Quiet volumes as investors still on holidays

A very quiet day on the news front today as most investors around the globe continue their holidays for the festive and New Year season and therefore trade is unlikely to be affected by any data drops or unforseen macro policy changes.

In the next three days there are only really two major market news events; the first is tonight with US pending home sales which are forecast to rise by 1.1% from a contraction in the month before. This should be positive and will help the market momentum of the last two weeks continuing and should help 2013 ending on a positive note.

The second is more important from an Asian perspective; with the release of China’s manufacturing PMI on New Year’s Day.

This will be an interesting piece of macro data as the liquidity in the FX markets on New Years can be as low as half the normal average and the data is likely to cause large fluctuations in the FX world. Watch the AUD from 11:30 AEDT on Wednesday for some slightly abnormal moves as the data release approaches and then on the release at 12:00 AEDT it will jump around.

With only one and a half trading days left in 2013 the market is likely to finish year above 5300 for the first time since 2007. Most investors are on holidays which means price action may be a little stronger than normal, however it is unlikely to really fall away or explode and therefore should see the ASX finishing 2013 up at least 14%. This will mean 2013 will be the second best year since the GFC after 2009, which finished the year up 23%.

What may temper trading in the markets over the next few weeks is the cyclone and bushfire season. Let’s hope the latter is non-existent and the reason I mention bushfires is insurance companies (excluding QBE) have had a fantastic 2013 due to lower claims from lower catastrophes throughout the year, and let’s hope this fire season is the same.

Cyclone season, however, is starting to impact trade as Port Headland, Cape Lambert and Dampier all hunker down as Cyclone Christine approaches the west coast. This is likely to have the biggest effect on Fortescue as the pure plays has seen a massive 56% in gains since June and the closure of its two major ports will have an impact on the end of Q4 and the start of Q1 export numbers. With first half profit numbers coming in February, the impact of the cyclone season will be known very soon.

Ahead of the Australian open

As I mentioned earlier, trade today will be light - probably not as light as Friday’s trade which saw the lowest trade day of the year with only $794 million changing hands - but it will be low.

We are currently calling the ASX up 26 points to 5350; that is only 100 points off the year high back in October, plus December is now back in the green having lost 5.5% to December 12 to now be four points in the green and could close the day 0.5% up for the month if it does add 26 points.

What is for sure is until trading returns to some sort of normality in mid-January I expect trade volume to remain low and therefore price action to be stronger in both directions, so positioning will be tricky.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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