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Headline sensitivity - CMC Markets

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Fuseworks Media
Fuseworks Media

By Michael McCarthy (chief market strategist, CMC Markets and Stockbroking)

Modestly positive overnight action could see Asia Pacific markets maintain gains in trading today. However fears of an escalation of trade and currency issues means investors are susceptible to breaking news. While the paths of least resistance for shares and commodities are higher, the potential for a single tweet to derail sentiment may limit buying.

White House attention on the currency management policies of Europe and China may signal a new front in rhetorical conflict, or a pivot away from specific trade factors. The ambiguity is another caution inducing factor. A weaker US dollar is also a drag. Bond markets rallied despite the overall risk on market stance, and may be warning of a sharp sentiment turn to come.

Resource stocks are likely to feature in today’s session after overnight rallies in industrial and precious metals, and oil. BHP Billiton reported a 33% in underlying profit this morning, driven by higher realised prices for oil and copper. This dynamic may see analyst revising estimates upward, and could catalyse a break through 4 year highs for BHP.

Other reports today include Healthscope, Super Retail Group and Oilsearch. The reporting season passes the half way mark toady. Sales so far are broadly in line, but write downs mean profits are lagging forecasts.

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