Ninth Straight Session And Counting

Published by City Blaster on Thu, 14/03/2013 - 10:54 in
pope francis

Daily Market Commentary for March 14: For the ninth straight session the Dow closed higher. That’s not only impressive but also the best run since 1996. Positive retail sales data helped the party.

Economic data has been light this week in terms of amount but luckily was strong in terms of quality yesterday. In the US retail sales rose more than expected and helped equity markets rise, even though in a moderate pace. But, with eight positive sessions already recorded, it’s not a surprise that even the most bullish of investors starts thinking about at least a small correction may be on the cards.

In Australia, employment data showed strong numbers which helped the Aussie rise from behind 1.03 to more than 1.0350. The Australian economy has been under trouble lately and the Aussie lost some ground this year. With the prospects of RBA cutting on its key rate, investors have been jumping out of the high-yield Australian currency and looking for other alternatives. Not even a broad demand for riskier assets helped the Aussie. In fact, if we look at the dependence Australia has from Chinese imports (around 30%) and from iron ore in particular (more than 50% of exports to China), we have reasons to be concerned with the economy over the next few years. With China trying to avoid a credit bubble and changing its investment-driven to a more consumer-driven economy, demand for commodities will drop, and with it, the trade balance of Australia will deteriorate. I believe the Aussie will have hard times ahead and may return to levels below par against the US Dollar and near 2.00 against Sterling. But if you’re trading the Australian Dollar don’t be too concerned with this as this is a medium to long term adjustment rather than a short term expectation, so during the next few days the trend higher may still be intact and boosted by the job market.

Today starts another EU Summit which will last for two days. Italy will be the focus but again don’t expect much coming from it, if anything.

And last, we have a Pope again. The chosen Pope Francis, Jorge Bergoglio, comes from Argentina. A man who is said to be close to the poor may help change the European view on solidarity and help change focus from debt to growth and employment.