonably good volumes. If it was going to severely affect markets then we would have likely seen significant weakness in Shanghai and Comex trade, which have both been online for the last two sessions.

Nonetheless, it will be very interesting to see what happens when more volume comes into the market during European trade.

Elsewhere, there’s the prospect of more bad news from NSW and Qld based coal miners following more torrential rain and subsequent flooding. We could see even more tightness in the coal markets!

Ben Potter
Market Strategist
IG Markets

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