Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Trader’s thoughts – equity markets move higher but conviction wanes

The concerns regarding a slow-down in global growth have abated somewhat, though the issue is still simmering.

trader's thoughts Source: Bloomberg

Sentiment cooling:

Sentiment is cooling and the drivers that have sustained global equity's recovery are subsiding. It's no cause for alarm (yet) by any means. The markets are demonstrating a level of short-term exhaustion after its chaotic December. The same risks remain; traders have just shifted their views. The concerns regarding a slow-down in global growth have abated somewhat, though the issue is still simmering. The outlook for how the Fed will approach policy is being judged as more-dovish, however it remains an ambiguous matter. The US and China appear to be pushing for a trade-deal, but it's known that it will be a protracted process to arrive at one. The US government shut down is down the list of worries for markets for now, although it is gradually gaining greater significance.

ASX200’s crossroads:

SPI futures are currently indicating a modest jump of 5 points for the ASX 200 at the open. The conviction for Aussie-market Bulls will be tested today. The ASX 200 stands before a reasonably significant wall, that if climbed, goes some way to validate that it's recent rally is more than a counter-trend. The zone between 5780 and 5800 has proven a marshy resistance area in the last two-days. The Bulls have done well to push the market through prevailing downward trend-line resistance, but now a meaningful push through 5800 is required to confirm the move higher. After a lukewarm day, the ASX managed to close at 5797, courtesy of a somewhat inexplicable 0.3 per cent jump in the index's price in the after-market auction.

Australian Retail Sales:

The macro-news for Australian markets has been relatively dull lately. Local shares, along with other assets, have traded very much in sympathy with developments on Wall Street. For justified reasoning too: sentiment to begin 2019 has been dictated by renewed optimism relating to the trade-war – a conflict that impacts the Australian economic outlook more than most. Overall, that will remain so given critical juncture US stocks are at. However today, Australian traders get their first real-dose of economic data: local retail sales figures for the month of November. The print is expected to reveal that sales expanded by 0.3 per cent month-on-month – a figure that is expected to be underpinned by strong Black Friday activity that month.

Australian interest rates:

Following the weaker December GDP figures, and against the backdrop of high private debt levels and falling house prices, analysts have generally expressed the concern that households are in a difficult spot. Given consumption contributes just over 50 per cent of total GDP, the perceived economic headwinds for consumers is driving markets to price in some-degree of an economic slow-down in 2019. On current pricing, interest rate markets have an implied probability of about 30 per cent that the RBA will cut rates before December this year. Today's retail sales figures will offer one of the first glimpses into what state the Australian consumer is in, with rates markets, and the AUD, sure to shift in the event of an upside or downside surprise.

Global-macro:

Of course, given Australia's status as an export driven economy, subject to the whims of the globe's economic (mis)fortunes, the broader macro-backdrop is crucial. Several data releases rattled market's nerves in the last 24 hours. Chinese CPI and PPI figures missed forecasts by some way, indicating softening demand within China's domestic economy; and ECB Monetary policy minutes all but confirmed the continent is heading for a slowdown in economic activity. Stock indices were unmoved on the news; however, a level of risk aversion was observable within markets. US Treasuries caught a small-bid and the US Dollar climbed on a pullback in the Euro. While a rotation into non-cyclical stocks, took place in Europe and to a less extent the US, as growth appetite diminished.

Powell speaks again:

Once again, the night's biggest release came out of the US and related to the US Federal Reserve. Fed-Chair Jerome Powell delivered a speech, and in all, while received in a better way than some of Powell's other addresses, markets didn't like the tone. There was a lot of emphasis on the unwinding of the Fed's balance sheet, and how that endeavour may progress in the year ahead. He also seemed to go to pains to emphasise how flexible and patient the Fed would be. Although it hasn't derailed US stocks so-far today, traders didn't hear enough of what they wanted to turn overly bullish on the market. With an hour left in play, the S&P500 is hovering between slight gains and slight losses for the day.

Trump dumps Davos; CPI data tonight:

To be fair on Mr. Powell, his speech did coincide with a Tweet from US President Trump announcing that he would be abandoning the economic summit in Davos to deal with the US Government shut-down. Markets didn't like that either: it was expected President Trump would further trade-talks with Chinese President Xi Jinping at the summit. Nevertheless, if US stocks were to close right now, the activity in the market would add-weight to the notion the recent rally is more bounce than recovery. The jury is still out, but momentum is slowing and at about 2600, the market is being faded. US CPI data is released tonight, so that may provide the impetus for even balanced battle between the bulls-and-bears to tip in one direction or the other.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See an opportunity to trade?

Go long or short on more than 13,000 markets with IG.

Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.