After a stronger European trading session, a resurgent USD sparked selling in commodities overnight, culminating in a rout and weighing on share market sentiment. Commodity currencies were also slapped. Given the weakness in energy stocks yesterday, today’s session may surprise if investors turn their attention to potential profit stimulus from lower energy prices.
Oil prices tumbled to six year lows. Market focus at the moment is the potential deflationary effects of lower oil prices, and the signalling that aggregate demand is weak. At some stage however, there may be a collective awakening to the immediate impact lower input prices have on profits. The slide in oil prices is a “good” fall in that it reflects increasing supply rather than falling demand, and this is not yet reflected in share prices.
Readings on business and consumer conditions and confidence may influence local trading, but the regional news is the release of China trade data. These are the numbers that smacked the market in August, and any further weakening could bring panic.