International worries dominate local trading

15.30 AEST, Tuesday 15 May 2012

International worries dominate local trading

By Ben Taylor (Sales Trader, CMC Markets)

The markets are in a cloud of uncertainty today as international worries dominate local trading.

Local markets are reacting to the international flight to safety effecting global markets as we witness what could eventuate to Greece’s departure from the Eurozone. The flight to safety is seeing a strong rise in the US dollar against risk currencies. The rising US dollar is having a negative effect on commodities with even gold not immune given a lack any further US quantitive easing talk.

Locally we are on some unsteady footing, local shares have already received a good amount of support over the US reporting season and it seems as we witness the demise of the Eurozone our immunity continues to deteriorate.

Miners and Energy stocks have taken the weight of selling today, overnight base metal falls along with oil trading below $95 USD/ barrel is weighing on today’s market. Banking stocks are also under pressure in sympathy with US banks following JP Morgan’s trading losses.

I have the feeling we are going to see some good buying opportunities in the next few months but now is not the time to jump in head first. With the RBA playing catch up on rates I have the feeling that the bias remains for further falls in the equity market before the lower dollar and better valuations give our market its support.

Today’s RBA minutes showed the bank responding to falling inflation, bank mortgage rate rises and slowing domestic growth. The minutes helped to push our dollar lower before it recovered later in the day. The weakness in housing and non-mining related areas of the economy mean that another rate cut is very likely in June.
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