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Healthcare, Utilities Boost Market Into Positive Territory

15.21 AEST, Tuesday 28 August 2012

Healthcare, Utilities Boost Market Into Positive Territory
By Ben Taylor (Sales Trader, CMC Markets)

News flow remains weak and volumes low as we await the Jackson Hole meeting at the weeks end. Risk is being taken off the table ahead of the meeting as traders bet talk will compose of “more of the same” rather than a detailed clear path for further US stimulus. Our market is being held higher on the back of defensives with healthcare and utilities boosting the market in positive territory.

The market is becoming wary of the governments surplus at any cost policy. Falling commodity prices are now being forecast to put a considerable dent in the government’s surplus. Whilst the government has said it “would not shy away from making budget cuts to reaffirm the government’s commitment" it could leave the RBA to pick up the pieces.

The Aussie dollar has topped out in the short term and is now reaffirming its correlation to the falling commodity prices. The potential for a government’s surplus at any cost is also starting to mean that we could see cost slashing measures in the future. Whilst the Treasurer believes it is too early to draw any conclusions on commodity prices, the market is voting with its feet selling Australia’s largest export Iron Ore plays as the commodity comes under pressure from falling Chinese demand.

Gold and Silver plays are also taking a “sell first ask questions later” approach as the precious metals start to tip over technically and a clear QE3 framework remains a distant promise.

The new home sales fall in July has also signalled that recent interest rates have done little to promote a sustained rise in housing construction.



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