Sell Global, Buy Local

Selling pressure emerged across asset classes overnight. Many attributed the weakness in shares, the USD and bond markets to lower than expected result from IBM and market disappointment with Apple. However, this is “after the fact” reasoning, and a global trimming of portfolios after an eight day rally is a more likely explanation for the general malaise.

Apple executives must be wondering what it takes to spark a positive reaction to reporting. A 33% quarterly lift in revenues saw Apple shares fall around 8% in after-market trading, as investors focussed on disappointing iPhone sales and reduced forward guidance. A similar fall in IBM shares is more explicable, given the company’s report of its 13^th straight quarterly revenue drop. The subsequent pressure on US indices, and further after-market futures selling, sees Asia Pacific markets set to slide 0.5%-1% at this morning’s open.

Two local factors may provide support for Australian shares. Despite the general sell-off, commodity prices rose, mainly due to the weakening USD. Gold regained ground above U$1,100, and West Texas oil recaptured U$50. These moves may slow, or even reverse, the resource sector rout. BHP’s quarterly production report this morning will also draw attention, with copper write downs and lower coal production offset by forecast beating iron ore sales.

The second factor is the release of inflation data for Q2. Analyst are offsetting rising petrol prices against sluggish retail sales, to estimate further falls in core annual rates. Trimmed readings are forecast around 2.3 to 2.4%. However, surprise either way could bring support, with a higher reading suggesting a more buoyant economy and a lower reading sparking further interest rate cut speculation.