A nervous market waits on building approvals data and China’s PMI

Lower commodity prices and a downdraft in US markets look like delivering a weak opening for the stock market this morning.

Lower commodity prices and a downdraft in US markets look like delivering a weak opening for the stock market this morning.

The apparent emergence of a new downtrend in spot iron ore prices over recent days is ratcheting up concerns about the viability of higher cost miners. It’s also leading to renewed nervousness about growth prospects for the Australian economy. With iron ore accounting for around 20% of exports, the terms of trade is potentially under pressure again.

The latest weak session in US stocks reflects a market caught between the constraints of current high valuations on the one hand and low interest rates on the other.

There is potential for market sentiment to be influenced by both the Australian Building Approvals data and China’s official PMI for March. Strength in housing construction is one of the predicted bright spots for the Australian economy in 2015. While monthly building approvals data is volatile, a weak figure today will help fuel mounting expectations that declining iron ore prices will see the RBA cut rates next week. Similarly, China’s PMI figure could either fuel or arrest current downward momentum in the resource sector.

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