ASX200 remains in consolidation mode

True to recent form, the ASX200 has simply meandered along today, edging higher at time of writing, having given up an early rally, that had defied the soft start that had implied SPI Futures this morning.

Amidst a still generally bullish backdrop, the ASX200’s uptrend has well and truly stalled, as bullishness about the economic outlook runs up against of higher bond yields, along with a mining sector going into reverse because of softening commodity prices.

The technicals still look good for the ASX200, with momentum and price action pointing to a market that’s consolidating rather than rolling over. But nevertheless, minus a major catalyst, this range bound trading looks set-in, for now.

Asian stocks dip with European and US futures

The lukewarm session for the ASX200 has come against a backdrop of a general sell-off in Asian stocks. The region’s benchmark indices are broadly lower, with the exception of Japanese stocks, which are only slightly higher after yesterday’s spill.

US Futures are also unwinding an early pop, pointing at a small tech-led drop when Wall Street commences trade tonight. While European futures are suggesting a drop for Europe’s major stock indices when they up later on.

Combining the drop in stocks with a drop in yields, a slight bid on the US Dollar and lower oil prices, it would be fair to say that in the context of just today’s trade, market sentiment has skewed moderately the bearish side.

Perhaps a reflection of a market taking a few deep breaths, as bond market volatility eases and event risk remains light, there’s the argument to be made that perhaps the markets are revising marginally the outlook for the global economic fundamentals.

Of course, it’s still considered a matter of when, and not, if the global economy puts rubber to the road when it comes to post-COVID recovery. But with signs of moderating Chinese growth, and a Europe that can’t get its fiscal, monetary and health policy in order, headwinds confronting the recovery are a little stronger than they have been in the recent past.

Central bank speech to dominate tonight’s trade

After what was a practically empty day on the economic calendar in Asia, market participants turn their attention to a slightly busier night’s trade in Europe and the US. It’ll be a night of central bank speak, in effect.

Bank of England Governor Andrew Bailey will kick-off proceedings. But the highlight will be a testimony from US Federal Reserve Chair Jerome Powell, alongside US Treasury Secretary Janet Yellen that will be the marquee event, before a slew of other Fed speakers cap-off the session.

There’s no expectation that any speech delivered tonight will deviate from the dovish stance central banks have fought hard to deliver in recent communications. But that’ll prove to be the key: the market will seize upon any message, intended or otherwise, that hints at earlier than expected policy tightening.

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