In what is now a regular event global markets sunk overnight and are pricing the worst of the US and China. According to this view, China continues to weaken towards implosion, but not far or fast enough to head off a lift in US rates. This anticipated combination of weak growth and tighter monetary conditions thumped share markets in overnight trading.
What started as a stronger USD pricing in the Asia Pacific region appears to have turned to outright bearishness, and local futures are pointing to further weakness today. Mixed messages from commodity markets add to the negativity. Industrial commodities such as copper and oil fell further, confirming deteriorating global industrial sentiment. However, gold also fell, suggesting at least part of the weakness in commodities is due to a higher USD.
A clue to today’s action rests with the Nikkei 225. The stronger USD and weaker commodity prices saw the ASX drop sharply yesterday. However, the Japanese market rose, as investors anticipated a weaker JPY and a subsequent repatriation of investment funds to Japan. A further rise today would suggest investors are simply re-pricing currency levels, rather than souring on investment prospects.
Naturally, the AUD is also under pressure, trading around seventy and a half US cents. Home lending data due this morning may hit share prices, if strong numbers further remove potential for an RBA rate cut.