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.

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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