After a strong rally yesterday in Chinese equities, traders will be looking at the raft of data that is due out in the afternoon. At 15:30 we get Chinese industrial production (expected to grow at 9.9% year-on-year), fixed asset investment (20.2%) and retail sales (13.3%). After Sunday’s stronger trade balance figures, economists will be speculating on the upcoming Q3 GDP print (due October 18) and it seems there are upsides risks to last month’s 7.5% print.
At 11:30 we get the NAB business confidence survey. This survey has printed negative four months in a row, and we feel the RBA will be keen to see if there are any signs that businesses are feeling more confident given the aggressive rate cut cycle. As things stand, this hasn’t played out and the bears have speculated that the RBA would have to cut further to keep supporting the non-mining space. A good number here today would have positive ramifications on AUD/USD and would push it closer to the inverse head and shoulders target of 0.9400.
The US market has found solace in the fact the Fed is only likely to cut its bond purchases by a token amount in September, while fears around Syria also abate. The fact the market has closed at 1671 means the index has recouped over 50% of the 4.8% pullback in August.
The iron ore miner paid no attention to 2.2% fall in iron ore yesterday, rallying 8.5%. The stock is clearly in a strong uptrend and thus shorting this name is tough and we would always advise following the trend, unless there were clear technical signs a reversal is on the cards. The stock has rallied 105% since the June 25 lows, but is getting a touch expensive, trading 12% above the consensus twelve month price target.