Overnight US market rose despite stronger than expected CPI numbers. The current sentiment coming from the FED though is that this will only be transitory and that inflation will fall back to normal levels. What the FED is actually aiming for is for inflation to stay at the 2% target range once it comes back down. Bond markets saw strong buying, which is a very bullish sign, the US 10-year yield has now dropped to 1.43% from 1.63% only a week ago.
The US market seemed ok with the higher-than-expected CPI ready pushing into an all-time high early in trade, but only to pull back to hold the all-time high resistance level. This leaves us in limbo once again waiting to see if the US market will continue high or not.
Investors will likely wait for the FED announcement next week; we will be looking for further guidance on what the FED has planned regarding tapering bond-buying and the timeline for an interest rate rise.
Melbourne reported zero cases yesterday as they lift restrictions today. There are still strict restrictions in place in Melbourne, but if the low cases continue, we will likely see another announcement early next week.
The XJO is expected to open fairly flat despite U.S markets rallying overnight. Our open this morning may be hesitant because it is a Friday and the U.S will have all weekend to digest and mull-over the CPI readings from last night. In addition, U.S futures sit flat this morning, giving little clue as to how they will continue to trade going forward. Finally, yesterday’s rally practically anticipated the move higher in the U.S with our market sitting near the top of the short-term consolidation range alongside theirs.
If we drift lower today, expected the new support at roughly 7260 to hold, and if we edge higher then our intraday highs are roughly 7340.
US shares closed higher overnight, with the flagship S&P500 index trading at all-time highs at points before pulling back. US inflation data, which many had been eagerly awaiting recently, showed that prices grew at a stronger rate than expected for the month of May, though this wasn’t enough to force US government bond yields higher, with many investors happy to write-off the current level of inflation as transitory. Additionally, a US unemployment report showed a larger amount of jobless claims this week than expected. There was broad based strength overnight, with seven of the eleven sector groups from the S&P500 closing higher, while the tech-heavy NASDAQ index rose to its highest level since April. Healthcare stocks were the strongest performers in the session, while Financials were the weakest.
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