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  1. ASX: SPI futures are indicating an 11-point drop at the open, on the back of a day that saw the ASX200 close just shy of 0.6 per cent. The local session could be characterised as being somewhat lacklustre: the lion's share of the day's losses came shortly after the open, volume was below average, and market breadth finished at 26 per cent. Most sectors finished the day in the red, but naturally it was a pullback in bank stocks that contributed greatest to the markets falls. The materials space made a very humble play higher in afternoon trade it must be said, courtesy of a tick higher in iron ore prices, to sit near the top sectoral map by close. But at just shy 0.1 per cent, the day's recovery wasn't anywhere near sufficient to salvage the day for the ASX200. Financial sector: As it presently stands: where goes bank stocks so goes the ASX200. Not a revolutionary idea of course, given financials' weighting in the Australian index. However, with buying impetus missing across the ASX currently, combined with overall bearish sentiment, the effects of the bank-trade are much more pronounced. Having popped higher from oversold levels last week, the financial sector pulled back in this week's opening stanza by 0.76 per cent, accounting for about 14 points of the ASX200's total losses. The down trend appears still intact for the financial sector, auguring poorly, as one ought to infer, for the Australian stock market. Domestic risks: The fortunes of the big banks mirror many of the issues afflicting the Australian economy now. The weekend's Wentworth by-election outcome, which has delivered Australia another hung-parliament, is one; another is the possible regulatory crack following the Financial Services Royal Commission, coupled with the likely election of a hard-line Labor opposition come the next election. The most compelling explanation for the banks' weakness (at least yesterday) was another poor auction-clearance figure on Saturday. The local property market looks in a very shabby state as it stands, exacerbating concerns regarding the feeble position of Australian households and consumption in the broader economy. House prices and households: Granted cooling house prices have predominantly afflicted the Sydney and Melbourne markets, and prices remain elevated relative to historical standards. Amid higher global borrowing costs and by some measures unprecedented indebtedness, soft credit conditions in the Australian economy is a risk to the property market and households alike. Ultimately, the concern is whether with income growth slowing, savings dwindling and interest rates bottoming, the loss of the "wealth effect" will stifle demand in the economy even more. On balance, prevailing wisdom suggests that gradually improving economic fundamentals will cushion the ill effects of a property slowdown. However, the fragile state of the Australian consumer means the broader economy is increasingly vulnerable to external shocks. China: Of course, the biggest and most pertinent of possible external shocks to the Australian economy is the health of the Chinese economy. Trade on China's financial markets yesterday proved the power and willingness of its policy makers do whatever it takes to stabilise its markets and economy, particularly in the face of the escalating US-China trade war. Though it's never easy to say, volumes at 136 per cent of CSI300's Average-Volume-At-Time suggest that possible and massive intervention by Chinese policy makers was at play. This isn't to say that the entire flow of funds into equity markets came from (effectively) the state's pockets, more that whatever liquidity injected into them certainly stoked investors animal spirits. Overnight: China's powerful stance yesterday may in time be considered much akin to ECB President Mario Draghi's "whatever it takes" moment. The follow through in Chinese equities will be closely observed today, to witness what lasting impact the actions have. Overnight though, the carry over effect into the European and North American session diminished throughout the day, muted by other, more regional concerns. The Italian fiscal crisis took a temporary back seat and supported the narrowing of European sovereign bond spreads. However whipsawing sentiment regarding the likely outcome of Brexit led to another dip in the Pound below 1.30 and in the Euro below 1.15. The macro-fears weighed on European stock indices, dragging the majors by up to as much as -0.5 per cent. US session: The US Dollar caught a bid on last night’s macro-dynamic as traders modestly increased buying of US Treasuries. Gold dipped as a result, while in other commodities, oil climbed on supply concerns amid heightened tensions between Saudi Arabia and the West, and Dr. Copper was flat. Fundamental data was very light, with positioning underway leading into the massive ECB meeting and US GDP prints in coming days. North American equities saw an inversion of Friday’s theme: growth/momentum stocks, such as the FANGs, were generally higher, while the industrials-laden Dow Jones pulled back 0.50 per cent. The meaty part of earnings season is about to get underway in the next 24-48 hours – and may well dictate the theme in US equity markets adopt for the next several weeks.
  2. Expected index adjustments Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 22 Oct 2018. 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. No special dividends this week You can see the special dividends listed below. Unfortunately we do not have granular insight on the effect on the index for the index in question, however the below maybe helpful for some. Please note the dates below are the stock adjustments in the underlying individual instrument, whilst the index div adjustments are taken out the day before on the IG platform at the cash close. Index Bloomberg Code Effective Date Summary Dividend Amount AS51 APO AU 19/10/2018 Special Div 42.8571 How do dividend adjustments work? 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. 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. Market sentiment: Markets put in a mixed day on Friday. The results for global equities were generally poor, but absent were any violent swings in market activity. Individual regions traded -off apparently their own idiosyncratic drivers, characteristic of the diverse web of risks plaguing investors. Chinese indices were the stand-out, climbing more than 2.5 per cent, collectively, while European shares were generally lower, and US stocks were mixed. The mood is still edgy and dour for equities overall, with the weight of an extending list of risks stifling appetitive for riskier assets. There is a growing sense now that the many and considerable challenges facing market participants are here to stay; the matter hence becomes what level of willingness do market participants possess to stomach these and push equity markets higher. Risks-elevated: Uncertainty and instability isn't something novel for traders -- it's reigned for the last decade, as is well known. Yet it's proven now that there doesn't necessarily exist the confidence that, with the world's most powerful central banks turning off the liquidity taps, markets have the strength to sustain themselves. To be perfectly fair, 12 months ago, an all-out trade-war, the seeds for huge US twin deficits, a new Italian fiscal crisis, a Chinese economic slowdown, and major regional instability in the Middle East wasn't seriously expected. Without such interferences, perhaps the global economy would have been on stronger footing. It's pointless to speculate, however one can safely assume at this stage of the economic cycle, fundamentals should be presenting as much firmer. Economic fundamentals: The way in which this dynamic of higher risk and lower confidence plays out in Australian markets will be curious, as the final stages of the calendar year unfold. The US economy is booming and that will anchor the global growth story until the Fed's interest rate hikes begin to lean on the US economy. For us down under though, it's of lesser relevance than what transpired in the Chinese economy. The massive data dump delivered on Friday out of China was on balance underwhelming: headline growth was lower, while the other tier-2 data releases didn't salvage much. The Australian economy is ticking along relatively nicely it must be said, but our economic fortunes will stay wedded to China's almost undoubtedly, with the effectiveness of Chinese policymakers attempts to stimulate their economy the key variable. China: As far as markets go, equity indices seemed to benefit from the latest salvo by some of China's top economic officials about tackling any economic slowdown. In effect, policymakers came-out on Friday and implored market participants that they would ensure that a floor was placed under the recent sell-off across Chinese shares, in the interest of capital safety and financial stability. According to the slew of top-regulators who delivered the message, the massive tumble (30 per cent year-to-date) in Chinese stocks isn't reflective of the nation’s fundamentals, so support, it is argued, can justifiably be provided to align financial markets to the economy. Europe: Although this story did underline a late rally in Chinese shares on Friday, the benefits diminished, if not disappeared, in the grand scheme of things, by the time the European session got underway. Fizzled Brexit negotiations were parsed, but weren't a significant sticking point for European traders, who were apparently more relieved about a modest easing of tensions between European bureaucrats and the Italian government about that countries fiscal problems – even despite a rating cut to Italian debt. The EUR and Pound ticked slightly higher and JPY dipped as anxiety around European political stability and China's growth moderated slightly, while US Treasuries declined throughout the day leading into the North American open, losing its haven bid, edging the yield on the 10 Year note to 3.19 per cent. Wall Street: US stocks delivered little in the way of upside, slowed by activity in tech stocks again. Earnings season hasn't delivered the lift so far to US equities as hoped, stifled instead by the effects higher discount rates are having on stretched valuations in growth/momentum stocks. The Dow Jones did close 0.26 per cent higher – led by strong trade in consumer staples stocks and other defensives, along with financials, which gained on higher bond yields – however the more comprehensive S&P500 was flat. Worries that earnings growth leading into 2019 will be dampened drove the mood in US markets, with the key litmus test for this hypothesis possibly coming this week, as traders prepare for earnings reports from the likes of Alphabet, Microsoft and Amazon. ASX: SPI futures are indicating a 12-point drop for the ASX200 against this backdrop, ahead of a day which should be of interest given the possible impacts of a hung parliament in Canberra. In the recent past, when confronted with leadership challenges and the like, it’s proven a drag on the A-Dollar and the ASX200. The banks have borne the greatest brunt, probably due to the regulatory crack down and the perceived unfriendly stance towards property and share investors by the Labor opposition – though it must be said but this risk has already been priced in by investors. Friday’s trade saw the bank witness a continued pop higher from its oversold levels, keeping the ASX200 trading flat for the sustained. Slightly higher commodity prices may aid the Australian share market in the day ahead, however with little real impetus for rally today, perhaps a grind more-or-less sideways can be expected to start the week.
  4. Risk-off (again): Just when it looked like it was safe to jump back into financial markets, it was risk-off again overnight, as market participants dwelled once more on the myriad of risks facing them. There’s nothing entirely new in what has developed during the European and North American session: the same confluence of factors that has weighed on sentiment in markets have simply reared their head again. It’s probably what makes this situation all the graver, if not at the very least, highly gnawing. The anxiety riddling markets regarding the impacts of trade-protectionism, and the beginning of the end of the easy money era, can’t seem to be rationalized, inflating the magnitude of that issue – apparently inexorably. Fear is feeding on fear, making markets more attuned to the roar of the bears. Haven buying: As has been the case throughout the turbulent journey markets have traversed in the last week, it pays not to catastrophize; but the longer the weak sentiment lasts the more difficult it will probably prove to shake. As a trader, no matter the weather, opportunities abound for those willing to tackle them. It was havens again that attracted a bid higher last night, with gold (as old-reliable) catching the upswing. Carry trades were broadly unwound and kicked-down the likes of the AUD/USD to the 0.7100 handle, a dynamic causing the Japanese Yen to tick higher. 10 Year US Treasury yields maintained the line at 3.17 per cent, amid opposing pressure of haven buying and the carry-through of higher rate expectations, bringing the USD back into haven-vogue. Europe: European economics and geo-politics threw up some more major worries overnight, drawn out from the EU economic summit in Brussels. Markets over the extent of the week have priced-out an imminent Brexit resolution, pushing the Pound further into 1.30 handle and the Euro into the 1.14 handle. The greatest risk being priced in by markets however is renewed concern regarding Italy’s fiscal position – and Rome’s perceived belligerence towards Brussels’ bureaucrats. The EU slapped down Rome’s budgetary position, effectively labelling it untenable for both that country and the Union. European sovereign bond spreads widened more so in the last 24 hours, the greatest impact naturally being found in the spread between German Bunds and Italian BTPS, which expanded to almost 330 basis points – the widest margin since 2013. Global equities: The day on Wall Street, backing that up of Europe’s, has been a difficult one for investors, unaided by a session (of what’s being judged) of soft earnings reports. Two days of lukewarm company reports shouldn’t shift the dial of equity markets, but the hope that strong corporate profits would be the saviour from otherwise dour sentiment hasn’t yet eventuated. It’s forced market-bulls to doubt their conviction and fed the bears greater fodder to sell stocks. Consistent with recent themes, US big-tech and the NASDAQ (down 2.08 per cent) have generally led the sell-off on Wall Street over reluctance to go long growth companies, punctuating the shaky European session where the likes of the FTSE100 dipped 0.39 per cent, and the DAX shed 0.97 per cent – the latter in part due to a poor earnings report from market giant SAP. ASX yesterday: The lead garnered last night augurs poorly for the ASX200, reflected in an expected 66-point drop for the index according to SPI futures. The shame is that some semblance (or as close as can be found in these circumstances) of equilibrium appeared to return the Australian market yesterday. The tone throughout Asia trade, notwithstanding the struggles of Chinese markets, improved throughout the session, supported perhaps by the reported drop in the domestic unemployment rate, pushing the tepid Wall Street lead aside and allowing the index to recover early losses to close trade effectively flat for the day. Volume thinned as the session wore on to be sure, but breadth recovered to just shy of 50 per cent, revealing a willingness in market participants to acquire and spread some exposure across Aussie equities. ASX today: For all the contentment that yesterday engendered, in means little in the face of another day of likely heavy losses. The call in these instances is to assume the ASX200's (modestly sized) tech space, along with the health care sector, will lead losses. In saying that, the selling today risks being rather broad based, with a sell-off in oil prices and a wider dip in commodity prices a potential drag on the energy and materials sectors. The risks abound at this stage, but the major flashpoint will probably come mid-day when a massive data dump, containing GDP data, Fixed Asset Investment numbers and more, is released out of China. It provides a potential queue for investors to form a judgement on the Chinese growth story, and may prove to exacerbate or soothe investors’ fears regarding global growth. China: The bearishness in China is possibly the severest predicament of all – one that can only become worse today given the sweeping of bearishness through global equity markets. Depending on the index, Chinese equities have tumbled now by 30 per cent off this year’s highs, further entrenching a technical bear market. China’s equities overall look very oversold, with average PE ratios on the blue-chip heavy CSI300 circa 10:1, and presenting on the technicals just above an absolutely oversold reading. Simply, China’s equities can’t find a buyer, fundamentally due to potential fall-out of the US-China trade war. Undoubtedly, there are more complex and murky issues going on under the bonnet of the Chinese economic vehicle – the seemingly controlled devaluation of the Yuan by the PBOC apparently one – but a sell-off like this in spite of not that bad fundamentals suggests that investors can’t move passed the unknown whipped up the unfolding US-China trade war.
  5. Fed minutes: The week’s blockbuster event dropped over night: the release of the FOMC’s Monetary Policy Minutes. Equity markets have staged a tentative turnaround globally this week, but it has all been occurring in the shadows of what could be gleaned from last night’s Fed minutes release. When all is weighed up, the document reaffirmed the Fed’s hawkishness, revealing in-depth discussions ranging from cutting the word “accommodative” from the central bank’s language, to debating the possible need to hike rates above the “neutral rate”. A spike in volatility in financial markets wasn’t forthcoming on the back of the release, most likely because traders have been analysing it in a far different context to the one in which it was written: the meeting precipitated the recent equity market rout, and therefore appreciate circumstances have duly changed. US markets: However, the detail in last night’s minutes establishes the new environment within which future Fed policy discussion will take place – both for the Fed itself and amongst market participants. Reaction’s to the Fed minutes were relatively dull overnight, seemingly due to a reluctance from traders to jump-the-gun. Benchmark US 10 Year Treasury yields climbed modestly to 3.17 per cent and the US Dollar has taken advantage of a weaker bid on the Pound and Euro to climb slightly. Wall Street has suffered somewhat, erasing earlier gains on earning’s optimism to trade more-or-less flat-to-down for the day. The trade dynamic gives a curious impression for equity indices, a struggle between an apparent binary: a battle of forces, if you will, between optimism regarding solid earnings growth and pessimism regarding the impact of higher global rates. ASX yesterday: SPI futures have absorbed the lead on Wall Street and translated it (currently) to a 13-point drop at the open for the ASX200. No cause for alarm naturally, following a day where the Australian share market put-in a broad-based rally, to bust back within the upward trend channel it abandoned during last week’s equity sell-off. The ASX200 was registering an oversold reading on the RSI leading into yesterday, and a basic breadth reading of 74 per cent yesterday across the index recognized the sell-off was a tad overdone. The growth stock heavy health care sector ran with the lead of US big tech, to top the markets winners; while the only sectoral laggard for the day was the materials space – though that can somewhat be discounted by the unlucky timing of news from BHP regarding that company’s production downgrades. ASX day ahead: The day ahead will probably be a grind for the ASX200 given a weak Wall Street lead, but a hold within its trend channel, the bottom of which is around 5890, should be considered a win for the bulls. As always, the core strength in the market was underpinned by a bounce in the banks yesterday, a theme that may well continue today given the boost in global bond yields, but will likely fizzle in the weeks and months ahead. Activity around the Asian region was also settled, with Chinese equities for one catching a small bid on rumours that a further cut to China’s banks reserve-ratio-requirement may be imminent. The general relief-rally provided the fuel for a pop in the MSCI All-Asia Index, pulling that index away from its near-18-month lows. Aussie employment: The major event risk for Aussie markets today will be domestic employment data, out of which the ABS is forecast to print a steady unemployment rate of 5.3 per cent and an employment change figure of 15.2k. Only the most extreme outcome to this release will shift the dial in financial markets, especially that of interest rate markets, which continue to price in no-move from the RBA until early-2020. A sprinkle of volatility could be seen in the AUD/USD, as that pair hugs support just above 0.7100, but as always, will probably take a stronger lead from activity in the greenback. The spread between US 2 Year Treasuries and 2 Year Australian Government Bonds has narrowed of late, supporting the AUD/USD – however a repricing of interest rate expectations for the US Fed could widen this spread once again, potentially pushing Aussie Dollar back towards previous lows at 0.7040. Europe: Taking a glance at other risks entering the end of the week, European markets continue to remain a source of uncertainty. European bureaucrats have gathered for a multi-day summit in Brussels, to discuss the many seemingly intractable issues facing the continent. A Brexit deal this week is becoming a diminishing prospect and is showing up in pricing across the region’s financial markets. Adding to the tension is a slight spike in anxiety relating to the Italian fiscal situation, stoking fears of greater animosity between Europe’s leaders and a general instability the European Union’s political structure. Credit spreads have widened in sovereign bond markets as a result, weighing on the Euro and Pound (which also receded on the back of weaker CPI figures overnight), sapping strength from the major European equity indices consequently. Oil: Oil markets deserve a mention, given the human-tragedy that is defining much of the volatility found in the price of the black-stuff now. Fundamentals first: US Crude Oil Inventories surprised to the upside overnight, sending the price of Brent Crude to the $US80.00 per barrel mark. The real developments in all markets this week centre, however, on the alleged murder of journalist Jamal Khashoggi by the Saudi Arabian regime. Putting aside (the far more important) humanitarian implications of this situation, speculation has increased that the Saudi’s will exploit the leverage they possess in the form of their massive oil reserves to suffocate scrutiny on the subject by members of the global community. The details of the matter are far too nuanced to do justice to here, but the approach taken by global leaders to the Saudis and the subsequent Saudi response could prove one of the major determinants of oil price volatility moving forward.
  6. Wall Street: It's still early days, but investors appear to have regained their nerve overnight. The Asian session was tepid, to be sure, however a rally in European and US equities reveal a market that has found its appetite for equities again. As the existing narrative would imply, much of this was underpinned by a fresh appetite for rate-sensitive US big tech stocks, which according to the NASDAQ, rallied almost 3 per cent overnight, leading both the Dow Jones and S&P in the realms of 2 per cent higher. Implied volatility fell, but remains relatively high at around 18, so of course it would be foolish to claim the recent sell-off is authoritatively through. In stating this, commentary has shifted away somewhat from risks from rates and tariffs, to anticipating the fruits of what is expected to be a bumper reporting season – particularly after the likes of Goldman Sachs and Morgan Stanley posted impressive results early this morning. Europe: Likely owing to being largely oversold to begin with, the strong activity in European equities come despite a mixed-news day for the region. Like much of the global-share-market following last week’s equity rout, valuations and dividend yields within European indices have become more attractive this week, apparently enough to attract buyers into European share markets, even against doubts regarding the strength of the region’s upcoming reporting season. UK data provided some impetus for the bulls last night, after labour market figures showed that the unemployment rate held at 4.0 per cent and average earning climbed by an above forecast 2.7 per cent. The GBP/USD pushed-up just below the 1.32 handle on the news, however rate markets were more-or-less steady, as traders ostensibly tie their BOE rate-hike bets to the outcome of souring Brexit negotiations. Macro-backdrop: The boost to investor sentiment has infused equity traders with glimmers of confidence, though the greater appetite for risk hasn’t necessarily flowed through to other asset classes. Yields on US Treasuries were flat the last 24 hours, and despite climbing back above the 112-handle against the Yen, the US Dollar has failed to catch a major bid. Risk proxies like the AUD and NZD are a skerrick higher, with the Aussie Dollar floating about 0.7140, but gold is still finding haven buying, holding above a support line at $US1224. Moreover, proving that last night’s rally isn’t on the firm basis of greater confidence in global growth prospects, the Bloomberg Commodity Index edged 0.1 per cent lower, even considering a sustained increase in oil prices amid fears of lower supply because of a potential rift between the US and Saudi Arabia. ASX: The strong overnight lead has SPI futures pointing a 28-point jump for the ASX200 at this morning's open, following a day in which the Australian share market popped modestly higher from its oversold levels. The pop was reflected primarily in the activity in bank stocks, which rallied-off its own oversold reading, to collectively climb 0.55 per cent for the session. It was the materials space though that led the index higher, courtesy of a 1.4 per cent rally, despite the limited price gains in commodity prices yesterday. The day's trade establishes an interesting dynamic for the ASX200 today: the index fought unsuccessfully throughout trade to re-enter last week's broken trend channel. Futures markets has this transpiring at the open - a positive sign for the Aussie market. Regional data: Despite leading to limited price action across the region, Asia was littered with fundamental data yesterday. It was kicked-off early morning our time, upon the release of key New Zealand CPI data, which revealed stronger than expected consumer price growth of 1.9 per cent annualized for that economy. The algo-traders seemed to kick-in post the event, pushing the NZD/USD to the significant 0.6600 handle, before human rationality took over the pair lower, primarily on the knowledge that the data wouldn’t change materially the RBNZ’s interest rate views. Chinese CPI data was also printed yesterday, revealing an-expectation figure of 2.5 per cent – up from the previous 2.3 per cent. Once again however, although inflation is proving to be running a little hotter in China, trader’s judged that the news wouldn’t shift the dial for policymakers and promptly moved on. RBA’s Minutes: Of domestic significance, the RBA released the minutes from their recent meeting, with very little novel information to glean: “members continued to agree that the next move in the cash rate was more likely to be an increase than a decrease. However, since progress on unemployment and inflation was likely to be gradual, they also agreed there was no strong case for a near-term adjustment in monetary policy”. The reaction in market was one of the more muted from an RBA release, registering barely a reaction across financial markets. There were some interesting points discussed from a purely academic perspective in the document – some substance for the economics-nerds – especially relating to hot global asset prices, but nothing in the way of potential policy approaches from the central bank. FOMC Minutes and Reporting Season: Approaching the half-way mark for the trading-week, investors prepare for its pointier end. The major event will transpire tomorrow morning local time, in the form of the FOMC Minutes from the US Federal Reserve’s last monetary policy meeting. Of course, most of panic and volatility in global markets has come because of the Fed’s hawkishness in recent times, so market participants will peruse the details of tomorrow’s minutes for insights that confirm or deny fears about higher global rates. The broader market will also engross itself further in US reporting season, with Netflix (for one) posting what is being considered currently a better than forecast set of numbers, by way of virtue of a smashing of subscription growth estimates.
  7. Dead cat bounce in Asia? The ASX200 really couldn’t catch a bid yesterday. Most concerningly, it happened within a back drop of slightly higher volumes, showing that the sellers truly washed out the bulls throughout the day’s trade. The Asian region kicked-off the week sluggishly in general, unable and unwilling to run with the lead provided by Wall Street on Friday evening. The action in Asia prompted calls of a dead-cat bounce across global equities, something that has since been proven premature, based on the mixed day witnesses overnight in the European and US session. There just appears such a general reluctance for investors to search for value in the Asian region, despite the cold-hard numbers implying that pockets of it exists. Of course, P/E ratios and yields never tell the full story, and often lag actual changes in earning’s forecasts. Yet still, it does feel surprising, if not concerning, that the pockets of value that exist aren’t being seized by investors. Where are the buyers? It’s none-truer than on the ASX200, ahead of a day in which SPI futures are implying a 1-point jump at the open. The Australian share-market is presenting as a trifle oversold, with the daily-RSI stuck at multi-year lows, but downside momentum slowing-down only gradually. An absence of growth investors has stripped the Aussie shares of much of their bid, in-line with investor behaviour across most equity markets in the face of rising global rates, but again, the curious point – one that sets the ASX200 somewhat apart at present – is the missing search for underling value. In principle, it shouldn’t be too difficult to find: the sell-off across the local market has pushed yields just-shy of 4.50 per cent, while the project 1-year P/E ratio for the overall index is just above 14:1. It could be that a VIX above 20 is too higher to attract buyers at this stage – it will be an important litmus test for the market as to whether the ASX200 catches a bid when this unwinds. ASX Downside: To be fair, there are some considerable headwinds for Australian investors that may preclude them from behaving in the same fashion as their US or even European counterparts. The banks look ugly now – less so the hard numbers, but more from the superficial perspective that their brands have been (justifiably) diminished by the effects of the Financial Services Royal Commission. The best-yielders on the Australian share market are comprised in a big-way by the banks, so a lack of yield chasers in the market could come based on a sizeable reluctance to buy banks, even at apparently cheap prices. Following a day for the ASX200 that only saw the energy space catch-a-lift, entirely due to a since faded bounce in oil prices, buying impetus could be difficult to come by in the day ahead for the index, as support around 5800 returns to trader’s sights. RBA Minutes: It won’t change much the trading dynamic for Australian shares, but some useful insights regarding the Aussie-macro backdrop will be handed to us in the form of RBA Monetary Policy Minutes today. The interest generally will be directed towards any idea into the confluence of factors stifling the Australian households: financial stability will be one, a lack of wage growth another, so will high levels of private debt amid falling property prices, along with increasing retail interest rates, and (to a lesser extent) how global risks will affect the local economy. Despite the abundance of information, for traders, the dial probably won’t shift in rates market expectations that an RBA hike won’t come until 2020; nor in the AUD/USD, which will probably find support at 0.7100 even in the event of the most dovish tone to the minutes. China: Zooming out the microscopic lens for a moment: Australian financial markets are being served no favours by what is transpiring in Chinese markets. It was another rough day for China-bulls, who were legged by a fresh bout of selling after news broke that US President Trump – while riffing in an interview with CBS – may consider a fresh round of tariffs on the Middle Kingdom’s economy. Counter-arguments based on fundamentals aside, there seems to few willing to bet on a strong Chinese growth story at presetn. The comprehensive Shanghai Composite hit lows not registered since November 2014, while the narrower, blue-chip laden CSI300 languished around 2015 lows. This week will be illuminating for investors regarding whether the growth-outlook is indeed this poor for China, with CPI data day (for one) kicking-off a slew of Chinese fundamental data releases. Chinese growth, global growth: Perhaps it is so that the actions of Chinese policy makers are raising concerns about the country’s dubious growth prospects. Markets seem to interpret any policy intervention from the government or PBOC as a minor concession that things in the economy aren’t so great. The logic makes sense: there is the view that China’s economy is a touch opaque, and that Chinese data is prone to some level of manipulation. The offshore Yuan is manifesting signs of this scepticism, as the PBOC apparently conforms to the markets desire to devalue the Yuan, to potentially the key psychological barrier of 7.00. How far Chinese, and broader Asian indices, may fall before bottoming out is becoming an increasingly interesting question, as sentiment overrides the highly attractive valuations to keep the bears in control. Overnight: The underwhelming display in the Asian session translated into mixed European and US trade overnight. There was little depth of fundamental data, and though Brexit negotiations and fears of deteriorating ties between the global community and Saudi Arabia persisted, it wasn’t enough to incite panic in market participants. US Retail Sales disappointed slightly, but trade was defined more by a general lack of confidence in US investors: US Treasuries ticked higher and the USD dropped –benefitting gold again, driving its price temporarily above $US1230. A rotation away from growth stocks – that is, the tech-giants – continued by way of virtue of fears surround trade-wars and higher global rates, driving the NASDAQ lower, and the Dow Jones and S&P500 weren’t able to catch and hold onto their early-bid, selling-off in late trade as investors struggled to grasp whether generally higher growth-risks will manifest in the upcoming earnings season.