Originally published by CMC Markets
Positive economic data releases in Australia and the US have helped steady markets with late buying support keeping the S&P/ASX 200 index on the right side of chart support levels yesterday.
Locally, the fact that April building approvals rebounded from March’s sharp drop provides comfort that the downturn in Australian residential construction, which will start from a high base, may only be moderate.
In the US, the expected 0.4% increase in consumer spending in April and the upward revision to March figures is consistent with the consensus view that US GDP growth will recover in the current quarter after a transitory dip in the March quarter.
Investors will now be hoping that today’s release of China’s manufacturing PMI can also hold the line after a softer read in April, which showed a decline in employment conditions.
Sentiment on Australian markets today could be influenced by how China’s steel and iron ore markets perform when trading gets under way after a two-day holiday. Prices were sliding at the end of last week and sentiment will not be helped if strong downward momentum continues today.
Support for bank stocks helped the ASX 200 bounce clear of its March and May lows yesterday afternoon. However, the extent of any recovery in bank stocks may be constrained over coming weeks as markets wait on APRA’s release of its revised position on bank mortgage risk weightings and capital requirements.