Buyers scramble to take advantage of value opportunity
After another strong market open, investors are starting to wonder what the recent sell-off was all about. Another day of strong buying looks likely as investors scramble to take advantage of what looks like a value opportunity before it closes down.
Concerns about a possible softening in China’s economic growth have been offset by news of a sharp upward adjustment in US 2nd quarter GDP. From a growth point of view, the US Fed looks well placed to begin increasing interest rates in December. This will heighten interest in comments Fed Vice Chairman Fischer is expected to make over the weekend about inflation and whether this might still be perceived as a barrier to rate hikes.
This morning’s rally has been helped by the large jump in oil prices, which has contributed to strong support for BHP. At the end of the day however, investors will also be conscious that short covering after a protracted down trend is likely to have turbo charged last night’s sharp gain in oil markets.
While the strong gains of recent days are encouraging, the residual concern for traders is that these type of moves are not unusual after the sort of large declines that preceded them. Major stock indices are yet to break back through resistance levels making it at least possible that the latest rallies will prove to be no more than corrections in an ongoing period of extreme uncertainty and volatility.
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Frequently Asked Questions about this Article…
The recent surge in market activity is largely driven by investors scrambling to take advantage of perceived value opportunities following a strong market open. This is happening despite earlier concerns about China's economic growth, which have been offset by positive news about the US GDP.
The US economy is influencing global markets through its strong second-quarter GDP growth, which has increased expectations that the Federal Reserve may raise interest rates in December. This potential rate hike is drawing attention to comments from Fed Vice Chairman Fischer regarding inflation.
Oil prices are impacting the stock market because a large jump in oil prices has provided strong support for companies like BHP. However, investors are also aware that short covering after a downtrend may have exaggerated these gains.
Yes, investors should be aware that while recent gains are encouraging, the market remains volatile. Major stock indices have not yet broken through resistance levels, suggesting that recent rallies could be temporary corrections in a period of uncertainty.
China's economic growth plays a significant role in current market trends as concerns about its potential softening initially contributed to market sell-offs. However, these concerns have been somewhat alleviated by positive economic news from the US.
Upcoming Federal Reserve decisions, particularly regarding interest rate hikes, could significantly affect investors. A rate increase in December is anticipated, which could influence market dynamics and investor strategies.
Short covering occurs when investors buy back shares they previously sold short, often leading to sharp market gains. This can turbocharge market movements, as seen in the recent oil market rally, but may not always indicate a sustained upward trend.
Investors can stay informed about market changes by following economic news, such as GDP reports and Federal Reserve announcements, and by consulting market commentary from experts like those at CMC Markets.
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