A night of selling on international markets suggests that some commodity markets may be entering another capitulation phase as prices in oversupplied commodities continue the process of adjusting to levels that will force production cuts. Investors in resource stocks are likely to be unsettled by news that the US oil price fell another 1.5% last night while copper was down around 1.8% on US markets. News that Brazilian iron ore miner, Vale, beat production expectations with a 7.5% increase in production compared to the June quarter last year is also a negative for shareholders in Australian iron ore stocks.
The release of China’s flash manufacturing PMI indicator today will be another focus for resource investors as they seek to get a handle on the outlook for China’s economy and demand growth for commodities.
While US indices provided a weak lead for the broader stock market today, this may be offset by news that Amazon released a strong profit report after the market closed.
One of the keys to performance of the ASX 200 index today is likely to be whether the big yield stocks like the major banks attract buying from investors rotating out of the resource sector. The outlook for banks may not have been helped by yesterday’s news that ANZ has increased its mortgage rate for landlords underscoring the fact that regulatory risk management comes at a cost, in this case to landlords and tenants.For further comment from CMC Markets please call 02 8221 2137.