Oil takes over as the worry of the day
As fears about a rapid Yuan devaluation ease markets now turn to fret over potentially deflationary pressures as oil plunged to new six year lows overnight. Stronger than forecast US data did little to lift spirits, and US markets finished flat despite significant European rallies. Rallies in copper and iron ore may provide a silver lining for local trading.
Statements from the PBoC that talk of a potential 10% devaluation of the Renminbi is “ridiculous” have calmed talk of “currency wars”. However, pressure on oil prices may not only turn around yesterday’s market leading performance by energy shares but also spark concerns about deflationary effects where growth prospects are also in question. While gains are possible across the Asia Pacific region, trading is likely to at least start in cautionary mode.
The first full week of results in Australia is painting a modestly positive picture, enhanced by improved trading updates from James Hardie and Automotive Holdings this morning. Traders will no doubt keep a wary eye on this morning’s Yuan rate fix, but attention will likely turn to a speech from RBA assistant governor Kent as he discusses recent changes in employment conditions. Investors will seek the RBA’s understanding of the surge in participation and its implication for interest rates.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.
Frequently Asked Questions about this Article…
Oil prices have plunged to new six-year lows, sparking worries about deflationary pressures and impacting growth prospects. This has led to concerns among investors about the potential negative effects on the market.
Fears about a rapid Yuan devaluation have eased after statements from the PBoC dismissed talk of a potential 10% devaluation as 'ridiculous'. This has calmed concerns about 'currency wars', allowing markets to focus on other issues like oil prices.
Despite stronger than forecast US data, it did little to lift market spirits, and US markets finished flat. This suggests that other factors, such as oil prices and deflationary concerns, are having a more significant impact on investor sentiment.
Yes, rallies in copper and iron ore may provide a silver lining for local trading, offering some hope for investors despite the broader concerns about oil prices and deflation.
Investors are keenly watching the RBA assistant governor Kent's speech as it discusses recent changes in employment conditions. This is important for understanding the surge in participation and its implications for interest rates, which can influence investment decisions.
The first full week of results in Australia is painting a modestly positive picture, with improved trading updates from companies like James Hardie and Automotive Holdings, providing some optimism for investors.
Traders should keep a wary eye on the Yuan rate fix and be cautious about the potential impact of oil price fluctuations and deflationary pressures on the market. Starting trading in a cautionary mode is advisable given the current uncertainties.
For further comment and insights on the market situation, investors can contact Michael McCarthy at CMC Markets by calling 02 8221 2135.
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