A quiet start to the week, but market sentiment still improving

It was a relatively quiet Monday for global markets. And for many, that may well be a welcomed fact.

Source: Bloomberg

A generally quiet Monday’s trade

It was a relatively quiet Monday for global markets. And for many, that may well be a welcomed fact. Volatility, while picking up ever so slightly in Wall Street trade last night, remains at comfortable levels, with the VIX currently trading at around 15. The calm on the trade-war front is naturally behind this dynamic. But nerves have also been soothed by the prospect of widespread global-central bank monetary stimulus. The day ahead offers little on the data front to really worry investors for the time being. Attention still remains fairly fixed on the ECB at the end of the week.

Sentiment still relatively positive

Really, if you had to call it either way, last night’s trade was a notionally positive one. Granted, equity markets didn’t do a great deal. The S&P 500 closed flat. The DAX was marginally higher. The Nikkei did put in a good session, as did Chinese shares on hopes for more monetary stimulus in China’s economy. But the better read on the prevailing market sentiment came from the currency, bond and commodity markets. Fears about a slowdown in the global economy eased. Government bond yields have rallied across the globe. Gold prices are down; oil prices are up. The JPY is lower; the AUD is higher.

ASX pops in a flat start to the week

The ASX 200 in particular began the week on a flat note. It was more-or-less a mirroring of Wall Street trade on Friday night. The session ended in positive territory, however it was on very low activity. Just another Monday, really. But all-in-all, there remains the general sense of bullishness in the market that characterized last week’s trade. China’s weak trade-balance data was the big story in Asia yesterday. And that did manifest on the ASX. Materials stocks were lower, as were energy stocks, as some nerves were rattled about the prospects of Chinese economic growth. The impact was negligible, however.

The ASX following global themes

The ASX is highly macro driven right now, and its fortunes are closely tied that of Wall Street, the outlook for the global economy, the trade-war, and global monetary policy. Hopes are growing that all of those issues are demonstrating signs of improvement. As mentioned, Wall Street’s VIX is shifting markedly lower, and is now in the realm generally associated with risk-taking behaviour. The global environment is still remarkably unstable, so any sense of calm in global markets could quickly evaporate. But while clear air remains, so does the strong chance of further upside in equity markets. New all-time highs may well enter investor’s crosshairs once again.

UK GDP data beats

From a purely fundamental point of view, UK economic data captured the most attention overnight. UK GDP data was released, and broadly beat economist estimates. It printed 0.3% month-on-month, versus a forecast figure of 0.1%. Concerns that the UK could be tip-toeing towards recession, especially amidst all this Brexit uncertainty, were assayed slightly by the news. Bets were marginally unwound that the Bank of England would have to leap to the UK economy’s rescue to stave of recession. The odds of a cut from the BOE before year end pulled back to a 30% chance.

Cable can’t shake weight of Brexit

The GBP had another crack at rallying after the UK GDP release – and managed to come close to challenging price-resistance around 1.24. But the barrier proved too strong. It would seem the weight of Brexit is too heavy for traders to be too optimistic about the prospect of the UK economy, right now. Uncertainty reins in Brexit, and so does a downtrend for the Cable. A UK general election looks on the cards presently. But how this will come about seems messy. That disorder wasn’t helped by news that House of Commons speaker John Bercow resigned overnight, adding another thin layer of bureaucratic complexity to the Brexit process.

Markets to gauge Australia’s animal spirits

NAB Business Confidence is released this morning, and could prove the news highlight of the local session. There’s the general view prevailing at-the-moment that Australian business is suffering from a small crisis of confidence. And that’s putting a dampener on the outlook for the Australian economy. Australia’s animal spirits are clearly in a state of hibernation. It will take time for them to wake-up, and there’s little expectation that that will happen quickly. But with the government and the RBA pulling levers to bring this about, today’s NAB data will give a small insight into whether such efforts are beginning to work.


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