Weak leads from international markets overnight ensured the local index started under pressure, and it very much remains this way at midday.
US and European markets fell as growth trepidations returned to the fore. Weak data out of China and Japan highlights the current polarisation occurring within global markets. On the one hand, the US economy is on the up, along with its currency, and is flirting with interest rate hikes. On the other, the rest of the world is struggling to make traction, with monetary stimulus the only apparent remedy. In recent times, market action has reflected the toing and froing between these opposing themes, but on this occasion, global weakness reigned.
Locally, the continued plunge in commodity prices is hurting our index. The dramatic dive in the price of oil overnight has mugged the Energy sector. Likewise, further falls in the iron ore price has the Materials sector deep in the red. Right now, the naming of BHP’s spinoff company, South32, seems apt.
Adding to the gloom, this morning’s NAB Business Confidence figure have disappointed, coming in at a read of 1, compared to last month’s read of 5. This is the fourth consecutive decline, which doesn’t bode well for the local outlook, or sentiment in general.
The local currency is heading the same direction as the index, losing circa 35 pips after this morning’s NAB Business Confidence release. It last traded at 0.8261 USD.For further comment from CMC Markets please call 02 8221 2135.