Global Markets Overview – June 11, 2014

Global markets were in a holding pattern through European and US trade, with limited activity on the economic calendar. Perhaps the highlight was a further slide in the single currency, which helped keep equities afloat in Europe. However, emerging markets remain buoyant on the back of the measures China is taking to stimulate the economy. China's move to cut reserve required ratios for a number of regional and agricultural banks saw Asian equities mostly enjoy gains yesterday with the exception of Japan. The Nikkei dropped quite significantly as yen strength weighed on Japanese equities. USD/JPY had enjoyed a solid run over the past few weeks but this has stalled as investors see less scope for further easing.

Recent releases out of Japan have been quite strong and it is looking less and less likely any significant measures will be announced to counter the sales tax hike. Even a round of firmer US economic data hasn't been enough to push USD/JPY higher and this has seen the pair test the 200-day moving average again. This level comes in around the 102.30 region and it'll be interesting to see if it holds in the near term. We are currently calling the Nikkei up 0.2%, but if this level fails to hold on USD/JPY, then we could possibly see another negative day for Japan.

Flat open for the ASX 200

Ahead of the local market open, we are calling the ASX 200 up 0.1% at 5475. This is not impressive at all particularly considering the sharp reversal lower in yesterday's afternoon trade. The materials space will be quite interesting today and we might see some disjointed moves given the mixed performances in the commodities space.

Platinum and palladium miners could be in for a tough day after strikes in South Africa resulted in some downside in price action. Iron ore also extended its losses, while copper concerns on the back of its use as collateral for shadow banking are heightening. Gold was perhaps the biggest beneficiary of the stimulus measures announced by China and finally managed to recover some ground. Gains for the precious metal should support the gold miners today.

While there continues to be talk of iron ore finding a bottom, it is clear investors have lost confidence in the sector for now and selling into strength is likely to remain the preferred strategy.

Telstra looks like it could be in for a bit of a recovery in the near term as investors return to yield plays for some comfort. The stock's dividend yield had dropped to the 5% region on share price appreciation, but the recent share price weakness might encourage fresh buying. On the local economic calendar we have Westpac consumer sentiment due out at 10.30 AEST.

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