Resources to stem tide

Rallies in industrial commodities following the announcement of further targeted stimulus measures in China should help Australia shares back into positive trading later today, after a likely weak start that follows European shares lower. A US holiday and important data later in the week may see a subdued Asia Pacific trading session after yesterday’s strong rallies.

The announcement of one thousand new infrastructure projects in China has turned the outlook for industrial commodities. Copper, iron ore and oil are all higher this morning as markets factor in this most recent demonstration of commitment to stabilising China growth rates around 7%. The news should see energy and materials stocks lead the market. A focus on top operators and world class assets should see BHP and Woodside in the spotlight today.

Traders will watch the action in Shanghai today for any signs of follow through on yesterday’s stimulus inspired rally. However, the release tonight of US housing, manufacturing and durable goods numbers may see a cautious overall approach. The Australia 200 index sits just below a key level, and success or failure around 5750 could determine market direction for the next days and weeks.

For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.