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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