International news was mixed for investors last night. US stock indices are now all about the profit reporting season. A great session for Facebook yesterday followed soft a bad session for Apple the day before.
This whipsaw pattern may be repeated with Amazon missing estimates with its after-market report. The bar had been set high for Amazon with its stock rallying hard into the close. Given its status as a star performer in the online sales space and also that its results speak to the overall strength of consumer demand, even a modest miss on expectations will be a negative for stock market sentiment.
News that Vale, the big Brazilian iron ore miner is unlikely to pay a dividend has mixed messages for Australian miners. It’s a reminder of the inevitability that investors in this sector face significant cuts to dividend income. Vale’s dividend cut also reflects its balance sheet problems. This makes it increasingly likely that the Brazilian miner will ultimately need to cut some of its higher cost production. This could be good news for Australian miners, especially Fortescue which has often been seen as the likely swing producer.
Oil prices continued to rally last night as markets prepare for the possibility of positive news such as US production cuts and a weaker $US. OPEC representatives have denied knowledge of Russian plans to reach a production agreement but it’s doubtful that many traders saw recent reports of these plans as a serious near term possibility.
Markets will have a watching brief on the Bank of Japan’s meeting today, especially given its record of surprising the market. Traders are becoming less certain that any additional stimulus will have a significant impact on the Yen, especially given reduced expectations for US rate hikes. This will mean that any additional BOJ stimulus initiatives may have to be pretty substantial to influence markets beyond an initial announcement effect.