CMC Markets: Where to next?

Where to next?

By Ben Taylor (Sales Trader, CMC Markets)
18 September 2012

Volumes remain light and investors cautious as we settle in post European and US stimulus announcements. The market remains elevated but taking a defensive stance today preferring to increase exposures in healthcare and utilities.

The big question is where to next, will real gains for corporates eventuate and can confidence be restored.

The quick succession of gains has ensured that we are receiving overbought signals across risk assets. Further consolidation and positive reinforcement of improving economic conditions are needed before we can continue on the path higher.

The next big hurdle we need to clear is China. The slowdown is being noticed across the world and traders are particularly concerned. Thursday’s Chinese manufacturing PMI will bring some clarity but I expect we need to see less talk and more action by the authorities before the market is off to the races.

A potential build-up of inflationary pressure is also causing some traders to question unlimited US bond purchases which target US employment. There is an expectation that China’s central bank will now hold fire on their own stimulus and take a wait and see approach following the recent US and European central bank announcements.

Today's RBA minutes were positive and proved we have room to move with rates in the future. Falling commodity prices, especially iron ore and coal have and will continue to affect our terms of trade and Australia’s prosperity, this fall off has occurred whilst our dollar remains elevated which weighs on our economy negatively. Despite all central bank intervention globally I believe we will see another interest rate drop locally before the end of the year.

www.cmcmarkets.com

ENDS

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