Markets Lift on US Drivers

The problem with economic theory is that every now and then it describes market behaviour well, meaning economists cannot be discarded entirely. In a classic “price signal” response, oil inventory numbers released overnight showed a large draw on gasoline stocks for the week as US drivers took advantage of lower petrol prices.

The problem with economic theory is that every now and then it describes market behaviour well, meaning economists cannot be discarded entirely. In a classic “price signal” response, oil inventory numbers released overnight showed a large draw on gasoline stocks for the week as US drivers took advantage of lower petrol prices.

Despite the tenuous theoretical link between supply side driven lower oil prices and weakening share markets, they again moved in lock step overnight. Oil fell during European trading, and shares took a hit. The German Dax fell more than 3%. Similarly, US markets fell at their opening and the S&P500 was down 1.64%. However, the increased demand for gasoline changed everything. Oil reversed a 4% drop to move 1% higher, and stocks followed, with US markets closing with gains for the session.

This U-turn in sentiment sees Asia Pacific markets set for a positive day. The Australian market was hit harder than most in yesterday’s selling, and may therefore top the 31 point gain indicated by futures markets.

Australian company reporting season draws to a close very soon. Twenty–four top 200 companies will disclose results today, taking the total to 187. Alumina has disappointed, while Perpetual and Seek will likely receive market support after stronger reports. South 32, Village Roadshow and Blackmores may provide further reporting season highlights.

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