ASX200 surges to top end of its range, Asian stocks trade mixed

Key points from Tuesday's session:

• Asian stocks trade mixed; ASX200 surges to top end of its range
• Chinese PMI numbers exceed estimates but fails to move markets
• Focus turns to US President Biden’s speech on next stimulus package

There’s been little high impact news in Asian trading, while price action has been fairly mixed across stock indicies, and broader financial markets. Though there’s certainly a few tier-1 risk events coming up in the next few days, there’s some sense that the markets are trying to settle into a pre-holiday lull.

Certainly, the key themes that have driven financial markets over the course of what was a choppy month of March is still being chewed-on by market participants. In the last 24 hours, a fresh push higher in bond yields has returned the reflation narrative back to the fore. But little has fundamentally shifted in the past few days, with the waffling movements in markets broadly reflecting that.

The ASX200 has put-in a solid day’s trade overall

Breaking with the pattern that had prevailed in recent sessions of strong opening rallies being faded by traders.

The Australia 200 is up 1.5 per cent at time of writing, in a very broad-based rally, that’s seen 10-of-11 sectors pushing well into positive territory. The rally had a value-driven bent to it, with heavy-hitting banks and materials stocks up, along with the industrial sector.

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But, despite another lift in Australian bond yields, defensive and growth stocks still managed broadly to deliver a solid return – though the information technology sector has come under renewed selling pressure, with it the only sector in the red at time of writing.

From a data and macro standpoint, Chinese PMI numbers were the highlight, and broadly surprised to the upside. Manufacturing PMI lifted to 51.9, while services PMI shot the lights out, printing at 56.3 and well above the 51.9 forecast figure. The numbers allayed some budding concerns that after last year’s remarkable rebound, the Chinese economy might be plateauing.

Though undoubtedly positive news from a fundamental perspective, the PMI surveys did little to move markets, with the USD/CNH largely unresponsive to the news, and Chinese equities dipping by a fraction.

Currency landscape continues to be driven by US Dollar strength

Although steadying today, the AUD/USD is keeping most G10 pairs on the backfoot. The combination of a potentially cooler Chinese economy, as well as Eurozone that can’t get its health or economic houses in order is fuelling the narrative of US economic outperformance, and driving a yield advantage in US Treasuries.

The market appears reasonably split on whether this rally above 93.00 is corrective or the beginning of a new trend. Price action points to a potential pullback in the Dollar, but the recent hold above the 200-day MA for the US Dollar Index is feeding the view of a bullish trend-reversal for the Greenback.

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Looking to the session ahead now, and the beginning of a new month brings with it great event risk into the end of this holiday truncated week. In the next 24-hours, focus will be on a speech scheduled to be delivered by US President Joe Biden, that will outline the President’s economic vision and infrastructure spending package.

The markets will be honing in on two primary issues: the size and shape of the package, and its potential implications for long-term growth prospects, and how the package will be funded – that is, whether it will necessitate, as expected, corporate tax hikes.