The Australian market should start on a mixed note this morning after the rout on China’s markets settled yesterday, other markets rebounded and iron ore prices jumped sharply.
The spot price of iron ore leapt 9.9% to $US48.99 a tonne overnight, a day after it plunged 11% as the rot on the Chinese stockmarket accelerated.
But the steadying in China in the wake of another round of moves by regulators helped settle other markets – so oil prices recovered (but gold weakened) as the US fell (and the Aussie dollar jumped past 74.50 US cents).
The Dow rose 33.2 points, or 0.19%, to end at 17,548.62. The S&P 500 added 4.63 points, or 0.23%, to 2,051.31 and the Nasdaq added 12.64 points, or 0.26%, to 4,922.40.
All three indexes had earlier traded up 1% or more but there was a distinct easing in tone as the session went on.
For that reason, trading here will be weak, as investors await the opening of dealing in the Chinese markets late in the morning.
And with the fate of Greece to be decided this weekend, no one will want to be long or short (unless they are really game) until there’s a clear decision, which won’t come until early Monday morning, our time.
For that reason, trading Monday could be frenetic across Asia, starting with Australia.
Trading overnight in the share price futures contract showed a big fall in the front contract – September, but gains in others such as July and August. That will further confuse investors. The September contract was down around 20 points.
But it was the move by the Chinese government to curb the selling of shares in mainland China boosted the country’s major markets.
China’s securities market regulator had announced on Wednesday a ban on major investors and company executives selling shares in their businesses.
As a result, the Shanghai Composite Index rose 5.8% yesterday,the Shenzhen market was up 3.8% and the ChiNext was up 3%.
And despite no such ban being implemented in Hong Kong, the Hang Seng Index has closed 3.8% higher at 24,393 points, partially reversing the 5% plus slide of Wednesday.
The gains also followed a report by state-run Xinhua News Agency that Chinese police had visited the China Securities Regulatory Commission to investigate what were claimed to be “malicious short selling,” a move widely seen as more pressure to halt the rout.
In the real economy, Chinese inflation edged up 1.4% in June, but there was no let up in the producer price deflation gripping the country’s manufacturing sector – it fell at an annual rate of 4.8% in June, steeper than the 4.6% contraction in May.
That tells us that ahead of next week’s big data dump, the economy was sluggish in June, which is no change on what we have been seeing all year.
