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ASX: Waiting for Yellen

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Fuseworks Media
Fuseworks Media

By Michael McCarthy (chief market strategist, CMC Markets)

Shares and commodities slipped as markets await the Fed’s March interest rate decision - due early tomorrow morning. Currency markets remain becalmed and bonds rallied slightly as global investors made last minute asset allocation moves. Energy stocks face renewed pressure as crude oil prices dropped for the fifth straight session.

Negative leads and disappointing China retail sales data yesterday point to a sloppy trading day. Muted volumes and mild pressure are the starting orders. Mid-session Japanese industrial production and Australian motor vehicle sales numbers are unlikely to alter the course. Index selling will likely weigh on Australian financial stock, and oil and gas stocks may capitulate after holding up well in the previous session. CSL trading ex-dividend will also add to market pressure.

A US rate rise is now baked in to the market cake, with a small number of analysts now suggesting 0.5% is a risk. The focus will shift to board projections. Any increase on the current indications of a further three hikes this year could disrupt equity markets. US bond traders point out that despite the rally 10 year yields stopped at the previous break out point at 2.60%, meaning the charts are still pointing higher.

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