Investors turn to Asia for direction

10.13 AEDT, Tuesday 9 April 2013

Investors turn to Asia for direction after firm opening
By Ric Spooner (Chief Market Analyst, CMC Markets)

The Australian market looks set for a firm opening with Alcoa’s better than expected result and stronger base metals supporting early confidence. However, economic statistics and market direction in China and Japan may set direction later in the day.

Alcoa’s result gives a mildly positive tone to the opening of the US earnings season, which often sets the direction for world markets. While Alcoa’s sales were down on the previous quarter, its underlying earnings beat expectations with a good performance from its engineering division.

The NAB business conditions and confidence indices will be a focus for domestic investors later in the morning. Yesterday’s decline in jobs vacancies suggests that business confidence is subdued despite recent signs of an improvement in consumer spending. Subdued and steady as it goes conditions at least have one silver lining from a market valuation point of view in that they increase the likelihood of the RBA maintaining its easing bias on interest rates.

Strong trending moves in Japan’s stock market and currency have brought these markets right into focus as a sentiment driver for regional markets. Its machine tool orders for March will be released this afternoon. While this is a notoriously volatile statistic, traders will be looking for the weaker Yen to be driving an improvement in Japan’s export and manufacturing sector. The recent strong stock market moves have increased the potential for sharp sell offs on disappointing news.

China’s CPI will also be a focus for this morning’s trade. Markets are looking for a decline to 2.5% and the potential for a Goldilocks, not too hot, not too cold result. This might allow China to steer a middle path between tightening up on the property market and keeping growth ticking along in the face of moderate world growth and increasing export competition from Japan.

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