Commodities, China News Boost Stocks After Drop
A combination of declining oil prices and soft manufacturing data released at the start of the week for both the US and China led to a weak trading session on Monday that saw the Dow Jones slide around 0.5%.
Tuesday, August 4, 2015 - 00:00
News overnight that China has taken yet another move to shore up its shaky stock market by introducing extra rules intended to curb intraday short-selling did give prices a late boost in the Asian trading session and the Shanghai Composite Index finished up close to 3.7%.
The price of crude oil has been in a large slump over the past month, US crude oil falling well below $50 a barrel against a backdrop of increasing global supplies, and the slide continued on Monday. Tuesday has seen a bounce though, along with a broad advance in the price of commodities, and US crude oil futures rose 1.50% to $45.96 in early trading.
The improvement in the price of raw materials also helped lift commodity currencies: USD/CAD fell 0.16% to 1.3135. NSD/USD gained 0.35% to 0.6586 and AUD/USD jumped 1.5% to 0.7394. As well as the rebound in commodities, the Aussie dollar was also influenced favorably by comments made by the Reserve Bank of Australia following the central bank's latest monetary policy decision. The RBA's decision to leave its benchmark cash rate unchanged at 2% was widely expected, but it was the wording of the accompanying statement, which was noticeably less dovish than the previous version, that worked to support the currency.
Governor Glenn Stevens had previously contended that 'further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices,' but his latest statement said in contrast that 'the Australian dollar is adjusting to the significant declines in key commodity prices'. While there is no explicit message there, the sharp rise in the Australian dollar following the statement suggests participants in the forex market are inferring the RBA will hold again in future months rather than heading toward greater accommodation.
US stock markets opened little-changed on Tuesday morning, despite a second-successive slide for Apple ($AAPL). Shortly after the opening bell on Wall Street, the Dow Jones was trading up 17 points or 0.1% at 17,615, while the broader measure of the S&P 500 Index was up just 0.01% at 2098.2. Apple lost more than 2% on Monday, dropping below its 200-day moving average, and has shed another 2.2% in early trading on Tuesday. The stock is now down more than 10% from its peak price; such a decline in the most highly-capitalized stock in the market clearly acts as a drag on the major stock indices and there will be concerns that the downward momentum may be hard to reverse.
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