Commodities Bloom

Australian shares look set to record their seventh straight day of gains as surging commodity prices lift resource shares and broader sentiment. An AUD approach to 75 US cents is clear evidence that "risk on" remains the order of the day, at least until the release of China trade data later in the session.

By Michael McCarthy · 8 Mar 2016

By Michael McCarthy ·
8 Mar 2016

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Australian shares look set to record their seventh straight day of gains as surging commodity prices lift resource shares and broader sentiment. An AUD approach to 75 US cents is clear evidence that “risk on” remains the order of the day, at least until the release of China trade data later in the session.

Iron ore leapt 19% in overnight trading. Copper and oil jumped too. The conundrum for investors is that gold also rallied, suggesting the moves are not just about improved industrial sentiment. While modest USD weakness is a part explanation, it appears short squeezes are contributing to the gains. Regardless, Australian resource shares could add to already substantial recent rises.

The banks as a group are today’s litmus test. The Australia 200 index is likely to open at important technical resistance just below 5,200. If global sellers add to China proxy hedges by selling index futures, the lack of specific bank support today could see the sector in the red, despite a positive market. On the other hand, further bank share price recovery could indicate the bears are heading into hibernation.

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Frequently Asked Questions about this Article…

Why are Australian shares experiencing gains recently?

Australian shares are seeing gains due to surging commodity prices, which are boosting resource shares and improving overall market sentiment.

How is the Australian dollar performing in the current market?

The Australian dollar is approaching 75 US cents, indicating a 'risk on' sentiment in the market, at least until the release of China trade data.

What commodities are contributing to the recent market surge?

Iron ore, copper, and oil have all seen significant price jumps, contributing to the recent surge in the market.

Why is gold also rallying despite the rise in industrial commodities?

Gold is rallying alongside industrial commodities, suggesting that the market moves are not solely based on improved industrial sentiment but may also involve factors like USD weakness and short squeezes.

What is the significance of the Australia 200 index's current position?

The Australia 200 index is opening at an important technical resistance level just below 5,200, which could influence market movements depending on global seller actions and bank sector performance.

How might the performance of banks affect the Australian market today?

Banks are acting as a litmus test for the market. If they lack support, the sector could see losses despite a positive market. Conversely, a recovery in bank share prices could signal a retreat of bearish sentiment.

What role do short squeezes play in the current market conditions?

Short squeezes are contributing to the gains in commodity prices, indicating that the market dynamics are not just about industrial sentiment but also involve speculative trading activities.

What should investors watch for in the upcoming China trade data release?

Investors should monitor the China trade data release, as it could impact the current 'risk on' sentiment and influence the performance of Australian shares and the broader market.