Despite screaming headlines in various Australian business dailies, commodity prices rallied overnight. Oil jumped more than $2 per barrel, and gold slammed through the U$1200 mark, rising $21 in the session. These dramatic lifts should see Australian resource shares on the front foot today. Futures markets are indicating a lift of around 0.5% at the open, but positive momentum could see further gains.
A commodity focus means today’s trade balance release could have a more significant impact than usual. The effect if lower commodity prices is offset to some extent by a weaker AUD – while exporters are receiving less USD for their commodities, they are receiving more AUD for their USD. The balance of these conflicting currents in February will be laid bare late in the morning session, and a weak number has potential to derail a likely positive start.
The other key factor in trading today is a lower AUD. Falls overnight have the AUD sitting around US 76 cents and 91 Japanese yen, levels which have attracted international support for Australian shares in the recent past. These may not drive prices higher, but should at least put a floor under the market performance today.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.