Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets
Greece optimism not enough for Asia
Investors are finding themselves questioning the price action we’ve been seeing recently and many are not convinced the gains we’ve been seeing off late are a permanent fixture. This has resulted in a degree of profit taking through quiet trade. After printing record highs on Friday, US markets came off yesterday and ended up actually closing below Friday’s lows. US markets are increasingly cautious heading into the FOMC meeting and US GDP data. This has kept the greenback on the back foot and risk currencies bid. Europe has led the way this week and this is still on the back of optimism around Greece. There are some interesting developments in Greece at the moment with the country reshuffling its bailout negotiating team and forcing Finance Minister Varoufakis to the sidelines. Mr Varoufakis was seen by some as being part of the problem and as a result news of him being sidelined has been well received. The bailout negotiating team met in Athens yesterday and is looking at some of the reform measures the Eurozone has been wanting to see.
Prime Minister Alexis Tsipras is also said to be getting ready to suspend the minimum wage plan with an overall comprehensive package expected to be concluded by early May. Clearly Greece is now starting to play ball and it’ll be interesting to see how the population reacts to the developments. Despite all this, I will reinforce my feeling that the numbers simply do not add up for Greece and we are likely to be back to square one in the not so distant future. The writing is on the wall for Greece and while a last minute deal is likely to be reached, many will be questioning how much longer the Eurozone will be willing to carry a wounded partner through the recovery. For now though the euro has managed to remain stable and is still within striking distance of the 1.0900 handle against the greenback.
ASX 200 blushes near 6000
The ASX 200 has struggled to gain traction today and failed to maintain the momentum we saw in yesterday’s trade. Once again, the conversation was whether we’ll trade above 6,000 but at the moment it actually seems we are drifting even further away. The fact that the AUD just continues to defy gravity and is rising despite analyst expectations of further weakness has also not helped sentiment. RBA Governor Stevens was happy to pass on an opportunity to jawbone again today and that seems to have disappointed some traders. The Governor has been very vocal recently and it’s been well documented that the central bank has an easing bias and expects a weaker AUD. However, the fundamental picture has actually been showing signs of improvement for the AUD including recent data and rebound8ing iron ore. Heading into next week’s rate decision the swaps market is still pointing to a 50-50 chance of a cut. Traders will be sceptical about shorts and we might actually see shorts unwound.
Record high for Apple
Ahead of the European open, we are calling the major bourses weaker and some of yesterday’s gains will unwind. Headlines will continue to focus on Greece while the UK releases its advance GDP estimate for Q1. Investors will continue to focus on earnings in US trade and it’ll be interesting to see if the monster result from Apple will be enough to keep the momentum going. The company’s Q2 revenue smashed expectations, coming in at $58 billion vs $56 billion consensus. EPS of $2.33 was well ahead of a $2.16 consensus with margins quite strong. iPhone sales continued to drive strong cashflow while iPad and mac fell short. Apple is looking to aggressively roll out the Watch and the stock was up 1.3% at 134.40 after-market to a record. China is playing a big part in sales and for the first time iPhone sales in China outsold the US.