Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets
Asia fluctuates after recent gains
Asian equities have been fairly choppy with some of the key markets retreating despite a record close for the S&P 500. The rally in US equities continues to roll on and seems unstoppable at the moment as it looks to finish the year in style. The S&P closed at a record 2077 and is within a couple of points of its December 5 intraday record high of 2079. While most of the globe is winding down heading into the Christmas break, there is still a bit of data to look out for in the US. We have Q3 GDP which is expected to be revised higher to 4.4% (from 3.9%) while durable goods orders are also expected to have rebounded significantly. Apart from this, we also have new home sales, consumer sentiment, inflation expectations, personal spending and personal income. This should help keep the USD bid and maintain the momentum it has been seeing against the majors. USD/JPY has remained bid all week and despite Japan being closed today, it continues to see interest in a relatively thin market. The yen is gearing up for a big week in which we receive the Bank of Japan’s monetary policy meeting minutes, Governor Kuroda’s speech, CPI, unemployment rate, industrial production, retail sales and average cash earnings. It’s no secret Japan’s inflation has been falling short and the market will be expecting to see this trend continue.
Euro in focus ahead of Greek vote
The euro is also going through some challenges at the moment and it seems the currency is still yet to overcome some key hurdles. EUR/USD is just holding on to the $1.2200 handle and pressure is mounting to the downside. Greece will have another attempt at electing presidential candidate Stavros Dimas today and judging by the effort Prime Minister Samaras has been putting in to garner support for his candidate, things are not looking too promising. Failure to elect him today will then shift pressure to December 29 which will be the third and final attempt. From there, an election will then be called and Syriza seems to have enough support to win it. This is the situation markets do not want to see and no doubt could spark further weakness for the single currency. As it stands, we are calling the major European bourses firmer but I expect to see a cautious tone to an extent. Data will be limited with French consumer spending and Italian retail sales on the calendar. In the UK we have current account, mortgage approvals and revisions to GDP and business investment data.
ASX 200 and AUD under pressure
The ASX 200 has suffered at the hands of profit taking today with energy and materials names losing some of the ground they had made over the past four sessions. With oil and iron ore giving up recent gains, traders took advantage and closed out to realise the gains they had made in a short period of time. Iron ore futures have continued to fluctuate in Asian trade with elevated China interbank rates remaining a concern for the region. Meanwhile, investors will remain nervous that they may have pulled the trigger too soon. Even the banks are experiencing some weakness after significant moves yesterday. However, there is some support in the 5,400 region and it’ll be interesting to see if investors have enough resolve to buy in that region. AUD/USD is on the verge of breaking below the 0.8100 handle and judging by the recent price action, this move may not be far off.