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Australian market starts low and stays low

15.26 AEST, Wednesday 5 September 2012

Australian market starts low and stays low

By Tim Waterer (Senior Trader, CMC Markets)

What the ECB will or won’t deliver on Thursday remains the point of great conjecture however there is enough chatter that Draghi will have something to show for all his efforts, and this is keeping traders interested in holding Euro positions despite the potential room for downside disappointment.

Elsewhere, traders seemed to take an orthodox interpretation of the soft US manufacturing data by treating this as a negative development. On another day, such a result may well have prompted a positive reaction by the markets as it would be seen as bringing QE3 one step closer to fruition.

There has been no shortage of obstacles for the AUD to face in recent times. Slumping iron ore prices, question marks over Chinese economic health and a soft patch of domestic indicators have combined to take considerable lustre off the Aussie Dollar. Instead of enjoying hovering in the 1.05-1.06 range as it was one month ago, the currency is now having its work cut out staying above 1.02. The latest GDP print did not miss the mark by too much (+0.6% vs +0.8% forecast) but it was enough to show that the pace of growth is far from setting the world on fire. With Retail Sales, and GDP coming up short of expectations so far this week, if we see Thursdays jobs numbers follow suit a dip in the AUDUSD rate to the low to mid 1.01’s is looking on the cards.

The Australian sharemarket started low and stayed low, with our mining heavyweights again showing their susceptibility to the current downturn in iron ore prices. The tale of woe amongst the mining sector was the dominant theme of the day with the likes of BHP and RIO trading well into negative territory, whilst yet another round of sub-par Chinese data did little to instil traders with any confidence. It was certainly a very defensive based mindset of traders today who are again getting jittery about the global state of affairs.


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