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China’s data inspires relief: The Middle Kingdom was at the centre of financial market focus yesterday. Informally dubbed the “monthly economic data-dump”, market participants were granted the opportunity to test the thesis that the global economy’s Q1 malaise is turning around. And though it was only one set of numbers, the answer received from the Chinese data to this quandary was to the affirmative. China’s GDP figures beat economist’s estimates, printing at 6.4 per cent against the 6.3 per cent forecast; and the litany of other data-points, most notably retail sales, industrial production and fixed asset investment, all either exceeded forecasts, or showed signs of improvement. The global economy’s resurrection? The Chinese data has added further credence to the notion that China’s economy, and therefore that of the rest of the globe, isn’t about to fall off the cliff. Judging by the improvement in the numbers, policymakers intervention and receptiveness to market and economic trouble, not just in China but globally, is apparently feeding through into economic activity. Although global equities, and especially Chinese equities, resisted reacting to the good news – the lower likelihood of greater monetary stimulus can explain that one – growth exposed assets conveyed the market’s greater optimism and risk appetite, boding well for risk-assets into the longer term. Traders bet on economic turnaround: As always, we need not look any further than our Australian Dollar to judge the merits of this case. Granted, it’s cooled its intraday rally somewhat now, but the local currency spiked upon the release of the Chinese data yesterday, breaking through (briefly) its 200-day moving average, and experimenting for a while with a life above the 0.7200 handle. The enthusiasm for the Australian Dollar was tempered overnight, as traders factored in more fundamental concerns pertaining to the Australian economy into market pricing. Nevertheless, the brief spike in the market’s favoured growth proxy proved that traders aren’t averse to placing bets on a global economic turnaround. Sentiment overriding A-Dollar’s fundamentals: Sticking to the Australian Dollar, and a reflection on the currency’s fundamentals portrays the opposing forces driving its price action, at present. In fact, market-action yesterday reflected the “growth-proxy” versus “weak-fundamentals” dilemma well – with the latter proving an inhibitor of the enthusiasm demonstrated by the former. Prior to the Chinese data release, the Aussie-Dollar looked ready to shed its recent gains, after New Zealand CPI figures notably missed economist’s estimates. The response from traders to that release was to price-in more aggressively rate cuts from the RBNZ and, due to belief the New Zealand and Australian economies share major commonalities, the RBA, too. Iron ore retraces its gains: Another driver of A-Dollar upside went missing yesterday, too: iron ore prices have rapidly retraced their recent gains, falling over 7 per cent from its recent highs. The tumble in the price came counter to the intuitive logic that perceived improvements in the global economy ought to lead to a lift in commodity prices. Proving once more that iron ore’s rally has been a function of supply shocks rather than economic fundamentals, the market sold contracts for the mineral after news hit the wires Vale would be reopening one of its major Brazilian mines, potentially marking the beginning of the end of underproduction in that market. Fall in iron ore prices drag on the ASX: Naturally, iron ore’s fall legged materials sector stocks yesterday. It was one factor, combined with the rallying Australian Dollar and slight lift in discount rates, that lead to an overall fall in the ASX200. The theme seems likely to continue today, too. According to the SPI Futures contract, the index ought to drop about 21 points at this morning’s open. Today may prove one of those days where the markets direction is determined by the resilience of the banks: financial stocks added 17 points to the ASX200 yesterday, masking a weak day for Australian stocks, which traded on less than 40 per cent breadth. A busy day leading into the long weekend: Trade across the rest of the globe in the next 24 hours may well be dictated by pre-positioning for the Easter weekend holiday. Wall Street trade was characterized by relatively higher activity overnight, but the results were underwhelming, with the S&P500 dropping 0.23 per cent, and (fittingly) closing bang-on 2900. Despite the assumed reluctance from traders to make big bets leading into a long weekend, economic data will be dense: Australian employment figures are released this morning, before focus turns to a swathe of high impact European PMI numbers, and US Retail Sales data tonight. Written by Kyle Rodda - IG Australia

ASX to keep trading on its own themes: SPI Futures are presently indicating an 18-point jump at the open for the ASX200. Once again, Australian equities look as though they’ll march to the beat of their own drum today. It comes on the back of a reasonably solid day for the ASX yesterday – though admittedly it was another day of relatively low activity. A general driver for the session’s activity was hard to pinpoint, perhaps fortunately, with the market trading much more on the basis of the myriad micro-concerns impacting individuals shares and sectors. It may be a dynamic that set not to last, as market participants prepare for a significant “macro” day today. A dovish tilt from the RBA? Not that such themes were entirely absent in the local market yesterday, just that they proved insufficient to markedly change the narrative for the ASX. The RBA’s meeting minutes were released yesterday, and more-or-less confirmed the suspicions of market participants: the central bank is entertaining the idea of possible interest rate cuts in the future. Always the first to take the conservative route, the RBA was clear to state it merely discussed under what circumstances a rate cut would be necessary and were explicit in their view that such a set of circumstances aren’t present within the Australian economy right now. RBA keeping their powder dry: As is reasonably well known, the RBA’s central thesis is that although global growth conditions are softening, and that there remains major domestic economic headwinds, while the labour market keeps tightening, there exists no immediate need to cut interest rates. Furthermore, the RBA outright acknowledged, in perhaps what is a small hint at government policymakers, lowering interest rates wouldn’t deliver the same impact to economic conditions as they had in the past. Nevertheless, traders concluded from the simple recognition of the possible need for further monetary stimulus in Australia’s economy as a sign that the RBA is losing confidence in the local growth engine. AGBs out of step with global bond markets: The result was a brief fall in the Australian Dollar following the release of the RBA’s minutes, as traders repositioned their bets on the future of Australian monetary policy. Having unwound recently positions that the RBA would need to cut rates by August this year in response to a moderating of global growth fears, yesterday’s minutes forced the market to increase the implied number of interest rate cuts before the end of 2019 to about 29 basis points. The knock-on effect saw AGB yields fall, out of step more broadly with bond markets, which experienced a general climb in bond yields yesterday. Growth concerns diminish; but risk appetite neutral: As might be inferred from the moves in bond markets, trade overnight was characterized by a further diminishing of fears about the outlook for global growth. US 10 Year Treasury yields were up by 3.6 basis-points to 2.59 per cent, and 10 Year German Bunds maintained its (albeit slim) positive yield. It was by no means a total risk-on day, however: stocks were up globally, with the world-indices map a sea of green indeed; but looking at the S&P500 in particular, it was only 0.05 per cent higher for the Wall Street session, as investors digest US earnings season bit-by-bit. China to dominate today’s proceedings: A very significant read on the state of the global economy comes today: the so-called “monthly Chinese economic data-dump” is delivered– and this time around, it includes the Middle Kingdom’s GDP numbers, too. The turnaround in fortunes for global risk assets lately has largely come in shifting perception about China’s economic wellbeing. There is greater hope that China’s economic slowdown, which had rattled market participants in the first quarter, has bottomed-out. Core to further upside for risk assets, improvements in China’s embattled economy is a necessary precondition for optimism towards the macroeconomy and for global stocks to maintain their trend higher. Chinese equity markets’ catch-22: So, equity markets in developed economies need to see strength in China’s economy to sustain themselves. However, and perhaps somewhat ironically, the case isn’t as clear cut for China’s financial markets. Chinese equities have outperformed global peers year to date, as markets position for looser financial and fiscal conditions to support growth in the Chinese economy. Less a reflection of strong fundamentals, it’s been this loosening of fiscal and monetary policy that has driven capital flows into riskier assets. Being this way, strong economic data out of China may reduce the requirement for such accommodative policy-settings and inhibit short-term upside in Chinese stock indices. Written by Kyle Rodda - IG Australia

Earnings optimism tempers the markets’ mood: Financial market participants curbed their enthusiasm yesterday. Friday’s brief excitement on Wall Street relating to a handful of earnings beats from some of the US’s big banks failed to translate into meaningful momentum to begin the new trading week. Such a dynamic was also evident throughout the Asian session. The ASX200 closed flat for the day, and Chinese stocks rallied and retraced all in the space of a few hours. The Nikkei was higher for the day; however, that was largely due to a markedly weaker Japanese Yen, with that currency unable to reclaim its losses after Friday’s risk-on move. Sluggish trade on Wall Street: The activity on Wall Street overnight was very much of the “let’s-now-wait-and-see” variety. The behaviour is sensible and based on a sound enough logic. Earnings seasons are a long-slog, with the possible arduousness of this reporting period even greater given the prevailing global economic backdrop. The return of thinner trade conditions, which of course were attributable in part to a level of Monday-itis, betrayed this cautiousness during the North American session. Volumes were below average, and market-breadth was meagre: 38.8 per cent of stocks were higher across Wall Street, with only 4 out of 11 sectors registering gains for the session. The next bullish impulse being sort out: If traders are unwilling to carry-through with their bullish bias, it bears questioning what presently stands in their way. The obvious answer is a general uncertainty as to whether US stocks will outperform their lowly Q1 earnings estimates; and whether an improvement in forward guidance is delivered by US corporates. But where might the substance of this answer be discovered? If last night’s trade is any indicator, it won’t be US bank stocks. After JP Morgan’s surprise beat on Friday night, the numbers released by the likes of Citi and Goldman Sachs, though solid, didn’t engender quite the same excitement. Markets wait for bellwether earnings: Instead, the meatier part of earnings season will come when market participants receive updates from the major tech-giants and big industrial companies. The rationale for this view is simple enough: the two key sticking points for the market at-the-moment pertains broadly to risk appetite and macroeconomic growth. As last year’s record run and violent correction will attest to, the US tech sector is the bellwether for what desire there is to punt big on growth-stocks. While the powerhouse American industrial companies will provide the ultimate read on what impact the slow-down in China and Europe is having on corporate profits. ASX likely to keep doing its own thing: The problem is market participants must wait a few days-to-weeks to receive clarity on these matters. For now, traders turn to the Asian session, and that of the ASX in particular, with few chunky leads to determine this region’s early fortunes. SPI Futures for one are pointing to a negative start for Australian equities, with that contract predicting a 16-point drop at the open. It backs up another day where the ASX traded seemingly according to its own will: a lift North American banks perhaps support our own somewhat, however the ASX200 experienced a meandering day, trading in a narrow 20-point range. RBA Minutes the key risk event today: Event risk during Asian trade today is relatively light from a global perspective. But for those with an interest in the Australian-macro landscape, RBA Minutes will be one to watch. Since the RBA’s monetary-policy-decision a fortnight ago, traders have moved gradually to temper their bets on the extent of rate cuts from the central bank in the year ahead. By way of virtue of diminishing fears about the state of health of the global economy, traders have reduced the number of implied interest rate cuts by the RBA from about 1-and-a-half to just over 1 before the end of 2019. Australian Dollar feeling the love: The restored confidence in the global macro-economic outlook has manifested in the Australian Dollar. Though its begun the week listless, the AUD has held onto its short-term trend, to be currently trading just below a few significant resistance level at the prices 200-day moving-average. Despite the yield story apparently unsupportive of the move in the currency, the climb in iron ore prices combined with speculation of further improvements in the global economic outlook is apparently underpinning Aussie Dollar strength. A break over the currency’s 200 day moving-average may well indicate a further run higher for it is afoot. Written by Kyle Rodda IG Australia

Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 15 April 2019. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect your positions, please take a look at the video. NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a cash neutral adjustment on your account. Special Divs are highlighted in orange. Special dividends Index Bloomberg Code Effective Date Summary Dividend Amount MEXBOL WALMEX*MM 23/04/2019 Special Div 35 As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements. How do dividend adjustments work? This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Activity lifts to end last week: A risk laden week has ended with a pop. Asian and European trade was solid, albeit dull. However, it was a clear-cut-case of risk-on during the North American session. The new fuel to the S&P500s fire came as US earnings season kicked-off in earnest. JP Morgan, and a handful of America’s other big-banks, reported and generally surprised to the upside. The catalyst served two purposes: one, it supported (granted prematurely) the view that assumed earnings growth across US equities may be too low; and two, it pushed the S&P500 above key technical levels – notably, psychological resistance at 2900. Traders are US earnings focused: That milestone, which has been clocked on three occasions in less than 18 months now, triggered a lift in trading volume that had otherwise alluded US stocks last week. As its been stated before: this is a stock-market primarily concerned now with earnings growth, before anything else. And the reasoning is logical: whether right or wrong, markets have priced in a dovish Fed, and something of a bottoming in global growth. Now what’s needed is a validation in the earnings outlook; less one that applies to the current earnings season, and more those of which to follow in quarters ahead. Market internals validate momentum: The first signs of that were delivered on Friday evening, so markets flicked the risk-switch. Once again: there was a marked increase in trading volumes during Wall Street trade, providing a very short-term confirmation signal that substance exists behind the market’s latest foray higher. Intra-day breadth was also solid, with 76 per cent of stocks, and 10-out-of-11 sectors, gaining for the session. This adds to the already bullish breadth signals in other, deeper measures of market internals. For one: the NYSE advanced-decline measure has remained, and again turned positively, to the upside, reveal solid momentum in the market. Fear-falling; but anxiety remains: Thus, with 2900 broken on the S&P500, barring any external shocks, the rest of the earnings season on Wall Street will probably end-up a day-to-day countdown to a new record-high for the S&P500. With all the excitement that captured market-participants on Friday, the VIX has plunged to new year-to-date lows. While the drop in the “fear-index” can easily be explained away, it probably doesn’t reflect the true-trepidation in the market at-the-moment. The rationale for very subdued implied volatility is very comprehensible. Nevertheless, memories are crystal-clear of what happened the last couple of times the S&P500 traded this high with volatility so-low. The bears are still hungry: Vol-canos, vol-pocalypses: they were two of the portmanteau floating around after big-spikes in the VIX last year following short periods of suppressed implied volatility. Hence, although US stocks sit nominally less than 40-points from new records, historical memory, mixed with market-fundamentals that are less favourable to those that supported previous record highs, has this latest record-run viewed through jaded-eyes. Despite constantly being proven wrong, the necessary pull-back in US stocks during Wall Street’s big V-shaped recovery still ought to be upon us, according to bears. Market participants’ complacency, as betrayed by the VIX, will only contribute to another correction and volatility break-out in time. The missing agitator: It’s true that the S&P500 is edging towards overbought levels when looking at a medium-term time frame. However, although the global economy is lacking the fecundity present in previous record-breaking rallies, a few ingredients that were present in recent sell-offs are missing. First of all, price-to-earnings ratios aren’t as stretched as they were in October and February last year. But more importantly, the key impetus for those two sell-offs will probably remain absent this time around: discount rates, although edging higher on Friday, are unlikely to rain-on-the-parade, with the US Federal Reserve all-but locked into keeping interest rates on hold. The ASX’s loose relationship: So: with this in mind, entering the week, and a period of high-impact corporate data, risk-assets sit cautiously on the precipice. The gravitational centre of financial markets is Wall Street, and consequently, its internal dynamics will be a large determinant of how markets trade this week – and for a little while yet. Of course, its influence will be of varying significance depending on the market in question. For one, the ASX200 is an index that has recently moved in relation to the S&P500 like Pluto does to the Sun. Today, even despite Wall Street’s bullishness, SPI Futures point to a flat start for the ASX. Written by Kyle Rodda - IG Australia

A week that’s (so far) under-delivered: Anything can happen in the space of 24-hours in financial markets. But as we enter the final day of trade in global markets for the week, activity today is shaping up as being just as tepid as that which we’ve experienced in the week’s first four days. It was hoped some new, market-moving information may have been delivered in what was a back-loaded week. Afterall, there was no shortage of event risk. However, thus far, despite a litany of risk events, many of which yielded positive outcomes, market participants have responded to the stories with a shrug. Market fundamentals take priority: Hence, we meander into this Friday having acquired some useful information about the world, but little in market pricing to show for it. It’s been said before (in fact, it’s been said a lot this week): market participants have developed a singular fixation on upcoming US earnings. And perhaps rightly, and comfortingly so: in a world where markets are dominated, even distorted, by macro-drivers and central bank policy, right now, company fundamentals matter more. It may seem trite to suggest so; however, it would be imprudent to underestimate how overwhelmed fundamentals become in a market dominated experimental monetary policy. Corporate earnings to be a risk barometer: The matter is now, that with Wall Street perched inches away from record highs, and the world’s other major indices well-off their lows, market participants need evidence to justify such a phenomenon. At that, it goes beyond just a micro-level concern of shareholder earnings. With the major risk to global markets the prospect for an uncomfortable economic slow-down, the forward guidance provided by US corporates will be used to form an abstract story for macroeconomic outlook. Market participants know that in the short term, the current state-of-affairs is unfavourable; what the bulls wish to see now is evidence of strength in the long-term. When the micro becomes the macro: A such, the micro-matters become important for macro-watchers, too. Arguably, this week has proven that, in a reversal of the status quo, micro-concerns have superseded those of its overbearing bigger-brother. The state-of-play now is markets have practically discounted fully the 4-and-a-half per cent fall in earnings growth projected by analysts for the quarter. What matters now is how future guidance is modified in response to the commentary and financials put forward by corporates. If that becomes downgraded out of earnings season, too, then Wall Street’s, and global equities big V-shaped recovery may come into question. A faith in the market’s high priests: The bar is still set quite high, with a nearly 7 per cent rebound in earnings on a quarterly basis expected come next quarter. This will come seemingly without a major boost to corporate America’s top line. Much of the rosiness in this outlook is embedded within a hope, however reasonable, that the recent monetary-dovishness and fiscal intervention from some major economic players will reignite global growth. From the Fed’s dovishness, ECB’s return to a completely neutral policy bias, and massive fiscal intervention from China’s government and PBOC, the concerted efforts of policymakers are expected to succeed in turning global growth around. Bonds recalibrating to growth expectations: Market participants are more optimistic that the worst of the turbulence experienced in the global economy in Q1 is behind us. That’s being revealed in a recalibrating in global bond markets, in response to some reasonable economic data. US Treasury yields are lifting across the curve, following the face-ripping rally in bond markets only a fortnight ago, in response to a tempering of expectations of monetary policy easing by the US Federal Reserve. Though the next move from the Fed is expected to be a cut, the odds this will happen before the end of the year is now about 50/50. What will the impact be on the ASX? The correlation between the ASX200 and S&P500 isn’t terribly strong. SPI Futures are betraying this today: the S&P closed flat today, but the ASX200 ought to open 21 points higher. The local share-market has traded on its own themes of late, ranging from the oft-cited lift in iron ore prices, and the weakness in bank stocks in response to local property market weakness. Global growth remains a sensitive-point for the ASX, nevertheless, with the chances the bifurcation in Australian and US markets possible enough in the situation that US reporting season surprises to the upside or downside. Written by Kyle Rodda- IG Australia

Event risk passes with no surprises: The litany of economic data provided market participants the green-light they were looking for; but so far, the price-reaction, while bullish, has been subdued. Relative to the past 100-days, volume on Wall Street, and a majority of developed markets, has been thin overnight. It’s giving the impression of a stock-market bereft of conviction, as nervousness sets in as the S&P500 edges towards new record highs. Admittedly, much of this phenomenon could be attributed to the upcoming US reporting season: while risk-taking is being encouraged by policy-makers, a true validation in corporate fundamentals needs to accompany the oft-touted accommodative global monetary policy settings. Fed the highlight overnight: Nevertheless, the knowledge that monetary policy from the world’s largest central banks will remain supportive is a necessary precondition to any rally in equity-markets. Last night’s trade, and the data that was released and monitored within it, spoke of such a necessity. Naturally, it was the words of the Fed that held the greatest weight – this time, contained within their latest monetary-policy minutes. The information contained within them wasn’t new; however, it did confirm the stance makes have recently savoured. The majority of the Fed saw the need to remain qualifiedly “patient” in the face of “significant uncertainties”. US inflation-risk still low: The Fed’s dovishness was backed by US CPI overnight, which acted as tangible evidence for that central bank’s policy stance. Though headline inflation beat economist’s estimates, this was largely due to energy price volatility, with the “core” component of the number falling to 2.00 per cent on an annualized basis. The data itself saw the bets of interest rate cuts in the US increase marginally, prompting a fall in US Treasury yields across the curve. Moreover, 5 Year US Breakevens, while ticking slightly higher overnight, point to US inflation remaining below the Fed’s “symmetrical” 2 per cent target rate. ECB played second fiddle: Not to be outdone, the ECB met last night, too, and delivered approximately no surprises. Another rubber-stamping of the global monetary policy outlook, it seems. The ECB had already told the markets that it sees the need for a maintaining of its interest rate settings well into the future. The effect on Euro-zone rate expectations was practically the same as those in the US economy. Tighter policy settings from the ECB before year end has been all-but priced out; with negative interest rate policy, as well as many of the ECB’s more exotic policy tools, apparently here to stay for the foreseeable future. A nonplussed currency complex: As the race to the bottom in global interest rates resumed, currency markets appeared to have a little trouble working out what it all means. The US Dollar was the primary laggard in the G4 currency-complex, as the Fed seemingly won this round of Who can be the biggest dove? The Euro was up slightly against the USD; however, it was down against most its major crosses. The Yen climbed, but not as anti-risk trade. As it relates to the AUD, it climbed higher in the 0.7100 handle, as the yield differential between the US and Australian government bonds narrowed. A down start for the ASX, following a flat day: For what was a generally positive, albeit lukewarm lead from Wall Street overnight, SPI Futures are pointing to an 11-point drop for the ASX200 at today’s open. Trade was as flat as a tack yesterday, lifted only by a bounce in bank shares, partially (and arguably) due to a component in yesterday’s consumer sentiment data that suggested a shift in confidence towards the housing market. Otherwise, a stall in the astronomical rise in iron prices, and a pullback in oil prices, weighed somewhat on the market – though that dynamic may be due to change judging by last night’s commodity price action. A clear-cut lead hard to find: Today’s trade on the ASX may well be judged in large part on how the market reacts to the prospect of an announced Federal election date. SPI Futures fell into that market’s close, suggesting that the story may hold some weight. Otherwise, in the Asian session today, Chinese CPI data is the key release for market participants and will again be judged on what it says about China’s consumer demand, and the prospects for further fiscal and monetary intervention by policy makers. Thematically, cross-market moves suggest that there exists a present appetite for growth and risk, even if that comes without remarkable conviction. Written by Kyle Rodda - IG Australia

Waiting, waiting, waiting: Another uneventful night in global markets, traders have apparently occupied themselves positioning for the ramp-up in economic data in the next 24 hours. Equity indices pulled back in North America and Europe, as global safe-have bonds caught a bid. Commodities fell across the board, naturally with the exception of gold, which ticked higher on haven-demand. The G10 currency complex was lifeless, with the Japanese Yen edging higher as the carry trade was unwound on anti-risk sentiment. And in line with overnight trade, after a flat day yesterday, SPI Futures are indicating the ASX200 will drop 15 points come the open this morning. IMF rubber-stamps growth outlook: The macro-event that caught most attention last night was the IMF’s anticipated downgrade to global growth. Given the loaded calendar from now until Friday, perhaps that update was an appropriate precursor to the litany of risk-events. As can be inferred from the description of overnight price action, the release wasn’t met with a great deal of surprise, reaction or volatility. However, the message was stark, and worth noting. In the wise-old-eyes of the IMF, global economic growth ought to slow down to 3.3 per cent in the year ahead – a revision lower of its previous estimate in January of 3.5 per cent. Slow-down to be fleeting? Despite all their resources and soft power, the IMF told market participants something that they sort of already knew – and more importantly, had already priced-in. Higher trade barriers have sapped trade-flows and growth in emerging-markets. The consequences have flowed to developed economies – especially those of the European Union, which collectively will slow down to 1.3 per cent this year. For all this knowledge, risk assets remain supported. Maybe it’s this silver lining that’s keeping hope alive: although certainly below what its been in the past, forecasts suggest that the global economy will recover into the back end of 2019. Bonds flashing amber signals: The growth picture beyond that is a little sketchy, though on-balance its probably not a positive one. It is a matter of debate as to what this all may mean in a contemporary context, but at least a recognition of what rates-markets may be suggesting about the longer-term growth outlook should be discounted. Yield curves across developed economies still portray an ugly kink in the 3-to-7-year sections, implying a marked economic slowdown, along with subsequent central bank policy intervention, the world over at around that time-period. Generally, market participants do seem cognizant of the fact, and are treating it with merit. Make hay while the sun shines? But its material consequences aren’t yet being felt: it’s a case of make-hay-while the sun shines. And as far as risk assets go, the momentum on Wall Street Indices, and to a lesser extent the ASX200, can be somewhat attributed to this short-termism. Earnings growth prospects for the next quarter and next half are dim. Wall Street earnings season is practically upon us, and the series of revisions that have taken place since the start of 2019 has led to the consensus view earnings growth will have contracted by over 4 per cent; in Australia, earnings growth is expected to stagnate. Earnings forecast to improve, eventually: However, the bigger picture view is that earnings growth will turnaround. And in no small part it seems, markets are banking on a central-bank engineered turnaround in the global economy before year end. More than just a fall in discount rates, the projected recovery in sales growth across the S&P500 speaks of a belief that demand can be sustained enough to keep delivering growth to US corporate’s top line. It’s here where the bulls and bears become divided: sure, a chase for yield and capital growth will support flows into equities, but is a lift an improvement in fundamentals really that likely? The week to finally pick-up: It all rests on the fortunes and policymaking of the global economy’s triumvirate, of course: the US, Euro-zone and China. And the reason why the back-end of this week is significant is that key data is released out of all three that will illuminate whether markets are correct with their current bullish-view. The ECB meet this evening, with their thoughts on the continent’s short-term growth to be closely perused. US CPI and FOMC Minutes will be assessed in the context of confirming whether US interest rates will remain accommodative into the extended future. And Chinese CPI and trade balance will be carefully monitored when it arrives, too. Written by Kyle Rodda - IG Australia

An uneventful day on Wall Street: A flat, somewhat mixed, and low activity day on Wall Street, market participants seem to be eyeing events later on in the week. After Friday’s Non-Farm Payroll induced rally, traders have apparently looked-down below their feet, realized how far this market has climbed, and decided a fresh-wind is required before scaling to new record-heights. Such a milestone stands only 1-and-a-half per cent away for the S&P500; and sensibly, the market is in no rush to get there. Generally, though, the chatter in the commentariat betrays an overall confidence that the S&P will get there. As has been said a-plenty before: market conditions are looking quite “Goldilocksy”. Only a little more fuel is required to propel US stocks to where bulls wish for them to be. A backloaded economic calendar: The reasoning behind the lukewarm day on Wall Street overnight, aside from just being a Monday, is the economic calendar is backloaded this week. There seems to be a reluctance to get ahead of the data; with the preference being to position for it and react to it as it comes. US CPI data and FOMC Minutes will be the releases for US markets, and will, for the bulls, ideally confirm without qualification the Fed’s need to stay-put on interest rates. But Brexit-drama will also be closely monitored, as we creep ever-closer to the April 12 Brexit-deadline; as will the IMF’s economic updates due mid-week, and the ECB’s Monetary Policy meeting, for insights into the global growth outlook. Currency traders positioning for event-risk: In contrast to stock-indices, shuffling in currency markets was more pronounced on the litany of macro-headline risk. The central thread to the moves was a fall in the US Dollar, though much of this move came as an extension of positioning in the Euro ahead of Wednesday’s ECB meeting, just as much as it was a positioning for CPI data and FOMC minutes. Growth appetite is generally higher, it must be said though, with commodity currencies, such as the AUD, NZD, CAD, and NOK rising – the latter two owing to a spike in oil prices – and safe havens like the Japanese Yen and Swiss Franc falling. US earnings to determine Wall Street’s fate: Looking slightly higher above the fray, and US earnings season is coming-up, and may centre market-participants’ minds a touch. Not that any tremendous surprises are forecast; though earnings growth is expected to have softened a little this past quarter. That much won’t derail markets, and estimates are that a healthier growth in US corporate earnings should return as 2019 unfolds. Only the severest miss in earnings growth would curtail the recent bull-run across the S&P500. And not to mention that, with the US Fed keeping yields and discount rates low, the price-to-earnings ratio across the index remains relatively attractive, while dividend yields are also becoming of greater appeal, too. ASX facing domestic headwinds: A similar dynamic could conceivably prevail across the ASX200 in time, though some headwinds might keep momentum subdued. The ASX is showing a high correlation with iron ore prices at-the-moment, as the materials sector underpins the market’s gains. Though welcomed, the rally in iron ore is on shaky ground, given its being driven by supply disruptions rather than global economic growth. There are other areas of upside in the index it must be said: namely in biotech, which has benefitted from the recent turnaround in risk-appetite. However, not to be forgotten, the uncertainty in Australia’s property keeps weighing on the financials sector; as is the global slipping in long-term bond yields, which is keeping upside financial stocks globally limited. ASX in the day ahead: Nevertheless, looking just to the day ahead, and SPI Futures are indicating that the ASX200 will open around 8 points higher this morning. A clear indication of where the market might go today is missing currently. It comes on the back of a day which witnessed a very broad-based rally for Australian stocks. Lo-and-behold, it was another big rally in iron prices, and a slight lift in industrial metals generally, that underpinned a run-higher in mining stocks, and the overall ASX200. But breadth, too, was strong overall: 72 per cent of stocks were higher on the day, with the communications and financials sectors the only laggards for the session. Oil price rally accelerating: One theme to follow today will be the renewed rally in oil prices to begin the week. Supply-side risks have led the price higher once again; this time, courtesy of internal political instability in Libya. Actual supply disruption is yet to be confirmed, making the spike in prices sensitive to rapid retracement. According to the daily RSI, while upside momentum remains strong, the market is flashing signs of being overbought. However, given the current geopolitical dynamics, ahead of key OPEC meetings this week, future production cuts from major oil producing countries is still being priced-in. The WTI futures curve went into backwardation overnight, reflecting the pricing-in of perceived oil undersupply in the medium term. Written by Kyle Rodda - IG Australia

Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 8 April 2019. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect your positions, please take a look at the video. NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a cash neutral adjustment on your account. Special Divs are highlighted in orange. Special dividends Index Bloomberg Code Effective Date Summary Dividend Amount AS51 SIQ AU 12/04/2019 Special Div 28.5714 As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements. How do dividend adjustments work? This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

A “Goldilocks” end to the week: Sentiment was nicely boosted to end the week last week. US Non-Farm Payrolls printed as closely to a so-called "goldilocks" figure for risk assets as you're ever liked to see. The data revealed the US economy added 196,000 jobs last month, against an expected figure of 172,000. It was enough to keep the unemployment rate to its very low levels of 3.8 per cent. But the real kicker for market-bulls was the earnings component: wage growth missed estimates, revealing a monthly increase of 0.1 per cent, versus expectations of a 0.3 per cent expansion. The result from the NFPs achieved two things: a reassurance that growth in the US economy, while possibly late cycle, is still solid; and inflationary pressures coming from higher wages remain subdued. Risk appetite climbs: Equities and other risk barometers were the major beneficiaries of the "goldilocks" US labour market data. Cyclicals performed well on Wall Street, as the S&P500 sustained its focused climb towards record-highs. Credit spreads narrowed too, as yield was sort out in fixed income markets. The VIX fell into the 12 handle, as fears of a sharp and imminent economic slow-down abated. And US Treasury yields remained quite steady, as the likelihood of a Fed rate cut before the end of 2019 were unwound slightly. The dynamic has led to a great deal of positivity across global equities to begin the new week, with futures markets ubiquitously in the green. Trade-talks tread water: The other major event over the weekend was US-China trade-talks, and unlike the NFPs release, the outcome (so far) has generally been met with a shrug. Markets are hearing much of the same from both sides on the trade-war at-the-moment. Progress is ostensibly being made -- that's what Larry Kudlow told the press over the weekend, and that's what Chinese President Xi Jinping told the press on Friday afternoon. But markets are a bit fed-up with platitudes: they've priced in amicability, and are now craving a decisive resolution, with an unwinding of tariffs. That could still come yet, of course. However, it wasn't to be this weekend; so markets continue to wait with bated breath for a true breakthrough. Reshuffling in currency markets: The combination of strong NFPs and static trade-negotiations looks to have inspired a fall in growth currencies and a lift in the US Dollar over the weekend. Moves in foreign exchange markets were quite limited in the G10 space to end the week. The Australian Dollar has fallen back to the 0.7100 handle; while the Kiwi Dollar and Canadian Dollar have also pulled back - the latter falling despite a continued climb in oil prices. The Japanese Yen was down, however, revealing supported risk-appetite in the market currently; and the Euro was also down, much further into the 112 handle, as pessimism reigns about the Eurozone's economic prospects. Naturally, the Pound also dipped, unaided by heightened Brexit fears as the April 12 Brexit-deadline looms. China’s gold-bugs: Speaking of the currency complex, Chinese foreign reserve data were released over the weekend, and revealed that the PBOC once again increased its gold reserves last month. The motivation for doing so is speculative, and probably multifaceted. Nevertheless, one large consideration from Chinese policymakers must be to reduce exposure to the US Dollar. In the face of geopolitical conflict, and a begrudging dependence on the US Dollar as global reserve currency, the PBOC joins a handful of global central bank's reducing dollar holdings, often in favour of gold. Though dollar pre-eminence ought to last for some time yet, China's gold-buying spree adds credence to the notion that the yellow metal may see more upside yet in the long term. Trumponomics 2.0? Incidentally, perhaps evidence of the benefits of separating a national economy from US Dollar exposure came over the weekend. In the newest chapter of the Trumponomics handbook, the US President announced his desire to see the Fed undertake another round of Quantitative Easing to further fuel the US economy. Perhaps emboldened by (the perceived) success of forcing the Fed to halt rate hikes last year, the President has turned his power to force outright rate cuts. The President's rationale is easy to ascertain. But reading between the lines: given his desire to carry a strong economy into the 2020 Presidential campaign, might this outburst indicate the President's belief the US economy might soon slow down? ASX to reclaim losses this morning: As far as Australian equities go today, the bullish lead handed to market participants should see the ASX200 climb about 32 points this morning. If realised, this will put a line under a couple of days of rather broad based selling on the Australian stock exchange. Seemingly marching to a beat separate from that of the rest of the world, the ASX200 registered noteworthy falls to end last week. It was a wholesale exit from Australian stocks, with every sector in the red on Friday, on 18 per cent breadth. The rationale isn't clear as to why this was so: market internals were quite balances, though momentum had arguably gotten a bit over down. Regardless, global bullishness should spark a rebound, ahead of another busy week for traders. Written by Kyle Rodda - IG Australia

Positioning for the week’s climax: A little water-treading, as all eyes turn to Washington this weekend. And for two-reasons, really: highly anticipated trade-talks between the Trump Administration and Chinese officials – which includes Vice Premier Liu He; and the release of US Non-Farm Payrolls data by the US Bureau of Labor Statistics. Both promise to be potentially market moving events. Fundamentally, both events come in one-and-two as the week’s most significant macro-economic stories. How each unfolds will provide market participants with some key insights into the financial world – as it stands now and into the future. Is the US economy working to full capacity? Can the US Fed keep stay safely on the sidelines? What’s the potential for a global growth rebound? Stocks trade on low activity: With some crucial information promising to be revealed relating to these questions out of these events, financial markets in the last 24 hours have traded on a let’s wait and see mentality. Wall Street traded mixed: the S&P500 hovered in and out of “the green”, as the momentum in US tech stocks stalls. European equities, on balance, pulled back throughout the day, unaided by some weak German economic data. Asian trade was also lacklustre, with the Nikkei trading flat, the Hang Seng down, but Chinese indices generally clocking gains. Despite the mixture of results, the constant was generally a lack of volume in stock-markets, likely symptomatic of a market watching vigilantly for its next cue. Bond prices edge higher: On this basis, a rotation into government bonds materialized. Bond markets have settled-down after last week’s hysteria, and considering current fundamentals, have found something of a happy place. The safety has been sought in 10-years: the US 10-tear Treasury yield is down a basis point-or-two to around 2.50 per cent, for one. The US Dollar has been sort-out in general. Less a function of an overall search for liquid assets, the greenback has benefitted more from a fall in the Euro because of poor German Factory Order numbers, as well as another dip in the Pound on sustained concerns regarding Brexit. Speaking to the neutral sentiment in the market: the Japanese Yen is only marginally higher, as is gold. Market watch I: trade-talks: So that's how market participants have positioned for the weekend's big events, but what are they looking out for? Because of its political ramifications, trade-talks will be the headline grabber. Arguably, markets are a little exhausted by the trade-war. Holding onto hope can be exhausting; and judging by the diminishing impact of trade-war news, traders are tired of speculation and want substantial answers. A de-escalation in the trade-war is practically priced-in to the markets now. Future strategic consequences aside, the market-moving variable is probably going to be whether US and Chinese negotiators can flag a clear removal of at least some of the tariffs imposed on one another. Market watch II: US NFPs: As far as US non-farm payrolls go, the state of the US labour market always sits at the front of the carousel of concerns for market participants. Of late, however, the data itself has taken-on some new dimensions. Whereas in the recent past -- and we are talking in months, to maybe years -- it's been all about wage growth and the inflation outlook, as an extraordinarily low unemployment rate stoked concerns of an inflation outbreak in the US economy, and subsequently higher interest rates. That issue still exists. However, now, markets have to deal with another layer of complexity: the fear that the US economic machine is slowing down; and may lack the capacity to maintain labour market strength. Just a bit of profit taking? In our neck of the woods, SPI Futures are suggesting the ASX200 will translate the overnight-action into a 6-point loss at the open today. Australian equites are standing as an outlier, based on futures markets, across the Asian region. Most other futures contracts are pointing to a reasonably positive start for Asia’s major indices. Aussie stocks gassed out somewhat yesterday, proving the most notable laggard across the equity index map. Given it was the outlier, a single domestic cause for the broad-based selling on the ASX is difficult to determine. The market did sell-off from a 70 reading on the RSI, so perhaps we can chuck-out the old cliché and chalk-up the move to “profit-taking”. Reactions to an unofficial budget: Lacking a strong lead to follow this morning as markets await tonight’s key risk events, perhaps the curious matter for the ASX today will be how the market react to last night’s budget reply speech from Labor leader Bill Shorten. Aside from some quizzicality as to why the opposition leader kept bandying around the yield on 10 Year bonds as evidence for his economic argument, market participants may take greater notice of the detail contained within the budget-reply than that of the official budget on Tuesday. Markets like to play with and price-in probabilities; and given the balance of probabilities suggests a Labour government come next election, perhaps last night’s policy announcements will create greater impact than those announced on Tuesday. Written by Kyle Rodda - IG Australia

Growth fears ease; risk taking subdued: Risk appetite wasn't terribly high overnight. But in saying this, the persistent, vexatious concerns regarding the global growth outlook has continued to abate. Markets have become used to modifications in the growth outlook manifesting in a powering of risk-on behaviour. Given the economic backdrop, the reasons for this are pretty intuitive. Just as far as last night's trade, though, this relationship didn’t hold quite so strongly. There were clear signs that market participants were tempering some of their worst fears about global growth. However, risk-assets didn't respond in the way that they have in the recent past. Not that this should be looked into too much; it's just been a curious truth that's lead to a touch of head scratching last night. More good news than bad: It would be wrong to suggest it was a bad day for equity markets. More, that given some of the news in the market, and the cross-asset price action, a stronger move higher might have been expected. The macro-development that captured most attention was news of "new progress" in the US-China trade-war, that boosted hopes of a breakthrough in upcoming trade-negotiations in Washington. In a muted response, Wall Street has edged a trifle higher last night, with the S&P hovering around the 2870 mark. European indices performed a little better, following some strong Services PMI numbers, while Asian indices probably led the pack in the last 24-hours. Bonds tell the story (again): Evidence that market participants are re-pricing their global-growth-concerns, in part due to the trade-war developments, manifested in the bond market. A move inverse to that which markets saw last week, government bonds have retraced their gains, as traders reassess the immediacy of what is a widely accepted slowdown in the global economy. It's been the middle of the curve that has demonstrated most movement, with the US 10 Year Treasury note making a foray back above 2.50 per cent; while the equivalent German Bund is making a run out of negative yield. In fact, part of this move in bond markets could explain some of the flatness in equities overnight, as the swift jump in discount rates diminish equities' relative appeal. Yield fluctuations show in currencies: The slightly, and probably transitory, revision to global growth has naturally manifested in the currency market. The Australian Dollar and Kiwi Dollar performed strongly yesterday, while the Japanese Yen and US Dollar fell. The quick normalisation in bond yields supported the Euro, which continues to hold onto the 1.12 handle in the face of geopolitical risks and a concerning trend in the continent's growth. Gold prices also dipped on the normalising yield environment, and sits someway of its highs, though its losses were contained by the weaker greenback. The Pound also leapt higher, but as always, that was due as much to Brexit speculation, as it was to any other macroeconomic driver. Overall: a day of mixed signals: Really, if anything ought to be inferred from market behaviour yesterday, it's that it was a day of mixed signals. Upside in global equities is practically expected, as earnings forecasts stabilise, P/E ratios remain in a normal range, and monetary policy settings stay accommodative. Certain indicators of the "real economy" are favourable too: the gold-to-silver ratio keeps climbing, credit spreads are falling, while industrial metals keep trending higher. However, some cautionary signals remain: the VIX looks unnaturally suppressed, the "smart money" isn't supporting these news highs, and yield curves are completely bent of shape still. The path of least resistance for equities is higher, however the climb there could still be treacherous. ASX to open lower, following solid day: Never to be left behind on a global trend, the ASX200 ought to open a little lower today. The good fortune was flowing for the index yesterday, as the trade-war developments, the Federal Budget fallout, and another big lift in iron ore prices fuelled the market to multi-month highs. The materials stocks naturally lead the ASX higher, but the effects of the night prior's budget was plain to see: industrial stocks, the Real Estate sector, and utilities all fed off the news of fiscal stimulus. The eyes were on consumer discretionary space, given the support to households in the budget. It traded slightly higher, though most of the budget's news had already been baked-in. Retail Sales beats, easing local concerns: The good-news story, in a domestic sense, for Australian markets came in the form of Retail Sales data yesterday. It exceeded expectations considerably, printing month-on-month growth of 0.8 per cent, against a 0.3 per cent estimate. The fine print was interesting: on the month, Australian’s spent their discretionary income on eating-out, generally forewent spending on attire, and spent a tiny-bit more on department store spending and household goods. Overall, markets reacted bullishly to the data: the Australian Dollar rallied to trend line resistance at 0.7130-ish, and bond yields jumped as traders repriced the number of expected rate-cuts from the RBA before the end of 2019 to 32 basis-points. Written by Kyle Rodda - IG Australia

The biggest day of the (economic) year: The Australian economy garnered significant attention yesterday. Arguably, it was the biggest day on the economic calendar we’ll see this year. Insights into both the future of monetary and fiscal policy don’t often come on the same day. But yesterday it did: the RBA delivered their monthly decision on Australian interest rates; and the Federal Government handed down its latest budget. The price action in financial markets has thus far been limited – though, granted, we wait for the ASX to open this morning to witness the stock market response to the budget. At least from a purely intellectual standpoint though, both events have given market-buffs enough to chew on, and potentially frame future trading opportunities. The RBA stays away from politics: Let’s break it down and start with RBA. If there was ever a meeting the RBA wanted to avoid politicization, it was this one. Unlike what’s happening in the United States, our central bank has been generally insulated from political-ire in the post-truth, anti-establishment era. But surely Dr. Philip Lowe and his team have sharp memories and recall the impact the 25-basis point hike to interest rates in November 2007, weeks before a Federal Election, had on the political discourse. Considering that last night’s budget was just as much a re-election pitch as it was a document of economic management, keeping safely away from the fray was always on the cards for the RBA. The economic rationale: And not for unwise economic reasons, either. All Australians know how the game works: an election year budget is a vote-buying budget. In principle, it’s the chance to buy-back the electorate after years of (ostensibly) tough-but-necessary decision making. For the boffins at the RBA, the timing of the situation couldn’t be better: provided it’s implemented responsibly, with the Australian economy in its current state, some meaningful fiscal stimulus from the government wouldn’t go astray. It takes the heat off the RBA, undoubtedly: ideally, the injection of money into the economy will jump-start domestic demand, and boost consumption at a time when households are doing it a little tougher than they have in the past. Keeping the powder dry: It helps the RBA keep their powder dry, too. They have 1.50 per cent of potential cuts if things turn sour in the economy to play with, so to speak, before, like some of the world’s other major central banks, they would have to experiment with some unconventional monetary policies. Not only that, but unlike some of the more fiscally irresponsible governments around the world, the Australian government, with relatively low levels of debt, can still afford to pull some fiscal levers. This desire to wait-and-see shone through in yesterday’s RBA statement. They certainly took a more balanced view to economic risks, but they shied away from taking the line that rate cuts may soon prove necessary. Picking up the slack: The benefit of this is that rather than just drop interest rates, and risk inflating (certain) asset prices and encourage the accumulation of private debt, targeted spending may add the necessary sugar-hit to revitalize households and their consumption. This is important to the RBA: there are three things really weighing on consumers at present: high-levels of private debt, a fall in house prices, and low wages growth. Now, a touch of fiscal stimulus won’t reverse these challenges in-and-of-itself; and the RBA will need to remain active in managing risks relating to all three. However, the hope is that a quick boost to government spending could do its part to ease the pressures, and perhaps unleash the economy’s animal spirits. Forever the lucky country: Now, some of the structural or cyclical factors, from a global economic perspective, will remain unchanged. And that is what is often glazed over or ignore when it comes to Australian economic policy. The pollies will claim it’s an act of volition, but Australia is a small and open economy, and without good-luck, like what’s recently been seen in with our terms of trade, the money would not exist to support tax cuts and infrastructure spending. The problem for the RBA and Federal government, is sluggish wage growth (the thing that both parties are banking on turning around to maintain surpluses and stable monetary policy) is being caused by phenomena outside their control. A day for a little judgement: The interesting part of today’s trade is that market participants get a little sample of what the market is think about the combination of yesterday’s RBA meeting and Federal Budget. SPI Futures are indicating a big jump for the ASX200, despite a lukewarm night on global markets. First and foremost, in response to the RBA, the Australian Dollar has fallen with rate expectations and bond yields, as inflation expectations are deferred. Reactions to the budget will probably have to be judged by the behaviour of the ASX, though: consumer stocks outperformed yesterday, in a possible by-the-rumour sell the fact scenario. All of this will unfold around the release of important Retail Sales numbers today, which will give a true update on Aussie-consumers. Written by Kyle Rodda - IG Australia

Today was a good day: The term risk-on can be a little overused in financial markets at times. When short-on-time, and confronted with something complex, suggesting it’s been a “risk-on” or “risk-day” is a simple way to say market participants feel pretty good. At the risk of oversimplifying: the first day of the new quarter was certainly a “risk-on” day. It’s likely given the context of yesterday’s trade that makes this so. Concerns about a global economic slowdown have been their most sensitive in years. So: to receive a handful of better than expected economic data, such as we did in the last 24 hours, it makes things in the whole appear much better than if they were to be judged just in the particular. The story has changed (for now): It’s probably a part of that compulsion market participants have – pundits especially – to infer a trend from a tiny-bit of information. The justification is reasonable enough: most people understand the world through stories, rather than hard-data and analysis. To take a piece of information, infer a trend, and then tell a story with it is far more comprehensive (and saleable) than just enumerating some soul-less facts. It’s with this (partial) assumption in mind, the first day of the new week, month and quarter can be viewed. For all its intricacies, complexities and ambiguities, it was the most “risk-on” day we’ve seen in a short-while; and the hope is now that this is the beginning of a significant reversal in trend. The truisms hold: Maybe another reason why dubbing price action yesterday this way is that it lived-up to so many old market axioms. Ironically enough, in these situations, the coming-true of absolute, self-evident truths about the world are comparatively rare. More-often than not, it’s more common to find an exception to the rule than to observe clear evidence for the rule itself. But truly yesterday, all but a few of the hackneyed judgements about markets materialized. Stocks ubiquitously rallied, with the S&P500 eyeing new highs. Bond yields are recovering ground after their recent tumbles. Commodities were generally higher, though (of course) gold was down. And growth currencies rallied, with the Japanese Yen leading the G10 laggards. The focus on China and America: A little description, a re-cap if you will, of the data that drove this price action is definitely warranted. And here, this could be evidence of market participants’ collective desire to simplify and cherry-pick information. Markets were swept up in the hope and positivity of a series of PMI releases on Monday. There were many of them released, amongst other high-impact economic data. However, two stood out as the drivers of risk-sentiment. The most important was Chinese Caixin PMI numbers, which validated the weekend’s “official” figures, and showed an expansionary print in that metric. The second most was US ISM PMI numbers, which delivered a robust print itself, beating economists consensus forecasts, too. Counter-evidence ignored: The narrative formed out of this couple of economic releases was relatively simple: two forward looking indicators for the world’s two biggest economies came-out strong; growth in the global economy therefore could be stabilizing. This general mode of thinking overnight inspired the so-called “risk-on” day; and proved cogent enough for other contradictory data to be ignored. Because all-in-all, the balance of data released – the first lot in a mountain of data to be released this week – was probably fairly mixed. European PMI numbers and CPI figures were printed, and dramatically underwhelmed again; while US Retail Sales figures greatly undershot forecasts, conveying a contraction in consumption in the US last month. Australia to follow the leader: Nevertheless, unsurprisingly, the ASX200 appears set to follow the risk-on theme this morning and jump in excess of 30 points at today’s open. It’s going be a massive day for Australian-econ-watchers; and may market participants too. Quite reasonably, it could be argued that, on paper, it’s the biggest day of Australia’s financial-year. This afternoon we get the RBA’s monthly meeting, at which the central bank will most certainly be keeping interest rates on hold. Then tonight, in what could prove a pre-election manifesto from the Coalition Government, the annual Federal Budget is presented before Parliament, with the prevailing view being that it will be loaded with spending and other sweeteners to win-over members of the electorate. Framing the day: As far as the RBA goes, the key point to watch for is whether, following the RBNZ last week, the central bank makes a decisive dovish pivot in its outlook for Australian interest rates. That is: it falls in line with market expectations and adopts a rate-cutting bias. When it comes to the Federal budget, it will be judged by what extent proposed spending measures will help stimulate a softening domestic economy. The Australian economic outlook has remained reasonably strong lately is an improvement in the terms of trade, led by a fortuitous climb in commodity prices. Tonight’s budget will be judged by how the income from that phenomenon is redistributed to households, to reboot ailing domestic consumption. Written by Kyle Rodda - IG Australia