US equities return to record levels

US markets returned to trade on a positive note, with the S&P rallying to yet another record of 1912. 

Not only did the S&P print a record high, it also closed right at the highs, which is a positive sign and says a lot about momentum. Sentiment was lifted by a string of positive data releases out of the US, including durable goods orders and the Case Shiller house price index. Both indicators were quite positive and confirmed the US continues to bounce back after a tough start to the year. As a result analysts feel we will see a good Q2 rebound from a very disappointing Q1.

While US data was positive, the USD didn’t quite gain the traction we would have expected to see. USD/JPY just continues to hang around 102, with activity on the economic calendar set to ramp up in Japan. There has been a lot of commentary from Japan this week and this is set to continue with BoJ Governor Kuroda on the wires at 10.00 AEST this morning. As it stands we are calling the Nikkei up 0.2% to 14,637.

Commentary from Japanese officials this week has included deputy governor Iwata saying tapering might be necessary to prevent the economy from overheating. Meanwhile, the consumption tax hike remains a big debate and Abe will have quite a task in setting the economic strategy in June.

Industrial profits in focus

China will also be in focus today, with industrial profits data due out at 11.30 AEST. While there is no indication of what to expect, the March reading came in at 10.1% and as a result the market will be looking for an improvement in this figure.

A reading that a lot of analysts watch closely in the industrial profits data is electricity consumption. Just in March, electricity consumption was up a whopping 32.3%. While this was a slight improvement from February, it was still significantly down from last year’s readings which were north of 40%. After the recent China concerns, every reading will be watched closely and of course its implications on stimulus.

AUD/USD remains sidelined at 0.926 and perhaps this data might finally see the pair move out of this tight range today. On the local economic front, we have construction work done due out at 11.30 AEST where the market will be looking for an improvement in construction activity.  

Gold names in for a tough session

Ahead of the local market open we are calling the ASX 200 up 0.2% at 5523. Iron ore dropped to 98.10, from 98.60 and this might be a source of concern for the iron ore pure plays today. They have been showing signs of improvement this week and this might stall today. Gold was also on the losing end, dropping a big figure to a 15-week low of around 1264. Analysts have blamed this on a sharp drop in China imports of the metal and some on India easing hedging restrictions on imports. Gold names could be in for a tough day today. From a technical perspective, gold has been in a descending triangle over the past week or so and finally got squeezed to the downside.

On the company news front, we have Aristocrat Leisure 1H results due out today and a Wesfarmers strategy briefing. Also look out for Iluka’s AGM after a slowing in demand for mineral sands from China. Big losers yesterday were Suncorp and Ozforex; these stocks may be looking to extend losses in the near term.

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.

This information/research prepared by IGA or IGA Group is intended for general circulation. 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 or 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. In addition to the disclaimer above, 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 important Research Disclaimer.