A steady open looks likely for the ASX 200 index this morning as investors assess a large number of company reports.
The rally in US stocks last night will not be much help today. It was essentially a catch up on global markets, which had rallied over the US long weekend.
The oil market’s reaction to the announcement of a production freeze by the Saudis and Russia was understandably negative. However, to the extent that this is “the beginning of a process” as described by the Saudi Oil Minister, markets will have a watching brief on further developments. Against that background, rumours of further meetings and initiatives could again be a source of volatility in coming months.
In the meantime an oil production freeze at current levels will have no impact on the near term supply balance. This explains the oil’s decline following yesterday’s short covering rally when the Saudi/Russian meeting was announced. There will also be substantial practical difficulties in implementing or extending this agreement especially since Russia has indicated that it is conditional on other nations agreeing to participate.
News of strong growth in Chinese aggregate financing was taken as a positive for near term growth prospects yesterday. However, this may be tempered by the possibility that the jump in domestic credit could be related to a shift out of FX loans due to concerns about currency fluctuations as well as to a traditional surge in New Year activity.