Local shares higher ahead of RBA Statement

Local shares higher ahead of RBA Statement

By William Leys (Premium Client Manager, CMC Markets)
10 May 2013

The ASX200 is trading higher this morning, despite the end of the US markets' winning streak overnight.

After five consecutive days of record high closes, the S&P 500 ran out of steam. There is some speculation that the recent run of positive economic data, most notably the steady drop in unemployment, may prompt the Federal Reserve to begin winding down its stimulus. However, given the recent advances, it's more likely that yesterday's subdued performance is attributable to market exhaustion.

Locally, gains are broad based. The materials sector has picked up where it left off yesterday, and the finance sector has bounced back.

Yesterday's surprise fall in the unemployment rate lengthened the odds for another rate cut in the near term, and investors will now shift their attention to the release of the RBA's Statement on Monetary Policy at 11:30 AEST for the next cue. If the market interprets a dovish tone, we may see shares continue to firm, and the AUD come under renewed pressure. Alternatively, if the statement suggests the easing cycle may have bottomed, we may see some equity profit taking into the afternoon and the AUD receive some support. Whatever the case, caution must be taken, as the statement was in fact determined before the release of yesterday's unemployment data.

www.cmcmarkets.com

ENDS

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