Stock markets appear to have found a resting place for the short term. With little macro news to influence investor thinking, it seems likely that the ASX 200 index will have a relatively steady opening.
Traders are likely to adopt a wait and see attitude with a busy few days ahead in the final week of the reporting season. Markets, especially the Aussie Dollar are also likely to remain risk averse ahead of key data on private capital expenditure later this week.
However, there was some profit taking on Friday after a relatively good week. Traders will be alert to the possibility that Friday’s profit taking might follow through as today’s session unfolds.
The relentless growth in oil inventories proved too much for the brief bout of short covering that followed last week’s news of a production freeze by Saudi Arabia and Russia. With oil prices under pressure again on Friday, the energy sector is likely to be out of favour today as oil enters a period of seasonal weakness in demand that’s likely to extend through to May.
On the other hand iron ore continues to inch higher. While the consensus outlook for the medium term remains bearish, spot iron ore prices have rallied $10 since their November low. If nothing else, this is a short term bonus for beleaguered iron ore stocks and provides some buffer against future price declines. Spot iron ore prices are now running into the technical resistance of their July lows. A push up through this resistance around $50-$51 would be a further positive development.