Yesterday’s 25% drop in Chinese export numbers really questioned the recent commodities price hike. BHP and RIO fell by 8.5% and 9.4% in London and Crude Oil weakened 3.4%, as uncertainty relating to supply cuts, hits the market. But is the recent 18% rally in iron ore simply a “blip”? Yes… for now….
Happy “Hump Day”…
The commodities boom quickly evaporated last night, following those weak Chinese export data…
A 25% fall in exports last month certainly didn’t help sentiment, with BHP -8.5% and RIO -9.4% in London overnight…
At the recent rally, we did manage to sell some call options to generate some premium for client, as we feel that yesterday’s 18% gain in iron ore was simply a “blip”, rather than a change in trend….
Overnight, US Stocks were generally weaker (Dow currently down 60 points), as “resistance” emerges at the 17,000 level.
What we really need to see is justification rather than speculation that the recent rally in equities is sustainable and global central banks will continue to provide further stimulus to the economy…
Crude-oil prices CLJ6, -3.83% tumbled Tuesday as traders bet that weekly data will reveal a fourth straight climb in U.S. crude inventories and as the market resumed its doubts over the potential for an output freeze.
In OZ, focus today will be on the energy and mining sector, which will likely continue to be sold down on the back of BHP and RIO’s weakness in London.
We expect the market to fall back to the 5,000 level, then rally as the RBA cuts interest rates next month
The SPI is down 34 points this morning
Niv Dagan is an Executive Director of Melbourne based boutique funds management and corporate advisory firm, Peak Asset Management (www.peakassetmanagement.com.au). He is also a regular financial commentator on Sky Business.