Investor sentiment teeters on a knife-edge

September 3, 2015

It has been a choppy day for equity markets in Asia, with mixed results. China and Hong Kong are offline today, creating thin conditions and leaving investors without a major gauge of overall investor sentiment. Turmoil in Chinese stock markets and concern about its growth prospects have been at the forefront of investor sentiment lately, so markets are somewhat lacking overall direction today.

The Nikkei is benefiting from a weakening of the yen in the last couple of days as risk appetite has slowly returned, but it has only regained a very small percentage of its lost ground. The Nikkei 225 is still over 10% off its recent highs just below 21,000. It’s not surprising that bulls remain cautious, largely because even a small hiccup in this environment could easily spark another feeding frenzy for bears.

In Australia, the ASX 200 is nervously hovering above 5,000 and is down over 1% at the time of writing. Investor sentiment is being soured by dismal local retail sales numbers which show activity at the ground level in the economy slowed 0.1% in July, completely missing an expected 0.4% gain. This latest set of disappointing economic numbers out of Australia is adding to an already gloomy attitude. Yesterday’s soft Q2 GDP numbers have sparked increased speculation about the end of Australia’s recession-free run.

ASX 200 hovers above 5,000

The ASX 200 briefly dipped below 5,000 late last month, before rallying to resistance around 5,300. Now the index is heading back to 5,000, a break of which could send bears into a feeding frenzy. Below 5,000 we’re watching 4,890 and then 4,655, but such a mauling would likely need to be backed-up by a further souring of global risk appetite.

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