The 56 Billion Dollar Question
After a resource based panic in the Asia Pacific region, European and US markets have disdained the weak impulse and rallied into the US close. Oil prices are higher, as are industrial metals. The key issue for the Australian share market today is whether this rejection of the sell off will see some of $56 billion of value destroyed yesterday restored in trading today.
The company at the heart of the rout, Glencore, vigorously defended its solvency overnight. Resource bears were not helped by the Investec analyst who made the original Glencore call. In a television interview, he appeared less strident about the company’s prospect. Glencore shares rallied 17%. The sell-off occurred against a back drop of growth concerns centred on China. This may slow activity ahead of the release of China manufacturing, services and composite PMIs tomorrow.
Local building approvals data is estimated to show a fall of 2% for August, dragging the annualised rate down to 7.4%. Given the volatility in this series, a read well away from consensus is required to spark a reaction.
After a night of commodity related pressure, the AUD has bounced back towards 70 US cents after touching lows around 0.6932. Any further resilience in commodity sentiment could see further gains.
Frequently Asked Questions about this Article…
The recent $56 billion value loss in the Australian share market was primarily due to a resource-based panic in the Asia Pacific region, which was exacerbated by growth concerns centered on China.
Glencore responded to the market rout by vigorously defending its solvency. This defense, along with a less strident stance from the Investec analyst who made the original call, helped Glencore shares rally by 17%.
Despite the market sell-off, oil prices and industrial metals saw an increase, indicating a resilience in commodity sentiment.
The Australian dollar initially dropped to lows around 0.6932 US cents but bounced back towards 70 US cents, showing resilience in the face of commodity-related pressure.
Local building approvals data is expected to show a fall of 2% for August, which would drag the annualized rate down to 7.4%. However, due to the volatility in this series, a significant deviation from consensus would be needed to spark a market reaction.
European and US markets largely ignored the weak impulse from the resource-based panic and rallied into the US close, showing a strong recovery.
Growth concerns centered on China could potentially slow market activity, especially ahead of the release of China's manufacturing, services, and composite PMIs.
Further resilience in commodity sentiment could lead to additional gains in the Australian dollar, as it has shown a tendency to bounce back from lows.
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