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IG Markets afternoon thoughts

IG Markets Afternoon thoughts

Across Asia, regional markets are mixed as traders remained cautious following the weaker leads from Wall Street and the disappointment from the meeting between President Nicolas Sarkozy of France and German Chancellor Angela Merkel. The Hang Seng and Kospi are 0.8% and 0.1% firmer while the Shanghai Composite is flat and the Nikkei 225 0.8% weaker.

In Australia, the ASX 200 is currently 1.2% firmer at 4301, just off its earlier highs of 4311. Earlier modest gains have this afternoon given way to heavier buying interest with equity markets surging on rumours that President Obama will unveil a very a specific plan to boost the economy, create jobs and control the deficit by mid September.

Gains for the day are broad based with the information technology and consumer staples sectors the biggest percentage gainers while the heavyweight industrial, financial and energy sectors are all higher by more than 1%. The materials sector is seeing a more modest advance of 0.7%.

It’s a particularly encouraging sign to see the market open lower and rally. The typical mentality of traders in bear markets is to ‘sell rallies’; however we’re continuing to see buyers putting money to work. Volumes haven’t been brilliant but at least the market is moving higher.

Although the domestic earnings season has only just begun, the market seems to be garnering some confidence from the fact that most results so far have been pretty much in line with estimates. The market was obviously priced for Armageddon last week so these results are coming as a bit of a relief to participants.

Tonight’s European session will be very interesting. European markets were closed when Sarkozy and Merkel announced their latest plans to fix the European debt crisis. Markets had been hoping for the introduction of Eurobonds and more funding for the EFSF; they delivered none of this, which could see traders pushing the sell button as soon as trade recommences late this afternoon, although the short selling bans that have been implemented will likely help to limit any potential damage.


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