Data and non-resource stocks the key to the day's trading
Australian investors are surveying the familiar landscape of a positive lead from US equities that’s offset by concerns over weak commodity prices. The net effect of these conflicting influences looks like being a relatively firm opening.
Weaker oil prices overnight, serve as a reminder that, as with iron ore, corrective rallies tend can be disappointingly weak in oversupplied commodity markets until producers actually begin to reduce supply.
How the trading day pans out is likely to depend on economic data and on whether yesterday’s bargain hunting in stocks outside the resource sector such as the major banks continues today.
Better than expected data on business investment; inventories and net exports has set the scene for a solid GDP number today. However, upside reaction to a good number is likely to be tempered by expectations that while Australia’s output is improving; its income growth may be kept in check by declining terms of trade.
Today’s release of the HSBC China’s Services PMI also has the potential to influence market sentiment. China’s softer manufacturing PMI including weaker export orders has sharpened market focus on the need for the services sector to contribute an increased share of overall economic growth.
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Frequently Asked Questions about this Article…
US equities often set a positive lead for the Australian stock market, influencing a relatively firm opening. However, this can be offset by concerns such as weak commodity prices, which investors need to consider.
Weaker oil prices are significant because they highlight the challenges in oversupplied commodity markets. Corrective rallies in such markets can be weak until producers start reducing supply, affecting investment decisions.
Economic data, such as business investment and net exports, can significantly influence daily trading outcomes. Positive data can set the scene for a solid market performance, although reactions may be tempered by other economic factors.
Non-resource stocks, like major banks, are important because they can offer investment opportunities outside the volatile resource sector. Bargain hunting in these stocks can influence market trends and investor sentiment.
China's Services PMI can influence market sentiment by highlighting the need for the services sector to contribute more to economic growth, especially when manufacturing PMI is softer. This can affect investor expectations and strategies.
Australia's GDP data is significant as it reflects the country's economic output. A solid GDP number can boost market confidence, although expectations of income growth may be tempered by declining terms of trade.
Declining terms of trade can impact income growth by limiting the benefits of improved economic output. This can affect investor expectations regarding future income and economic stability.
Investors should pay attention to commodity market trends because they can significantly impact stock performance, especially in resource-heavy markets. Understanding these trends helps in making informed investment decisions.
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