A lift in European and US share markets and a surprise surge in oil prices should lift the Australian share market today, perhaps tempered by the news that iron ore miner and steel producer Arrium entered voluntary administration this morning. Subdued trading volumes could continue as global investors remain cautious ahead of the US quarterly reporting season.
Energy shares may reverse from yesterday’s feather duster to today’s rooster following a 5% jump in oil prices. Traders learned overnight that US crude oil inventories dropped from record levels by five million barrels, defying expectations of a further increase. The ASX 200 Energy index is around 10% higher than its 2016 low, compared to WTI crude’s 40% rally. This may add valuation support to positive price momentum, and short sellers are nervous ahead of the opening.
The US reporting season starts in earnest next week. Consensus estimates are a fall of 8% in earnings across the S&P 500 index. The driver of weakness in the previous quarter was a stronger USD, and the falls in February and March may mean there is potential for positive surprise. The index is around 3% below key technical resistance. Should estimates prove too conservative, a rally through this point may start a global scramble for shares.