ASX200 hits new post pandemic high and flirts with the 7000 level

Asian stock indices mixed, but European and US futures perk-up, ASX200 hits new post pandemic high and flirts with the 7000 level and the US Dollar and UST yields remain at a cross roads; USD/JPY dips.

Although price action in Asian markets has been a little mixed, a general skew towards risk-taking in the region, seemingly underpinned by a pick-up in US and European futures, is injecting a little life into what’s been an otherwise stale for week for financial markets.

Our prices are indicating a reasonably solid jump at the open for both European and US indices – of course, implying a new record high for the US 500 tonight.

Any sort of new flow has been lacking again today – at least in terms of any news that moves markets. The typical narratives are being rolled out, but prices are seemingly moving without much explicit impetus at all.

Clearly, the path of least resistance for stock remains to the upside. While a slight pro-growth skew in FX markets and a lack of bond market volatility is also implying an overall bullish bias in the markets.

The ASX200 has once again been an outperformer today

With the index’s 0.9 per cent rally – at time of writing – pushing it outside of its multi-month range and to new post pandemic highs. The index has also traded above the 7000 level for a period, for the first time since late February 2020. It’s been, perhaps as one might imagine given the breakout, a relatively broad-based rally for the ASX200.

10 of 11 sectors are trading into positive territory currently, paced by large-cap stocks, especially amongst the telecommunications, materials and financials sector, with the defensive utilities sector the only to sustain a modest loss.

In the FX space in particular, the AUD/USD continues to chop about, as the debate continues about trends in US Treasury yields, with some sticking to their guns that some sort of correction in Treasury yields is due. The US Dollar Index remains at something of a crossroads, as the recent stabilization in bond market volatility is yet to be met by buying of pro-cyclical or reflation currencies.

The USD/JPY has extended slightly its recent dip, as a reversal in yields spreads, combined with signs of rollover in price momentum, keeping the pair the purest FX play on US Treasury yield dynamics.

Market participants approach what shapes as another light night for event risk. US Fed Chair Jerome Powell will appear at a virtual conference and address the global growth recovery, while weekly jobless claims numbers will garner some attention.

The key issue, at least to kick-off the overnight session, might just be however whether this nascent bullish impulse manifesting in US and European futures really has legs, or whether we’ll see another lacklustre and low volatility night’s trade tonight.

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