Markets Continue to Battle with the China Story
July 6th, 2009 by Cale McCulloch
Closing Data
| Current | +/- | % | |
|---|---|---|---|
| Dow Jones | 8280.74 | -223.32 | -2.6% |
| NASDAQ | 1796.52 | 0 | 0.0% |
| S P 500 | 896.42 | -26.91 | -2.9% |
| FTSE 100 | 4236.28 | 2.01 | 0.0% |
| Nikkei 225 | 9816.07 | -60.08 | -0.6% |
| US Bond 10 Yr | 3.5004 | 0.0038 | 0.1% |
| US Bond 30 Yr | 4.3247 | 0.0019 | 0.0% |
| COMEX Gold - Aug 09 | 931 | -10.3 | -1.1% |
| COMEX Silver - Jul 09 | 13.408 | -0.352 | -2.6% |
| COMEX Copper - Jul 09 | 230.55 | -2.5 | -1.1% |
| WTI Spot | 66.68 | 0 | 0.0% |
| Aluminium | 1596 | -15 | -0.9% |
| Copper | 4991 | -15 | -0.3% |
| Lead | 1690.5 | -17.5 | -1.0% |
| Nickel | 16255 | 70 | 0.4% |
| Tin | 14500 | 10 | 0.1% |
| Zinc | 1540.5 | -9 | -0.6% |
With the U.S markets closed on Friday night, and the European zone virtually unchanged at the bell, the local market will have to wait and see if there will be any lead from the Asian markets as they open progressively throughout the morning. What little movement there was in Europe resulted in Resource and Utility Companies continuing to give back ground, while Bank and Media sectors recovered slightly.
The resource sectors were led lower by BHP and RIO, although only modest falls of 1 and 0.5% respectively in London. The markets continue to battle with the China story as it attempts to sort through the effects of the Chinese Governments enormous stimulus plan that resulted in the Government stock piling commodities. This started the run in prices, only to be amplified by speculative buying on hopes that the demand could be maintained. A further factor to be considered is the recent declines in the Baltic Dry Index which measures the cost of shipping dry cargo around the world. The index collapsed last year ahead of the dramatic declines in commodity prices as the “China story” fell apart. Needless to say, the turn in the index once again has given some legs to the school of thought that goes against a Chinese led recovery, and sparked an outflow of speculative buyers from the world commodity markets which if continued could be reminiscent of the sort of speculative bubble explosion that the region has come to be all too familiar with.
If you are looking for volatility in the coming weeks you need not look past the Big Miners. They are in the process of clearing up the Ore price negotiations with the Chinese steel mills. Thus far, the mills are holding out for a larger price cut than that accepted by their Japanese counterparts. Steep falls in Oil, that continued late on Friday, as it gave back a further 2.35% to close the week off at USD 65.16 per barrel may also be a point of volatility this morning.
The SPI has the market opening some 7 points lower, but look for a fall in the physical of about 20-25 points on the open. Likely to be a stagnant day ahead of the RBA rate announcement tomorrow afternoon which should result in no change to the cash rate. The RBA should continue to sit on the side line after some decent economic data in recent weeks, including some stronger than expected retail sales. The RBA will sit it out for now and see how much of recent gains in economic data are contributable to the stimulus package, and how much will continue to flow through the economy as unemployment continues to rise. Today, we have the ANZ job adds being released, as well as the TD Waterhouse monthly inflation gauge to keep an eye out for.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
Disclaimer
The material in “Market Fox” (newsletter) is of a general nature only and neither purports nor is intended to be regarded as advice. No consideration has been given or will be given to your investment objectives, financial situation or needs. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk. Not all risks can be or will be explained in the newsletter. Previous results are no indication of future results. Actual results achieved in the market can vary considerably. The Directors and Representatives of Freeman Fox Ltd and their associates may hold securities in the companies presented.
The research made available in this newsletter is for your private use only and it is protected by applicable copyright laws and other applicable intellectual property right laws. You may not reproduce, distribute, disseminate, broadcast, sell, publish, circulate or give for free, any of the materials made available to you in this newsletter without first seeking the prior written consent of Freeman Fox Ltd.
Freeman Fox Ltd is not required to update any of the content made available in this newsletter, including but not limited to any research commentary, forecasts, recommendations or other analysis in this newsletter. Therefore, for the avoidance of any doubt, material made available in this newsletter may not be accurate after the date of publication or the date on which it is displayed in the newsletter.
To the extent permitted by law, Freeman Fox Ltd and their respective directors, officers, employees, contractors and agents disclaim all responsibility to you for any loss, liability, claim, expense (including but not limited to legal costs and resultant defence or settlement costs) or damage whatsoever, whether direct, consequential, special, incidental, punitive or indirect (including but not limited to loss of profits, trading losses and damages that result from delay, loss or inconvenience) arising out of or in connection with the content of the newsletter and/or any omissions from the content whether in contract, tort (including negligence), statute or otherwise and even if Freeman Fox Ltd has been advised of the possibility of such damage or loss.
If you require assistance in relation to your personal investment situation, contact an authorised representative of Freeman Fox Ltd.