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.
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.
For further comment from CMC Markets please call 02 8221 2137.
Frequently Asked Questions about this Article…
Lower commodity prices can lead to a weak opening for the stock market as they impact the profitability of resource companies, which in turn affects investor sentiment and market performance.
Iron ore prices are crucial for the Australian economy because iron ore accounts for around 20% of Australia's exports. A decline in prices can pressure the terms of trade and affect economic growth prospects.
US market trends can influence Australian stocks as global investors react to high valuations and low interest rates, which can create volatility and affect market sentiment in Australia.
Australian Building Approvals data can influence market sentiment by indicating the strength of the housing construction sector. A weak figure might increase expectations of an interest rate cut by the RBA, affecting investor decisions.
China's PMI is important for the resource sector because it reflects the health of China's manufacturing industry. A strong PMI can boost confidence in resource demand, while a weak PMI might contribute to downward momentum in the sector.
A rate cut by the RBA could stimulate economic activity by making borrowing cheaper, potentially boosting consumer spending and investment, but it might also signal concerns about economic growth.
Market volatility can affect everyday investors by creating uncertainty and potential fluctuations in investment values, which may require careful portfolio management and a focus on long-term goals.
Housing construction is a predicted bright spot for the Australian economy, contributing to economic growth and employment. Strong construction activity can offset weaknesses in other sectors like resources.
Call 1300 880 160
Start a chat
Schedule a call
