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MaxIG

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Blog Entries posted by MaxIG

  1. MaxIG
    Expected index adjustments
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 17 June 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 DLX AU 21/06/2019 Special Div 40 HSI 857 HK 20/06/2019 Special Div 2.729 HSCEI 857 HK 20/06/2019 Special Div 2.729 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. 
  2. MaxIG
    Expected index adjustments 
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 10 June 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 RTY TPCO US 11.06.19 Special Div 150 RTY CFFN US 13.06.19 Special Div 25 RTY CWH US 13.06.19 Special Div 7.32 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. 
       
  3. MaxIG
    Global political economy in focus: International diplomacy, politics and global trade are at centre of attention to begin the new week. Indeed, that’s in part due to the corporate and economic calendar appearing relatively lighter, being the final week of the month; as well as the fact the UK and US are off on public holidays on Monday. But even in the absence of other hard-hitting, high impact news, the confluence of politics-related headlines merits attention in their own right. And it spans the globe: Trump is talking trade in Japan, the Europeans are voting in their Parliamentary elections, and the UK is now searching for a new Prime Minister.
    Markets watching for surprises: The overarching narrative hasn’t fundamentally changed. Generally speaking, a level of bearishness characterizes market activity, as the US-China trade war continues to rattle nerves. Nevertheless, global politics and international relations is bringing-about some shifting gears within the broader economic machine. On balance, there’s been little fall-out from the handful of political events unfolding across the globe. If anything, though not game-changing, they’ve collectively proven to be a net-positive for market sentiment. Of course, this could turn-around rapidly: traders ought to be used to expecting the unexpected by now. Hence, the least that can be said is “so-far”, so good.
    The future of Europe in question: European Parliamentary elections was where most interest lay over the week. For market participants, the vote is being viewed, and has been positioned for, through the lens that this election is a measure of public-sentiment towards the European Union as a political structure. Voting is in the process of wrapping-up currently, but from the available early indicators, the outcome of the poll looks to be in favour of pro-European parties. It must be said, there seems to be a sustained growth in Euro-sceptic parties. However, for the time being, such anti-establishment forces remain in the minority, and look broadly contained.
    Euro-sceptic parties grow, but stay in minority: Whether that proves to be a good thing or not is a value judgement. Of even greater import: whether, in the long-term, the continuation of the status quo is desirable is a more profound issue. In the here and now though, fewer uncertainties within the European political system will inevitably be welcomed by investment markets. This is especially so given Europe’s precarious economic position. European growth is anaemic, in the truest possible way, with policymakers possessing very few options in terms of monetary and fiscal policy. Europe’s problems won’t disappear with this election result, but at least it keeps one risk at bay for now.

    Leadership tussle begins in the UK: Across the English Channel, and the UK is facing its own political challenges. UK Prime Minister Theresa May has tended her resignation, and the jostling now begins for the Conservative Party leadership. In what will probably be another little test of liberal internationalism, market participants are watching the Tory leadership contest closely, in order to judge every candidates credentials and positions on Brexit. It’s very early days, however Boris Johnson is emerging as the favourite to achieve his long-held ambition to wrest the party’s leadership. And markets aren’t taking kindly too that, given the man’s “hard-Brexit” sympathies, and general populist-streak.
    Trump in Japan: For the next 24 hours, the interest of market participants will turn to US President Trump’s visit to Japan, as he chats trade and regional security. Japanese Prime Minister Abe and his team are apparently on the charm-offensive with Trump – treating him to games of golf, and all the other spoils of high-diplomacy. At-the-moment, risk-appetite is dwindling in financial markets, as the trade-war escalates and the White House hurls threats to its trading partners about imposing higher trade barriers. Market action will be in some-way determined by what commentary comes from Trump after this little summit, and whether he cools his anti-trade rhetoric.
    The lead-in for Australian markets: Despite the heightened nervousness brought about geopolitics, price action was relatively limited, and market activity was quite low, on Friday. The S&P500 edged modestly higher, while US bond yields lifted slightly. SPI Futures are indicating a follow through of this sentiment, pointing to a narrow, two-point drop in the ASX200 this morning. The AUD is back into the 0.6900 handle too, courtesy of a weaker greenback, after US Cored Durable Goods orders data disappointed on Friday – and comes despite a major drop in Australian bond yields, which saw the 10 Year note’s yield fall to par with the current cash rate of 1.50 per cent.

    Written by Kyle Rodda - IG Australia
  4. MaxIG
    Risk-assets up, but trade was tepid: The overnight session was, on balance, positive for risk assets, though the conviction behind market-moves was missing. The S&P500 – the natural barometer for market-mood currently – experienced a middling day. It’s closed more-or-less flat, having made a failed foray higher throughout Wall Street trade, to have sold off right-below crucial resistance at 2800. For the bulls in the market, circumstances didn’t fundamentally change last night. The short-term trend is pointing to the downside, with momentum clearly holding in that direction, too. The 200-day moving average is acting as a magnet for the index now, seemingly keeping the market neutralized until the next market-moving catalyst. 

    News-flow thin, ahead of a busy week next week: And at that, this week has very much been characterized by that general theme: for all the risks, and generally bad news, in the world, a thin data week has deprived market participants of fresh-trading fodder. There has been high impact news and events, it must be said. But much of it doesn’t relate to the news that markets are watching for to either driver the present trend further, or inspire something of a trend-reversal. A lot of that is due to the time of the month, but even still, given the heightened tensions in markets, one might have expected a little more substantial news-flow.
    Fears building still in the market: Indeed, there are trade-war headlines floating around the traps, and of course it’s that subject that’s responsible for equity markets’ global pullback. However, for better or worse, US President Trump – the man whose words (or Tweets) matter most – has been conspicuously quiet about trade this week. So as-a-result, the prevailing trend of the last 3 weeks has continued unabated. Market participants are betting on a global economic slowdown, and feel little inclined to take risks. Stocks are selling-off accordingly, while bonds are going on a tear, as traders position for a deterioration in global growth conditions, and a subsequent need for central bankers to cut interest-rates.
    The counterbalancing factors: This general assessment of the state-of-play ought not to be considered catastrophic – at a minimum: not yet. There are reasons to be somewhat upbeat: earnings on Wall Street haven’t been revised aggressively lower in response to the perceived threat of the US-China trade war. Furthermore, the sell-off in global equities might just as much be due to a reversal in momentum chasing, after a time when stocks markets got bid very high. And at that, volatility could be chalked-up to uncertainty rather than a tangible change in fundamentals. No doubt, the chance that things could get worse from here is elevated, but not a certainty.
    Markets betting on rate cuts: There is also reason to believe global policymakers will cushion the blow of any material economic slowdown. And probably, this variable is where things could really shift. Markets are pricing that indeed the Fed, as well as many other global central banks, like the RBA, will cut interest rates aggressively in response to slower growth. The view point has certainly kept stock valuations attractive, and given hope to market-bulls that the global economy could perform a soft landing. This isn’t manifesting in price action now, but if earnings growth remains positive, lower rate expectations will keep underpinning equity market strength.
    Might the Fed save the day? And last night, optimism was massaged slightly that the Fed may be willing to support this attitude. US Fed Vice-Chair delivered a speech, in which he affirmed the bank’s view that the economy is in “a very good place”, but that the Fed is on standby to consider downside economic risks. That message, though moderate in its delivery, does mark a creeping dovishness in “Fed-speak”, which has thus far been absent throughout this market slow down. It can’t save the day forever, but for markets in the short term, knowing the Fed is on standby is a soothing notion.

    ASX to open higher, with China data in focus: The culmination of last trade’s trade will see the ASX200, according to SPI Futures, open 20 points higher this morning. It will only be a modest recovery, following a day where the market shed 47 points, on the back of some broad-based, trade-war fear related panic-selling. The ASX will be quite attuned, indirectly, to the trade-war narrative today. The major data release in the Asian session will be Chinese Manufacturing PMI data. What goes for the Chinese economy, goes for Australia’s. If the trade-war is seen to be weighing on Chinese manufacturing activity, expect fears to be ratcheted up about a worse-than-expect global economic slow-down.

    Written by Kyle Rodda - IG Australia
  5. MaxIG
    Markets returning to normal trade: Traders in the US and UK returned to their desks overnight, and if price action is any guide, their verdict of the weekend news flow is “not much has really changed”. This isn’t to say the movements in financial markets in the past 12-18 hours have been ones of major conviction. Afterall, volumes are still light and the extent of the moves in price witnessed were modest. Nevertheless, despite what was notionally a tranquil weekend for financial market news, market participants have seen it fit to continue to take risk off the table, as if nothing has really changed at all.
    Risk-off still the bias: An assessment of risk-conditions finds merit in this notion. Yes, several risk events have been traversed since Friday, but none really provided the market with any reason to change existing biases. Fundamentally, the trade-war is still a growing problem, with sentiment finding itself sapped by the apparent intractability of that issue. Practically, no economic data has been released from any of the major economic powers since last week too, so markets remain mired in the perception that the global economy is on a soft footing. Perhaps a level of uncertainty is gone for now, however the balance of risks have seemingly remained the same.
    Indicators for global growth flashing amber: That’s resulted in some classic risk-off behaviour. Not that the moves were overly frightening, but they were stark enough to take notice. The conspicuous activity was in the bond market – especially US Treasuries. The yield on the 10 Year note fell 5 basis points to 2.26 per cent, which marks its lowest point in almost 18 months. The significance of that milestone is noteworthy, too, and perhaps a small marker of where markets are in the current cycle: the last time yields on 10 Year US Treasuries were this low, it was smack-bang around the time of President Trump’s famous tax-reform package in December 2017.

    An end of a cycle? Recall, it was the implementation of this massive cutting of corporate taxes that ignited the US economy, and by extension the US equity market. The dynamic fuelled market sentiment, and was a major catalyst behind the several record highs achieved by the S&P500 in 2018. Though only a crude measure, the fact the US 10 Year bond yield is back at where it was at that stage of history speaks volumes of current market perceptions. Markets are anticipating a global economic slowdown – an end to some small cycle – that will weigh on US growth, and probably force the US Federal Reserve to cut interest rates.
    A split between the market and policymakers: In fact, such an attitude is being baked into rates-market pricing – an 80 per cent chance of a rate-cut from the US Federal Reserve is priced-in before year end. This view is deeply at odds with what the Fed has flagged to the market in all its communications so far this year. Regardless, perhaps somewhat like the beginning of this year, whereby a breakdown in financial conditions more-or-less halted the Fed’s rate-hiking cycle, markets are assuming the Fed will again be bent to its will. And this is where the risk lies: if markets have got this wrong, heightened volatility is the (almost) certain outcome.
    Bullishness is absent right now: The problem right now, as it relates to risk assets, is that rather than solid earnings that’s propelled US stocks to its most recent record high, it’s been a lowering of interest rate expectations that’s really been responsible for bring about that phenomenon. Perhaps, this is what’s making the current pullback in the S&P500 so worrisome. Discount rates keep falling, just as they have been all year, however US equities remain in a short-term downtrend. The signal is that markets are positioning for an economic slowdown, at least just right now, brought about by the deterioration in trade-relations between the US and Chinese governments.
    Stock market softness persisting: As such, the S&P500 sold off in the final hours of US trade, pushing that index to psychological support around 2800, and bringing closer the completion of a much-watched head-and-shoulders pattern for that index. A caveat here: the action could be something of a manifestation of end of month flows. But judging by market activity in Europe too, where stocks also dipped, the lion’s share of this price dynamic does look attributable to a significant risk-off sentiment. It’s something that will apparently plague the ASX200 today, too: SPI Futures are pointing to a 44-point drop at this morning’s open.

    Written by Kyle Rodda - IG Australia
  6. MaxIG
    Expected index adjustments 
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 27 May 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 RTY WMS US 31/05/2019 Special Div 1 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. 
     
  7. MaxIG
    Expected index adjustments 
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 20 May 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 UKX MRW LN 23/05/2019 Special Div 4 AS51 FMG AU 22/05/2019 Special Div 85.7143 HSI 1299 HK 21/05/2019 Special Div 9.5 SX5E ENGI FP 21/05/2019 Special Div 38 CAC ENGI FP 21/05/2019 Special Div 38 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. 
  8. MaxIG
    A choppy week ends generally flat for Wall Street: Global stocks ended the week on softer footing. But if one narrows their attention to just the S&P500 as the bellwether, the past 5-days culminated in only a 0.76 per cent fall. Trade continues to dominate sentiment on a macro-scale. The US-China trade-war has deteriorated considerably, with positivity in the market currently being sustained by some vague hope that US President Trump and Chinese President Xi will meet on the sidelines of June’s G20 meeting to discuss trade. A total reversal of tariffs between the US and China looks increasingly unlikely however, so markets wait now for the new trade-barriers detrimental consequences to manifest in market fundamentals.
    Risk appetite is waning: Intraday price action on Wall Street somewhat reflected the loosening control buyers have on this market. After a spill at the open, the S&P500 grinded higher throughout trade to turn positive on headlines that the US would be removing steel and aluminium tariffs on Canada and Mexico. It proved to be cold comfort for market participants, however. Volatility edged-up throughout the session, US Treasuries gained very slightly, and the S&P500 shed 0.58 per cent, capping off a day which witnessed a marked flow out of risk-assets, and into safe-haven assets, wherever they could be found.
    Price-action looks ominous for the S&P500: The set up for US stocks is beginning to look quite interesting – and relatively ominous. The general view is that Wall Street equities have remained quite resilient, even somewhat calm, in the face of greater trade-tensions. However, given the possible impacts of slower global trade, maybe this is simply the calm before the storm: the quiet, underground evacuation of smart money from the market, before the herd attempts hastily to catch-up. The S&P500 looks to be taking something of a head-and-shoulders shape after Friday night’s trade, portending that another new-low may be in the making for the market in the short-term.

    How do market participants react to more ScoMo? Turning to the ASX200, and markets with an Australian focus, and despite Friday night’s weak end for European and North American stocks, the ASX200 ought to open 5 points higher today. The interest today, of course, will be on picking up what effect the weekend’s election has on local markets. Financial markets move on surprises: things that weren’t prepared for in advance. Such was the favouritism of the Australian Labor Party to take Saturday’s election, market participants, overall, had positioned their expectations for that party’s victory. As is well known, that outcome has not materialized, so interest turns to how market-pricing repositions from here.
    Australian Dollar gaps higher this morning: Looking at the Australian Dollar as the first cab off the rank, it has gapped higher this morning, to have climbed by as much as 1 per cent, in early trade. While ostensibly a tacit endorsement of the Coalition and their economic agenda, the trading dynamic is probably more a reflection of a “buy-the-rumour-sell-the-fact” situation. That is: one small unknown is removed from the market, and price has adjusted to reflect this, in something of a knee-**** reaction. The phenomenon, therefore, would probably have been observed even in the event of a Labour Party victory, and is probably not representative of a shift in fundamentals.
    ASX200 to begin week on shaky footing: Watching Aussie bonds and rate markets today will be a better barometer for how markets view the economy as-a-result of the Coalition’s election victory. However, given the big issues driving the macro-economy currently, most of which originate from beyond Australia’s shores, the ultimate consequence will be probably be tantamount to short-term noise. Given the lift in the Australian Dollar, and dwindling global-market confidence, the ASX200 may find itself stifled at the outset of this week’s trade – especially after a hot day’s action on Friday, which saw roaring iron ore prices ignite buying activity in mining stocks, and temporarily drove the ASX200 to new 11-year highs.
    All interest in the reaction of bank shares: The key to today’s trade will probably rest on the banks. As a sector, the financials arguably have most to gain from a Coalition government, given that policies like capital gains tax reform, negative-gearing reform, and (to a lesser extent) changes to dividend imputation will no longer be forthcoming. Rightly or wrongly, the banks had suffered from the expected implementation of these policies. To illustrate: the financial sector’s 12-month high came a day before last year’s Coalition leadership coup, after which market participants generally shied from buying banks on the expectation (at the time) that that event had handed government to the Labor Party .

    Written by Kyle Rodda - IG Australia
  9. MaxIG
    Stock markets continue to recover: Global stocks have maintained their bounce. It’s looking more like a market that is searching for it’s next high now, as price action, from a technical perspective, suggests the recent wave-lower is over. Hence, from here, considering trade-war risks, and therefore anxiety in the market, remains high, the matter becomes whether stock indices are preparing to pop in a new higher-high, or whether what we will see is a new lower-high. The result of that simple binary will inform market participants what the broader trend is in the market: are we still trending higher, or are we seeing the start of a trend reversal?
    The litmus test to come: This commentary pertains primarily to the S&P500, which has been the bellwether for global equities, recently. But it could equally be said of the ASX200, too, which demonstrated its resilience yesterday. Just sticking to the S&P500, the price set-up offers some potentially interesting insights about the world, in the weeks to come. Another high for US stocks is another record high and a clear continuation of that market’s bull run – defying, really, what is a deteriorating global backdrop. If this fails to occur, then talk will certainly emerge whether stocks are beginning a prolonged period of weakness, in line with clearly softer fundamentals.

    The signs of nervousness: Time will tell, of course, and all manner of things can change this underlying dynamic, in the long term. However, as it relates to the here-and-now: though the tension eased in Wall Street and European trade, safe havens are still in vogue for investors, currently. US Treasuries have pulled back overnight, but yields have kept close to their recent lows, and traders have flooded into the US Dollar. German and Japanese bonds are still in negative yield territory, removing some of their haven appeal, however the Euro, Yen, and (at that) the Swiss Franc are still broadly catching a bid.
    Trade-war keeps escalating: Conspicuously, gold prices are lower, but that’s a function of the much stronger greenback, while commodity prices have generally rallied across the board. That behaviour probably belies yesterday’s news flow, which was preoccupied with another small escalation in the US-China trade-war, after US President Donald Trump paved the way for sanctions on Chinese mega-company Huawei. The dynamic probably manifested in global-growth sensitive currencies more than anywhere else.  The Nordic Currencies, the Canadian Dollar, the Kiwi Dollar, and our own Australian Dollar continued to sell-off overnight, on the presumption that Chinese economic growth will be further stifled by US trade-aggression.
    Australian jobs data disappoints: Speaking of the Australian Dollar: it registered a new low in the last 24 hours, and is now cosying up with the 0.6800 handle. The driver was yesterday’s local employment numbers, which was probably, on balance, a negative one overall. On the plus side: jobs growth exceeded expectations and the participation rate moved a little higher. But crucially, the unemployment rate climbed, and the jobs added to the economy last month (according to the data) were predominantly part-time jobs. Also underquoted, but perhaps more importantly, was a big tick-up in the underemployment rate, which rose from 8.2 to 8.5 per cent.
    The problem with the jobs data: So: this is the kicker, as it applies to the jobs data: the problem the market sees in the numbers doesn’t directly stem from the unemployment rate or jobs change numbers per se. The ****’s in the detail, and the details suggest that considerable spare labour capacity exists in the Australian economy, at-the-moment. Crucially, for financial markets, this means one thing: that the long pined-for lift in wages growth is unlikely to be forthcoming. By extension, this likely means further weakness in inflation, and probably consumption too, which, if left unmanaged, will drag on economic activity moving forward.
    The need for economic stimulus: Hence, it’s this general perception that has driven traders to price in a fifty-fifty chance of an RBA interest rate cut next month; and also, price in a full cut by July, as well as more than another full cut on top of that by year end. This development comes at a fortuitous time, too. The election is upon the Australian electorate, and promises from both sides of politics to adopt stimulatory measures, by way of income tax cuts and major infrastructure spending, is giving hope that the government can juice the economy just enough to guide it through this current soft patch.

    Written by Kyle Rodda - IG Australia
  10. MaxIG
    The tariffs get hiked: The latest round of trade talks didn’t have the desired outcome. But nevertheless, the always forward-looking equity market closed last week on something of a high-note. It was a choppy day’s trade in Asia as the news filtered through that an agreement between the US and China in Washington wouldn’t be reached. Ultimately though, and just like the last time tariffs were hiked, financial markets handled the news with aplomb. The simplest explanation for why there wasn’t a huge reaction financial markets is roughly this: it “was buy the news and sell the fact” with markets having already discounted a trade-war escalation.
    Markets (probably) saw it coming: It’s an unhelpful cliché, that one. However, market-moves, ex-post or not, are often chalked up to such a dynamic. It’s one of those helpful mental models to make sense of the madness of financial markets day-to-day. Regardless, it’s ostensibly what financial markets have done in this instance; giving solace to the bulls and bolstering risk-appetite. Fundamentally, the global equity map was a rich-shade of green after the end of Friday’s trade. The S&P500, for one, closed 0.37 per cent higher, CSI300 lifted a remarkable 3.63 per cent, and SPI Futures are indicating a 29 point jump this morning.

    The future feels more uncertain: The question moves today to: where to from here? From a pure fundamentalists point of view, those folks probably just wait to see how new trade-barriers show up in the hard-data. That one is probably going to be a slow-burn. Recall, after the last round of tariffs were implemented, it took the better part of a quarter for them to show in the data, and vaguely reflect in market fundamentals. For the short-term sentiment watchers, an answer to that overriding question will be more immediate, however perhaps more gradual in its unfolding. Afterall, this is a headline driven market, and those headlines are still being produced.
    Trade will remain “headline-driven”: Hence, on the headline front, what was received over the weekend – after the market had closed – was probably not all that favourable for risk-sentiment. While Friday’s trade was buoyed by news that trade-talks were continuing and were “constructive”; trade at the very early stages of this week is being stifled by the harsh rhetoric from the Trump administration, towards the Chinese, over the weekend. Upping his binary “winner-and-losers” language, news has filtered through the wires that the US has delivered China an ultimatum: make-a-deal, or tariffs get applied to all Chinese goods going into the US in a month’s time.

    Higher trade-barriers to stifle global growth: The reliability of this story is somewhat questionable. Regardless, if tariffs are applied to all goods going into the US from China, and retaliatory tariffs are proportionately applied to all goods going into China from the US, then the global economy will almost certainly suffer. Speculation now in financial markets will probably centre in a big-way on trying to quantify the impact of this dynamic. This will take some time to actually materialize. But you can bet the quants and other data crunchers of the world will be adjusting their models to try and predict their impact now.
    US-China conflict possibly the “new-normal”: For traders not-so resource rich, the matter becomes less about predicting the numbers, and more about getting a rational grasp on whether the trade-war will continue to escalate. Given the current circumstances, a bitter spoonful of pessimism may well be the conclusion. That’s because the trade-war, as has been repeated ad nauseum in the punditry, is not an economic issue, but a strategic one. To borrow from the classics, it’s a case of Thucydides-trap. China does not wish to compromise its inexorable rise; while the US is trying to force China to rise within the restrictive confines of the world-order it, itself created.
    The consequences of this new order: The intractability of such an issue means that, at the very least intellectually, a true resolution to the trade-war in the short-term in unlikely. Tariffs may come and go, but financial markets will have to deal with a world in the future where its two biggest economies are “at each other’s throats”. This new reality will probably be internalized by markets, which will move-on over time, and trade according to the market-fundamentals, determined by economic and corporate strength. However, as the economic cycle continues towards its end, the interest will be in how weaker global-trade steepens its descent, and compromises the markets’ fundamentals.
    Written by Kyle Rodda - IG Australia
  11. MaxIG
    Expected index adjustments 
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 13 May 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 RTY TSBK US 14/05/2019 Special Div 10 RTY RILY US 14/05/2019 Special Div 18  
    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. 
  12. MaxIG
    The headline news: The trade-war headlines are coming in thick-and-fast, with none of them truly substantial. Nevertheless, they have proven sufficient to belt market sentiment around, and dictate financial market activity, once again. A re-cap of the (dis-jointed) narrative is handy, for the benefit of context. Yesterday our time, markets trembled on news that, at one of his notorious “MAGA” rallies, US President Trump announced he thought the Chinese “broke a [trade] deal”. Stock markets fell. Then last night our time, markets bounced on news that US President Trump announced he has an “excellent” alternative deal with China, and he and China President Xi were in communications. Stock markets jumped.
    More volatility looks likely: It’s been something of a wild ride in financial markets in the last few days – perhaps made worse by the relative calm that has preceded this latest outbreak of trade tensions. The S&P500 is demonstrating much greater volatility now, with the VIX still elevated and trading around the 19-mark. More than likely, this patch of turbulence isn’t behind market participants yet. Of course, the next 12-18 hours will be crucial, as the 12:01AM (ET) deadline to strike a trade-deal nears. The balance of risks, at a cursory glance, looks as though one won’t arrive, and that means ****-for-tat tariff increases from the US and China tonight.
    Moves in markets sentiment driven: What this fundamentally means for financial market activity isn’t precisely known. Analysis on the subject seemingly relies on some crude and intuitive heuristics: the textbook suggest that tariffs lead to higher prices, lower consumption, less trade, and weaker economic growth. And rationally, this is probably true, and will manifest over time if tariff increases are implemented, and stick-around, long term. But for now, at least in the hard stats in the available financial data, the consequences of high barriers are yet to truly manifest in forecasts. The market behaviour witnessed this week is sentiment driven, meaning volatility will remain heightened while trade uncertainty exists.
    S&P500 closes above resistance: Given that the trade-war isn’t clearly manifest in fundamentals yet, the pullback in Wall Street stocks is more a function of market psychology rather than anything essential to the market, at least in the short term. Just as new all-time highs invited the herd into the market, and pushed the S&P500 into overbought territory, the re-inflammation of US-China trade tensions has prompted the herd to sell-out, dragging the market lower. Picking tops and bottoms, over whatever time scale, is a mugs game. But the fact the S&P500 has managed to close above 2855 support is a positive signal for market-bulls.

    Other market-risks being overlooked: Perhaps the biggest risk, given this preoccupation with the trade war currently, is that it ignores the more fundamental factors in the market. The biggest of these, as it purely applies to the longevity of Wall Street’s bull run, is of an interest rate shock from the US Fed. Granted, such a shock is a low probability. Regardless, given that the recent highs in US equities were engineered by central bankers’ dovishness, it pays to be privy to the relevant data - especially as it applies to inflation, which the Fed Chair Jerome Powell maintains is low only due to “transitory” factors.
    US inflation data tonight should be watched: That makes US CPI figures the crouching tiger of financial market risks this week. All of this hysteria related to what’s proven a mis-pricing of trade war risks has seemingly led to the ignoring of potential fundamental pressures. This isn’t to suggest that some sort of inflation shock ought to be expected from US CPI data. But based on economist estimates of the data, consumer inflation on a quarterly basis ought to print another robust 0.4 per cent tonight. One print won’t change the trend in the market; however, it could add to the story that market rate expectations are out of line with reality.
    AGB yields fall; weakens currency, strengthens stocks: Such an issue is unlikely to trouble the Australian economy. Inflation expectations have diminished greatly, and that factor, combined with concerns about Australia’s growth outlook in the fact of deteriorating US-Sino trade-relations, has seen 10 Year Australian Government Bond yields tumble to all-time lows this week. The fact has also driven the AUD/USD to multi-year lows in the past two-days; with both the lower yields and the lower currency a net-benefit to the ASX200. As far Aussie stocks today: SPI Futures are suggesting the index will open 9 points higher, ahead of a day highlighted by the RBA’s statement this morning.

    ALSO SOMETHING A LITTLE EXTRA TODAY: The Uber IPO tonight
    One of the more highly anticipated IPO’s in recent memory launches tonight: that of Uber Inc. In the last 24 hours, the company has reached a valuation for its IPO, publishing that it will float at $US45 per share. This equates to a raise in equity capital of about $US8.1b; and comes in at the lower end of analyst estimates.
    In the last month, IG has run a grey-market that’s allowed clients to speculate on what the market-cap will be for Uber Inc, come the close of it’s first post-IPO day’s trading. Using this order flow as a guide, IG’s grey-market price currently suggests that Uber Inc.’s market cap will come to about $US85b – well below the $US100b initially expected by equity analysts.
    Written by Kyle Rodda - IG Australia
  13. MaxIG
    Trade-headlines determining sentiment once again: Judging by last night’s price action, trade for the remainder of the week is going to very “headline driven”. It’s an obscure way of saying a little bit nervous, a little bit jumpy, and probably a bit irrational. The reason for this judgement comes from market participants’ reaction to some pretty shallow, and conflicting news-stories overnight. As most traders have become used to when it comes to the subject, trade-negotiation news drove sentiment during US trade. And unlike the night prior, where traders became hung-up on bad-news, last night’s developments proved a dead-rubber for the stock market.
    Trump administration claims a deal is afoot: In another episode of “will-they-or-won’t they”, probably more befitting of a 90s sit-com plot-line rather high-stakes global diplomacy, the leaks provided to the press from the Trump Administration were rather constructive, and far less belligerent than those received at the start of the week. The conversation began with a Tweet overnight from US President Trump, announcing to the market that the Chinese delegation “are coming to the US to make a deal”. Those comments were promptly backed up by Trump advisor Sarah Sanders who announced that the administration had received word from the Chinese that they were ready to make a deal.
    US equities still sell-off into the close: The news, surely by design, broke at the start of the US session, and set-off a mini-flurry of buying in Wall Street stocks. And that behaviour held for the most of US trade. However, in what’s probably a sign of a general bearishness in the market currently, the S&P500 sold-off in the final 30-minutes of trade, dropping -0.60 per cent from the intraday high. That sort of selling into the close is a sign of a seller’s market currently; and it backs up the view upside momentum is global equities has stalled, if not reversed, for now.

    Momentum pointing to downside for stocks: Not to despair just yet, because the US equity market is pulling back from overbought levels. Nothing substantially fundamental has changed in the market yet, in the sense there’s few hard facts to suggest equities are entering another correction mode – such as those experienced a couple of times last year. Granted, the fundamentals aren’t overly strong to begin with; it’s just for now the behaviour of the marginal buyer-and-seller is driving price. Just as momentum-chasers stretched the S&P500 after it hit new all-time highs, it’s their departure from it that is generating the pull-back being experienced.
    A spike in the VIX fanning the fire: How far this wave lower will go is a difficult task to predict – no one can categorically state they know that, of course. But after a very big run-up in the US stock market this year, some further downside as the market recalibrates looks quite possible, judging by the emerging price trend. There are several other factors shifting the market about too, brought about by the surprise deterioration in US-China relations. The VIX has spiked, as the trade-developments drives an unwinding of what was historically high short positions on the volatility index – a dynamic that could exacerbate any further unwelcomed surprises in the market.
    Safe-haven currencies rally; AUD battles below 70: The trade-war nervousness and the drawdown in the equity market has prompted a play into safe-haven currencies. The Japanese Yen has gotten the biggest run-on, but the US Dollar has also strengthened, helped out by a lift in US Treasury yields overnight. That’s brought about another dip in the Australian Dollar, which looks as though its cleared-out the buyers at the 0.7000 handle – and is beginning to make itself comfortable trading with a “6” in front of it. This was despite a brief rally during Asian trade yesterday, after flows headed the Aussie’s way, from the Kiwi-Dollar, after the RBNZ cut its cash rate.
    ASX to open higher; China’s markets of interest: The lead handed to Australian markets by Wall Street has SPI Futures indicating a roughly 8-point jump at this morning’s open. Considering the S&P500’s drop into the close, though, perhaps this doesn’t give the most reliable indicator of what sentiment ought to be on the ASX today. It’s a much lighter day on the economic calendar today than yesterday or Tuesday. One eye should be kept on what happens in Chinese markets, as traders there appear pulled between this week’s trade-war politicking, and the prospect that any escalation in the trade-war will necessitate new rounds of monetary stimulus from Chinese policymakers.

    Written by Kyle Rodda - IG Australia
  14. MaxIG
    Stocks sell-off in Europe and the US: Global equities appear in pull-back mode. Ignoring Asia’s solid-enough day, European and US stocks have tumbled. The Euro Stoxx 50 shed 1.78 per cent overnight, while the FTSE100 dropped 1.63 per cent, and the S&P500 has given-up 1.65 per cent. It looks as though just when one assumed the latest trade-war developments lacked true bite, the conflicts potential consequences have reared their head in price action. Trade talks this week take-on an even greater significance now. Stamped with the knowledge of how the herd is responding to the latest break down in US-Sino relations, traders will be hyper-sensitive to good or bad trade-talk news.
    Trade-war risk raises questions about fundamentals: It’s a part of why markets have behaved (quite) edgy overnight: trade-related news, and its all-important impact on market fundamentals, has proven had to quantify and predict. The last time trade-tensions were this high, commentators were wrangling with what the material impacts of the trade war would be. Would it derail global growth? How big of an impact would it have on inflation? What might it do to corporate earnings? There were few sufficient answers to these quandaries, and the trade-problem seemed to disappear as US-Sino relations improved last year. They’ll return to the fore now, with market participants no closer to and answer now than then.
    Stocks sell-off in the face of uncertainty: Those answers come with time, and it’s probably not the root of those questions necessarily causing the overnight sell-off, per se. In the short-term, where the vagaries of the market are overanalysed, and the day-to-day movements in the market are rationalized away, a simple dose of uncertainty is all it takes to move sentiment from something “bullish” to something “bearish”. The fact that market participants can’t answer some of the bigger questions relating to the trade war is worse than if they’d received uncomfortable answers to those questions. Faced with uncertainty, traders overcompensate for the lack of information by removing risk, and therefore assuming the worst.
    An overdue pullback? Hindsight is golden, and of course it makes a genius out of us all, but there were signs that the global equity rally has been getting long-in-the-tooth, anyway. And with last night’s relatively big sell-off, price action in US stocks is (for now) behaving as this is a healthy pull-back, rather than another correction. Indeed, all sorts of scenarios sit between those two extremes explanations, and the fortunes of global stocks for the rest of the week will probably manifest as one of them. But given the widely acknowledged disconnect between fundamentals and price, an adjustment in markets looks to be at hand.

    ASX to follow Wall Street’s lead: The SPI Futures contract is suggesting that the tumble on Wall Street will manifest across the ASX200 this morning. According to that measure, the index ought to give up about 67 points, come today’s open. It’ll likely be a broad-based day of losses too, given this information, as safety is sought, and profits are booked by investors. It continues a rather challenging start to the week for ASX bulls. The market was first harmed by the escalation in the trade war on Monday, taking the sheen off of economic growth optimism; and then was bottled yesterday afternoon following the RBA’s interest rate decision.
    RBA rate expectations legs the ASX: Mirroring the dynamic manifesting the world-over, Australian equities were undercut yesterday by the RBA’s decision to keep interest rates on hold, as the repricing of interest rate expectations pushed the marginal investor back into cash and bonds. It’s a dilemma for equity markets here, just like everywhere else: equity valuations have become more attractive for investors due to falling discount rates, rather than true profit growth. Furthermore, a natural lift in the Australian Dollar inhibited enthusiasm within the ASX, rallying towards the 0.7050 mark as traders priced-in a more hawkish RBA than what was expected.
    For the RBA, it’s all about jobs: The market is still expecting the RBA to more-or-less cut interest rates twice this year. Going into yesterday’s RBA meeting, that assumption was unlikely to reverse. However, it was all about the potential imminence of cuts, and with what was handed to traders from the RBA, bets on when cuts will happen has been deferred. There was plenty of detail in the RBA’s communications to the market in their statement yesterday, but the key point was this: the RBA acknowledges that inflation is low and economic activity is soft; however, while the jobs market remains tight, it sees no immediate need to cut interest rates.

    Written by Kyle Rodda - IG Australia 
  15. MaxIG
    A rocky start to the week: The first day of the week’s trade can be reasonably said to have ended – and it was a tumultuous one. US President Trump’s tweeting of new tariffs on the Chinese economy sparked a level volatility not experienced in the financial markets for several months. It certainly had the effect of waking some (perhaps) complacent market participants from their slumber. And although the panic has abated somewhat, sentiment has been dented again this morning, after an announcement from Robert Lighthizer this morning that US tariffs on Chinese goods will be increased this coming Friday.
    US trade showed greater equanimity: Wall Street was closed when this information became public. However, during US trade, the S&P500 progressively climbed over night, after gapping considerably at its open. On any other day, one would suggest that the action seen in US equities overnight was negative: the S&P500 is down just shy of 0.5 per cent, with market breadth a lowly 26 per cent. But considering the circumstances, along with lead handed to US traders from Europe and Asia, the price action ought to be viewed with a silver lining. The buyers in the market still seem to outweigh the sellers in the big picture, for now.
    Volatility is re-awoken: Volatility has spiked and remains elevated globally. That dynamic may linger for some time yet, too. Arguably, measures of volatility were mispriced anyway, with the VIX trading as low as 11 up until only recently. It’s at 15 now, after lifting above 19 at stages yesterday. The dust will settle this morning in Asia’s trade, despite this morning’s new trade-war developments. So much is being portrayed in futures markets: our ASX200 for one, after shedding 0.82 per cent in rapid fashion in yesterday’s trade, will regain 25 points at today’s open, according to the SPI Futures contract.

    Chinese stocks at the forefront: The real interest for macro-watchers today, though, will be how Chinese stocks perform. For reasons that need no explanation, they got whacked in Asian trade yesterday, with the CSI300 sustaining losses close to 6 per cent. The extension of this was an underperformance in risk assets everywhere. It was especially true for the Australian Dollar, which traded at an intraday low of 6963 overnight. Safe havens have naturally prospered in this environment, driving gains in high-grade government bonds, lifting currencies such as the Japanese Yen, US Dollar, and Swiss Franc.
    Letting the dust settle: For the discerning punter, today’s trade should reveal far more about the truth of the impact of US President Trump’s policies. The trade-war after all disproportionately impacted Chinese and European equities when trade-tensions were last this high. On top of this, it will be curious to see how participants in Chinese markets, who’d more-or-less priced out an escalation of a trade-war, approach equities. The turnaround in trade overnight (seemingly) came consequent to news that China would still be attending trade negotiations in Washington, with interest now as to whether this news alone is enough to settle bearish sentiment in Chinese markets.
    The RBA to seize focus this afternoon: All other news was practically washed out overnight by the reaction to US President Trump’s trade-war Tweets. But today, for Aussie traders, the RBA, at least momentarily, will be the centre of attention. For the first time in several years, market participants approach an RBA meeting with its outcome genuinely unknown. On the one hand, pro-cutters suggest that given the recent poor CPI data, and softer overall economic activity, the RBA should stick strictly to its mandate and cut rates. On the other hand, pro-holders possess a “wait and see view” suggesting more rate-cuts will yield diminishing (and insufficient) returns, anyway.
    What are the markets expecting? Interest rate markets are very marginally pointing to a hold decision from the RBA. Around 12 basis points of cuts are baked into the market right now. It’s expected to be a relatively volatile event no matter what: either the RBA cuts, and the market must rapidly price-in the extra 13 basis points of cuts not “in the market”; or they hold, and the market must price-out the 12 basis points of cuts. If the former proves true, the AUD and bond yields will likely tumble, and stocks should get a solid lift; while if the latter proves true, the inverse ought to occur. 

    Written by Kyle Rodda - IG Australia
  16. MaxIG
    Expected index adjustments 
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 29 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 UKX CRDA LN 29/04/2019 Special Div 115 STI CIT SP 30/04/2019 Special Div 6 SIMSCI CIT SP 30/04/2019 Special Div 6 RTY HCC US 3/05/2019 Special Div 441.6183515 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. 
  17. MaxIG
    A good end to last week; a rough start to this week: Markets are going to be digesting some conflicting information to begin the week. Wall Street ended last week’s trading with a boost, following another economic release, this time Non-Farm Payrolls figures, that could reasonably be dubbed “goldilocks”. However, the weekend proved to bring with it some tumult that market participants thought they’d left behind in 2018: an agitated North Korea has gone back to firing missiles into the ocean, and there’s been threats of higher tariffs from the US President on the Chinese economy. So, although the economic data delivered a small-dose of positivity, old risks have resurfaced to renew anxiety about the immediate future.
    US NFPs another “just right” print: Beginning with the good news for risk-assets: US Non-Farm Payrolls figures were met with a swell of bullishness on Friday night. After Thursday morning’s “less-dovish-than-expected” US Federal Reserve meeting, at which that central bank emphasized its belief disinflationary pressure within the US economy were “transitory”, traders had their focus-fixed on NFPs for signs that this bias may be true. Though not clear-cut, market participants had their fears allayed: the US economy added another whopping 263k jobs last month, pushing the unemployment rate down to 3.6 per cent, but wages growth missed forecasts, to print at 3.4 per cent on annualized basis.
    Markets dash inflation fears: It must also be said that the US labour market participation rate fell too, which tempered some of the market’s enthusiasm. Nevertheless, the thrust of the data was this: the risk of an inflation outbreak is low, it’s been inferred, and that was enough to reignite the bullishness that had been dulled by the Fed. Crucially, perceived lower risk of higher inflation, and therefore a hiking US Fed, in the short-term manifested US Treasury yields. They dropped across the curve, with the yield on the US 5 Year Treasury note in particular falling 5 basis points.
    A Fed hike considered no-chance: Interest rate traders have set their bets of a rate cut from the US Fed before the end of 2019 to a roughly fifty-fifty proposition. This is in fact lower than where implied interest rate probabilities have been in the recent past – a rate cut in 2019 has been priced as high as an 80 per cent chance. But as it pertains to riskier assets: the combination of strong growth, as expressed through jobs gains, coupled with market-measures of inflation expectations suggesting price growth below the Fed’s 2 per cent target, are pushing flows into US equities.

    Growth and consumer stocks lead Wall Street’s gains: Hence, the S&P500 added 0.96 per cent on Friday, recovering much of the losses sustained in the prior two-day’s of trading. Though volumes were below average, market breadth was substantial, with 83 per cent of stocks higher for the day. Arguably, the most telling feature of market behaviour post-US-NFPs was whereabouts on the sectorial map the gains were made. US tech-stocks are portraying investor’s appetite for growth, adding most (around 5 points) to the S&P500 on a weighted basis pm Friday. And the consumer discretionary sector was the best performing in relative terms, as real wages stay well supported in the US economy.
    Geopolitics re-appears as key market risk: Because of this lead from Wall Street, the last traded price in SPI Futures has the ASX200 adding 31 points this morning. However, the true extent of these implied gains has been thrown into question, after the weekend’s news flow hurled up a series of “bad” news stories. In an act that might be described as equivalent to a child “chucking their toys out of the pram” for attention, Kim Jong Un’s ordered the launch of new missile tests over the weekend. While last night, US President Trump has suggested increasing tariffs on China if no trade-deal is struck this week.
    Australian Dollar wears the brunt of “risk-off”: The immediate consequences of these developments has been a big gap lower in currency markets this morning – especially as it related to the Australian Dollar. Ahead of a week that will be significant for the little battler in its own right, the Aussie-Dollar has tumbled in early trading, to trade as lows as 0.6970 (the losses have been even greater in the AUD/JPY). Keep in mind Japanese markets are still on holiday, so liquidity is going to be thinner than it is ordinarily, and will exaggerate moves in financial markets. Market dynamics aside, the re-emergence of geopolitical risk will certainly drag on sentiment to begin the week.

    Written by Kyle Rodda - IG Australia
  18. MaxIG
    Expected index adjustments 
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 12 May 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 UKX ADM LN 9/05/2019 Special Div 16.4 STI UOB SP 6/05/2019 Special Div 20 SIMSCI UOB SP 6/05/2019 Special Div 20 MEXBOL GFINBURO MM 9/05/2019 Special Div 100 RTY COLB US 7/05/2019 Special Div 14 RTY TSBK US 14/05/2019 Special Div 10 RTY RILY US 14/05/2019 Special Div 18
    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. 
  19. MaxIG
    Stocks fall as markets adjust US rate expectations: Traders have gone about repricing a world without the same imminence of rate cuts from the US Federal Reserve overnight. US Treasury yields have climbed markedly, during the North American session in particular, dragging with it stock indices. The S&P500 has traded 0.21 per cent lower, as traders apparently take their profits and adjusted their forecasts in line with the new dynamic. The action seen in the last 48 hours has given undue merit to the “sell-in-May-and-go-away” maxim; but however shallow the saying, profit-taking from all-time highs, and at that, overbought levels, has (ostensibly) proven the rational course of action for market participants right now.
    The necessity of a pullback in US stocks: It’d be of little surprise to any clued-up investor or trader as to why the markets’ pull back has transpired. Leading into yesterday’s US Fed meeting, the risk was widely called, and very well telegraphed by pundits. There was a sense US interest rate expectations weren’t on par with reality. But the short-term vagaries of market psychology drove rational folk to buy into the market, chasing momentum, after the S&P500 hit its all-time highs. The giddiness is over now, and what is being witnessed is a sensible recalibrating of market participants’ positions, more aligned with current market fundamentals.

    US inflation the key risk, ahead of NFPs: The pull-back in US stocks ought to be transient, provided inflation and inflation expectations don’t blow-out. The risk of this happening is quite low, although market measures of implied inflation have shifted higher in the past 24 hours. In light of this risk, the major event in the next 24 hours will be US Non-Farm Payrolls data, with key wages growth component of the data to be of most interest. A big beat on this number could add further to bets of higher inflation, and less accommodative monetary policy from the Fed — and therefore threaten to exacerbate the current market sell-off.
    US Dollar showing few signs of weakness: If we were to see an upside surprise in wages growth out of the NFP data, then it would likely only add to the might of King Dollar. The Greenback lifted across the board last night, courtesy of the rise in US Treasury yields. With the US economy the only major, developed economy looking in anything resembling a healthy state just at present, it’s difficult to imagine anything but a continuation of the Dollar’s upward trend. By extension, of course, this does not bode well for the Aussie Dollar: once again the local unit flirted with life in the 0.6900 handle overnight.

    The other macro-stories, ex-US: In the interest of balance, the US macro-story, while clearly the most significant, wasn’t the only thing driving market activity overnight. Numerous other (albeit lower impact) events transpired, and shifted market pricing around modestly. European PMI figures were dropped, and they were generally better than expectations, leading to a relatively (and only relatively) good day for the DAX. While the Bank of England met, and kept interest rates on hold at 0.75 per cent as broadly expected, but cut its inflation expectations in the process for the UK economy.
    The ASX to recover some of its losses: This morning, SPI Futures are suggesting a 7-point lift to the ASX200 at the open, belying the down-day across global equity markets. The weaker Australian Dollar might have something to with this, with few other clear, positive leads apparent for the market. The jump at the open will do relatively little to erase yesterday’s tumble, which saw the ASX200 drop 0.59 per cent. It was a sell-off with quite a level of breadth and activity behind it, too: volumes were above average for the day, and market breadth was a meagre 33 per cent.
    Bank shares giveth, and bank shares taketh: In a reversal of fortunes from the prior day’s trading, it was the financial stocks that drove the losses in the ASX200 yesterday. Stripping 22 points from the index, bank stocks took a spill after NAB missed profit expectations, reported a bigger than expected narrowing of its net interest margin, and slashes its dividend from $0.99 to $0.83 per share. Backing on from ANZ’s results the day prior, NAB’s earnings cast doubt on the hope of a trend-reversal in Aussie bank shares, with Westpac’s results on Monday now the next major for bank-share, and ASX200 traders.

    Written by Kyle Rodda - IG Australia
  20. MaxIG
    A flat, but generally positive, night’s trade: Wall Street closed flat to slightly higher overnight, in a day of soft activity that might well be chalked up to the numerous event risks awaiting markets in the second half of the week. The key stories in European and North American trade centred around European growth data; along with the ongoing US earnings season. And on balance, belying the lukewarm day in global stocks, the news was relatively positive. European economic data broadly beat expectations, resulting in a lift in the Euro and European yields; and after the US close, Apple Inc reported, and is trading higher in post-market trade.
    Chinese economic numbers disappoint: The big news in the Asia region yesterday was China’s highly anticipated manufacturing PMI numbers. Recall: it’s been this data-point that has been the centre of fears about China’s economic slowdown – and has been used as the barometer for policy makers success in re-stimulating the Middle Kingdom’s economic activity. For one, yesterday’s print was underwhelming. Anticipated to print at 50.5, it came in at 50.1, stoking concerns that manufacturing in China could be slipping back towards a “contractionary” condition – that is, a print below 50, and forecasts a potential slip in activity in the broader Chinese economy.
    What’s true for developed markets is true for China: Revealing investors priorities, however: the weaker data prompted a run higher in Chinese stocks, as markets bet on the need for more stimulus from China’s policymakers. Just like it has been, and continues to be the situation in developed markets, bad news is good news for risk assets. Poor economic data and the subsequent belief it necessitates fiscal and monetary stimulus drives flow into the stock market; while good economic data and the subsequent belief it implies a removal of fiscal and monetary stimulus drives flows away from the stock market.

    ASX pulls back from 11-year highs: The ASX200 caught little of China’s rally yesterday, giving up 0.5 per cent during the session. It was an overall lack lustre day. Last week’s gainers, those in interest rate sensitive sectors like that of real estate and utilities, declined, as bond yields recovered some of their losses. And energy and materials stocks seemed to suffer from a fall commodity prices. Although numerous causes for the broadness of yesterday’s selling has been concocted, much of it seems a function of a small market pull back, after the ASX200 clocked its 11-year highs last week.
    ASX primed for bank earnings: SPI Futures are indicating today that the ASX200 will open 15 points higher this morning. A possible inhibitor of upside in the market this week is that we are on the cusp of our big banks’ confession season. The micro details of each bank aside, the macro outlook for the banks have improved recently, in response to a healthy steepening in bond yield curves. It’s well known the ASX struggles to prosper without the help of bank shares, so for market-bulls, some positive surprises from the banks this earnings could be the catalyst for a new push higher in the ASX200.
    The Fed: markets’ main event: All eyes now turn to the US Federal Reserve. They’ll meet tonight (AEST) and will all but certainly keep interest rates on hold. Market participants instead will be keeping tuned to what the Fed has to say about the outlook for the US economy. Despite reasonably solid economic data lately, markets are still pricing in a full cut from the Fed within the next 12 months. It’s this assumed dovish bent by Fed that’s in large part sustained risk-assets so far this year — and underwritten Wall Street’s record run in the past four months.
    Have markets mispriced US rates? The risk tonight is that the Fed is more optimistic than expected: a dynamic that could force the adjustment of rate expectations and take the steam out of global equities. A pressing need to move to anything resembling a rate hiking bias by the Fed is absent, of course; especially given last year’s market tumult in response to a “hawkish” Fed. But the core question is whether the presumption of such a dovish Fed is accurate. This fact is less certain and could be contradicted by the central bank’s communications with the market tonight, meaning a potential reshuffling in markets consequent to tonight’s meeting.

    Written by Kyle Rodda - IG Australia
  21. MaxIG
    Wall Street adds to its record-highs: The first day of the financial week has been done and won, and its resulted in another small victory for Wall Street indices. US stocks have added to their record highs overnight, as market participants become increasingly bullish across asset classes. The story wasn’t quite so rosy for markets in other geographies yesterday: Asian equities generally slid amid low activity, while European stocks were positive, yet tepid in their trading. Still, it seems, the one clear bright-light in global financial markets is in the US, with the question once more becoming: how long can this latest bull-run last?
    Momentum picking-up in US equities? There remains a general reluctance from market participants (to use an American idiom) to drink the Kool-Aid in this market. The fundamentals, though solid-enough, don’t seem to justify it entirely. Valuations aren’t stretched, but they are largely as attractive as they are due to discount factors, rather than true earnings growth. Nevertheless, perceptions are shifting, with some of that FOMO-money, long sitting on the sidelines in this rally, apparently making its way into US equities. The great momentum play stocks, are exhibiting some of the behaviour they did during last-years run-up, suggesting a growing exuberance in the market.
    US tech playing catch-up: As one with a clear enough memory may recall, the centre of last year’s flow chasing rallies and busts was the US tech-sector. Perhaps remarkably, and reassuringly for the bulls in the market, although valuations across the S&P500 has crept towards levels reminiscent of October last year, valuations in tech stocks have so far lagged the broader market, this time around. It’s a state of affairs that’s rapidly changing, but using the NASDAQ as the barometer, valuations in US tech, at 35:1 price-to-earnings, is still well below the eye-watering 48:1 and 53:1 P/E ratios registered in October 2018 and December 2017.  

    Treasuries fall, despite no-change to the rate outlook: Another area in which the eagerness to chase risk is manifesting is in the US Treasury market. Bond yields are ticking higher across the curve, without much of a fundamental macro-economic catalyst, as traders sell safe-haven assets to join the equity market rally. US 10 Year Treasury yields climbed around 3 basis points overnight, to trade around 2.52 per cent, and the US 2 Year note’s yield edged 1 point higher. Despite still looking very bent out of shape, the slight steepening of the yield curve speaks of a market increasingly comfortable in the long-term growth outlook for the US economy.

    Global inflation risk generally low: Part of this dynamic can be explained by the actions of the Fed, coupled with the low inflation environment the global economy is apparently mired within. This perception could change quickly, depending on what comes out of Thursday’s US Fed meeting. However, there’s little justification that it ought to, and this was backed-up by yesterday’s key macro-economic release: US PCE inflation figures. That release revealed once more that price growth in the US economy has continued to recede: annualized core inflation is at a stubbornly low 1.6 per cent, implying the Fed possesses little need to return to a rate hike bias.
    Financial conditions supportive; eyes on China today: So, little concern right now exists that financial conditions globally may tighten and strangle the risk-on run. It’s probably in part why the VIX remains so supressed: liquidity isn’t seen to be much of a problem. But though accommodative monetary conditions will continue to underwrite market strength, some semblance of fundamental growth will be required to keep the market-moving forward. And today, the next little leap forward will come in the form of Chinese economic data: the market moving Chinese Manufacturing PMI data is released today, with market-bulls eager to see whether the “rebounding Chinese growth” story still holds merit.
    ASX200 to open lower: The revelations contained within the Chinese Manufacturing PMI numbers will likely be the ASX’s key determinant of activity today, in the absence of any other tier-1 data. Otherwise, Wall Street’s flattish finish, that saw the registering of a new all-time closing high at 2943 for the S&P500, will translate into a 3-point drop at the open for the ASX200, according to the SPI Futures contract. Aside from these two variables, market participants will be keeping an eye out for Australian Private Credit figures this morning; while action in bank shares may also be worth watching, ahead of the half-yearly reports from the ANZ, NAB and Westpac.

    Written by Kyle Rodda - IG Australia
  22. MaxIG
    US GDP data capped-off last week’s trade: Trade closed last week on something of a puzzling note. The attention, from a macro-economic point-of-view, was fixed in on US GDP data. Amidst all the fears of slower global growth on one hand and hope for a nascent global economic turnaround on the other, the US growth figures were being viewed as a tangible insight into the cogency of each point of view. Ultimately, the data provided little support for one over the other – and perhaps even deepened the divide. The headline figure was good for the bulls, however below the surface, there was plenty for the bears to find vindication, too.
    US economy in a mixed state: The news flow, naturally and rightly, focused on the headline figure: against an expectation of a 2.2 per cent print, it came-in at a robust 3.2 per cent, reversing (apparently) a multi-month decline. The underpinning driver of the strength was in the exports and inventories component of the data, which greatly exceeded expectations. However, for market participants, there were some far more significant details in the fine-print to drive market action. Consumption was much weaker than expected, adding to concerns that the US consumer may be displaying some late-cycle behaviour; while the price-growth component revealed softening price pressures within the US economy.
    S&P500 rallies as US Treasury yields and USD fall: It’s for this combination of reasons that US stocks rallied, and the US Dollar and US Treasury yields fell, throughout Friday’s North American session. The S&P500 put in a solid performance, on heightened activity, as the confluence of better than expected earnings, stronger than expected economic growth, lower bond yields, and a weaker currency bolstered equities. In fact, the day’s positivity was so much so that the S&P500 managed to register another small milestone: it finished Friday’s trade once more by clocking a new record closing-high; and now sits 3 points shy of its all-time record intraday high of 2942.

    A “just-right” bowl of porridge? To employ something of a cheesy (fairy-tale themed) cliché: overall, the US GDP data was perhaps the “goldilocks” print for which market participants had been hoping. Economic growth, on the aggregate, is solid, while little justification exists for the US Fed to reinvite “rate-hike” considerations into their policy-mix. The favourable financial conditions that has returned the US stock market to new highs will remain; while there appears enough steam in the US economic engine to sustain earning’s growth, for now. And it’s fitting this view is consolidating now: its mettle will be tested by tonight’s US PCE inflation report and Wednesday’s Fed meeting.
    Traders still pricing in a cutting Fed: As it is the world-over: traders are seeing limited risk of inflation, and therefore interest rate hikes, in the US economy. Following Friday’s GDP report, US 2 Year Breakevens have continued to fall – trading now in the realms below 1.8 per cent. Incidentally, it is that figure that the last PCE release revealed US price growth to be. Expectations have built that tonight’s set of numbers will reveal a fall in inflation once again. And it’s clearly manifested in the implied probabilities of US rate cuts: interest rate traders have factored in 22 basis points of cuts from the Fed by the end of 2019.

    US Dollar falls; AUD rallies: Much like the action in stocks and bonds, currency markets have traded in line with the growth-positive, low rate-hike-risk theme. Of course, the most conspicuous manifestation of this has been in the US Dollar, which depreciated markedly on Friday evening. The ultimate beneficiaries of the weaker greenback were growth-tied currencies — meaning our Australian Dollar has bounced off its lows. On balance, it’s difficult to imagine the A-Dollar regaining too much ground while markets effectively price in two RBA cuts this year. However, data permitting, a modest foray back through the 0.7000 handle can’t be precluded right now.
    ASX200 to open today’s trade flat: For all of Wall Street’s heightened optimism, somewhat unlike last week, Australian stocks will forego its bullishness at the outset this morning. SPI Futures are indicating a 2 point drop this morning, backing up a similarly flat Friday. The session on Friday was largely a benign extension of Wednesday’s trade: interest rate sensitive stocks, such as those in the utilities and real estate sectors, found most buying activity. However, perhaps due to weakness in Chinese markets, coupled with a fall in commodity prices, the materials and energy sectors weighed on the index, resulting in a tepid gain of less than 0.1 per cent on Friday.
    Written by Kyle Rodda - IG Australia
     
  23. MaxIG
    A mixed day for global stocks: It’s been a mixed 24 hours for global markets. A series of conflicting messages are being delivered to traders, after the release of some major corporate reports in the past 24-48 hours. Market participants are truly in the meatiest part of earnings season now. The trader’s eye has been fixed on earnings from US tech and industrial giants yesterday and overnight; with the former, thanks to Facebook and Microsoft, beating expectations overall, but with the latter, courtesy of Caterpillar and 3M, undershooting consensus estimates. It’s all culminated in a high activity, but effectively flat, day for the S&P500, which has added trade 0.1 per cent.
    ASX200 seemingly to follow suit: Given the mixed lead delivered by Wall Street (and that of Asian markets yesterday, for that matter) SPI Futures are pointing to a slim 3-point gain for the ASX200 this morning. Two trading days in a row like that which was experienced on Wednesday may be difficult to come by, especially given the lack of a clear catalyst, for now. Perhaps its slightly academic, but the question for many now is how long this rally for the ASX200 can last. With new 11-year highs made, technical levels become difficult to ascertain. However, one useful guide may be the index’s multi-year trend channel: it suggests there remains room for the ASX200 to test higher levels from here.

    Wednesday’s CPI numbers: To jump back slightly to Wednesday’s trade, local market participants had their attention firmly fixed on Australian CPI numbers and that data’s implications for the AUD and RBA monetary policy. After a considerable miss last week in New Zealand’s CPI numbers, traders were wary as to whether comparable disinflation was emerging within the Australian economy. These suspicions proved valid: the numbers greatly underwhelmed: inflation printed flat on a quarterly basis, taking the year-on-year figure to 1.3 per cent. The data missed the consensus estimate for annualized price growth of 1.5 per cent – and came in markedly below the RBA’s target rate of inflation of 2-3 per cent. 
    AUD drops with AGB yields: Needless to say, markets reacted violently to the news, as traders rushed to reprice their outlook for Australian interest rates. The already sickly Australian Dollar dived over 1 per cent, tearing through a handful of resistance levels within the 0.7000 handle, to trade as low as 0.6964 overnight, before finding technical support. The moves in Australian Government Bond yields were probably even more remarkable: they plunged by as much as 15 points around the front end of the yield curve, and by as much as 10 points around the middle-to-back end of the curve, with overall yield bending into even greater inversion.

    Markets betting on two cuts from RBA: Naturally, the fall in the A-Dollar and bond yields was anchored in changing bets about what the RBA ought to do with interest rate policy – and perhaps more importantly, when they might do it. Traders have priced-in almost entirely 2 rate cuts from the RBA in 2019, with a cut fully priced in for the month of July. Remarkably, traders are also betting that the central bank’s meeting in May is more-or-less a “live” meeting. Implied probabilities currently suggest a fifty-fifty proposition that the RBA cut rates at that meeting – even despite the fact it will be held in the shadows of the Federal election.
    The USD also weighing on AUD: It’s worth noting too that, in the broader currency complex, weak domestic macroeconomic fundamentals isn’t the only factor enervating the AUD. The USD has touched two-year highs in the past several days, owing to several fundamental and technical drivers. Primarily, the greenback has been bolstered by further poor data out of Europe, which has seen the Euro test life in the 111-handle again. The other, perhaps more curious driver, of green back strength right now, is tied back to circumstance: with Japan about to head into an 11-day public holiday, traders are seeking USD denominated assets in anticipation of a period of (relatively) low liquidity.
    The ASX rally helped by CPI numbers: For all the bearishness when it comes to currency and rates markets, the ASX200 is thrived courtesy of the weaker Aussie Dollar and lower discount rates. The ASX had already followed through with Wall Street’s lead on Wednesday by the time CPI data was released. However, the extra leg up that came from the softer inflation numbers and the subsequent expectation of a cutting RBA was the extra fuel to lift the ASX200 to an 11-year high. Much like equity indices across global markets presently, momentum for the ASX is apparently tilted to this upside, even in light of what are currently mixed fundamentals.

    Written by Kyle Rodda - IG Australia
  24. MaxIG
    Expected index adjustments 
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 22 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 SUN AU 1/04/2019 Special Div 11.4286 AS51 ABC AU 2/04/2019 Special Div 5.7143 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. 
     

  25. MaxIG
    Wall Street clocks new highs: Wall Street achieved a milestone overnight: it registered an all-time closing high. It in some way punctuates one of the more bemusing runs in US equities, following (what felt like) the near-cataclysmic market correction at the end of 2018. The S&P500 closed at 2933 this morning – a mere 10 points from that index’s all-time intraday high. As had been expected, the catalyst for US stocks’ latest burst higher came directly from US reporting season. A series of companies, including the likes of Coca-Cola, Twitter and Procter and Gamble, beat analysts’ expectations, inspiring hope that the feared “earnings recession” isn’t confronting the market after all.
    Can the good times last? The natural question to ask in these circumstances is: how far further can this run? This is especially pertinent give that the last two occasions Wall Street hit record levels, it was followed by major market corrections. A familiar point too: the previous market pullbacks were characterized by the evacuation of momentum chasers from the market, after US indices began to test “overbought” levels, somewhat like they are beginning to do now. The growth and earnings outlook then, as compared to what it is currently, was also much more favourable, giving credence to the notion that this market isn’t being supported by strong enough fundamentals.
    Valuations are (relatively) favourable: Of course, it’s impossible to predict these things with any certainty; however, for US equity bulls, confidence can be taken from a few facts. The first, is that that valuations aren’t looking quite as stretched as they were in February 2018 and October 2018 when the last two corrections hit. As of today’s close, the S&P500’s price-to-earnings ratio of 19:1 is markedly below the 24:1 and 21:1 that defined those two market-corrections. Furthermore, yields are still attracting flows into stocks over other asset classes, with the S&P500 still boasting a relatively attractive 1.89 per cent yield overall.

    The core risk missing this time: As might be inferred from these statistics, the key risk absent now as compared to when the S&P500 hit its last record highs is the prospect of interest rate hikes from the US Federal Reserve. One might even suggest that the cause of and solution to Wall Street’s volatility has been the Fed. Recall: the February 2018 market correction was sparked by a surprise increase in US wage growth that forced bond markets to price in the greater prospect of Fed rate hikes; and the October 2018 market correction came subsequent to Fed-Chair Jerome Powell’s now infamous “a long way from neutral (interest rates)” comments.
    The Fed unlikely to remove the punchbowl: It was the unwinding, if not flat-out reversal of the Fed’s policy bias, that inspired the most recent ascent to all-time highs for the S&P500. And as opposed to the corrections of 2018, the chances that the Fed will “pull away the punch bowl” as this party is getting started is quite low. Instead, the muted inflation outlook, combined with economic and policy related realities, has led market participants to bet that the next move in US interest rates will be a cut. Hence, financial conditions are likely to be supportive of risks assets, with the key now ongoing economic, and corporate earnings growth.
    ASX to join the party? In light of Wall Street’s quick-sip of euphoria, SPI Futures are suggesting that the ASX200 will back up yesterday’s strong showing and add around 20 points at today’s open. Though missing true volume through the market, the ASX demonstrated signs of robustness during Tuesday’s session, with breadth solid at 76 per cent, every sector in the green, and the major energy, mining and financials stocks all adding substantially to the index. It was enough to push the ASX200 into and beyond the 6300 level, and clock highs not witnessed for Australian stocks since September 2018.

    Event risk centres on Australia today: A few supportive inter-market variables have underwritten the strength of Australian stocks this week: a tumble in the Australian Dollar, and Australian Government Bond yields. Arguably, it's in anticipation for today's headline event-risk that this has been so: quarterly local CPI figures. Though not as significant as labour market data to the RBA, the inflation numbers will offer some insight into the RBA's potential next move. Australian inflation, as it has been globally, has been stubbornly low. A matching or missing of today's 1.5 per cent estimate for CPI only adds weight to the idea the RBA's next move will be a cut.
    Written by Kyle Rodda - IG Australia
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