The Aussie dollar hit new seven week highs in offshore trading overnight, but a sharp 5% slide in oil prices has hit the newly rediscovered support for energy stocks. US copper prices hardly moved, and while gold rose, stockmarkets shed much of their optimism that generated the surge in prices last week.
Wall Street had another positive day, but trading was not bullish – more sporadic as the Columbus Day holiday cut volumes. Our market will start with a small loss for the second day in a row later this morning.
The Dow rose 47.3 points, or 0.3%, to 17,131.79, the S&P 500 added 2.46 points, or 0.12%, to 2,017.35 and the Nasdaq Composite added 8.17 points, or 0.17%, to 4,838.64.
Gold stood out with a three month closing high of $US1,164.50 an ounce on Comex for its highest settlement since July 6. That was a gain of 0.7%.
Iron ore prices edged higher overnight – up 1.1% to $US56.61.
The Aussie dollar hit a rate of 73.82 US cents overnight and was trading around 73.60 in early Asian trading, and is up 5% in the past month. In fact Bloomberg reported that it was the Aussie’s longest positive run since March, 2009.
Not even plans by Glencore to sell a copper mine in Australia (Cobar) and one in Chile had an impact on market sentiment or on copper prices (although Glencore shares did rise in London).
That was unlike last week when its plans to cut jobs and zinc production in Australia and Peru had a big positive impact on market sentiment – even though the estimated $US1 billion to be raised by the latest mine sales (if they sell) will be used to cut Glencore’s debt.
US share trading was affected by the closure of the bond market, banks and the government, including Securities and Exchange Commission, for the Columbus Day holiday. But that didn’t cause the weak trading in Europe where most markets, bar Germany, ended in the red.
US investors are awaiting the start of the bank quarterly reports tonight our time.
And offshore markets also ignored two other normally positive moves – the first saw InBev lift the price of its offer for rival brewer, SABMiller to more than $US100 billion. It was the third formal increase and will probably win the day.
And computer maker, Dell and its private equity partner/owners are making the biggest ever takeover the tech sector has seen with a $US67 billion offer for storage group, EMC.
Normally big takeover deals would send a positive message to markets, but not this time as reaction was hesitant.
Our market will start with a small loss this morning – around 10 points, yesterday also started with a small loss, but turned into something more substantial with a 0.9% slide by the close.
In fact local investors yesterday ignored a 3% plus jump in Chinese markets. That in turned followed positive comments from the country’s central bank about measures to help bank lending, and another rise in the value of the yuan which is now back to the level it was before the surprise cut inits value in mid August.
But this equanimity will be tested by the September month and quarter trade data from China to be released later today.
More gloomy news about the level of exports and imports could see this new market confidence tested.
In London, Brent crude futures fell nearly 5%, its worst daily performance since September 1 as the wheels fell off last week’s 9% price surge. In fact at one stage, Brent briefly dipped below $US50 in trading.
In New York, West Texas Intermediate futures dropped 4.7% to $US47.28 a barrel — its biggest daily drop in three weeks.
The cause was easy to find – a dose of market realism from Opec in its monthly production report which showed higher, not lower output in September. In fact production was close to 31.6 million barrels a day in September, up by 109,000 barrels a day from August.
That was not supposed to happen according to the bullish talk last week about the future of oil production and prices. Now for the latest US production data on Thursday, after the Chinese import figures later today.
