Yesterday’s news on Greek politics and China’s bond market came at a time when US and European stock markets have extended rallies and pushed valuations higher. This makes those markets vulnerable to downward corrections as profit takers act to avoid missing out. The situation in the local market is a little different, with the ASX 200 index already 5% below its November high.
Last night’s rally in oil, copper and gold is likely to steady the tone in resource stocks at the open this morning and help to provide a relatively steady start for the overall ASX 200 index. While shareholders in resource stocks may by now be wary about assuming that short term rallies in commodity prices signal the end of the longer term downtrend, the size of last night’s rally in gold might make this sector a bright spot for today’s market.
Woodside Petroleum will be a focus for investors given press reports that it is in the running to buy Apache’s share in the Wheatstone LNG project. Not long ago Woodside was being criticized as having no growth prospects. This may now turn out to be an advantage. Long term winners in the resource space tend to be those with the balance sheet capacity to strike at times of cyclical downturn, picking up good quality assets at lower prices. Investors will be hoping Woodside is able to drive a hard bargain.For further comment from Ric Spooner please call 02 8221 2137.