Weaker crude and commodity prices

10.11 AEST, Thursday 11 October 2012

Weaker crude and commodity prices put energy and materials under pressure
By Miguel Audencial (Sales Trader, CMC Markets)

The Australian equities market is expected to start lower today as concerns about the future growth of China are at the front of investor’s minds today. The Energy and Materials sector will be under pressure through today’s session due to weaker crude oil and commodity prices.

The concerns over China’s weakening growth prospects were placed back into the lime light last night after Alcoa cut its outlook on Aluminium demand. This brought up alarm signals so loud that despite the company beating third quarter profit forecasts the share price dropped 4.6%. This alarm was obviously not limited to the company stock price as the DOW dropped 128 points. Given the recent IMF global growth downgrade these concerns are going to be present in the market for some time.

The excitement of QE3 has clearly passed and the market is now looking for concrete signals that the bond buying program is working. The Beige Book released by the US FED reported that the economy expanded’ modestly’ last month. A more positive tone is needed for the next release and a more encouraging change on employment figures is needed to bring that enthusiasm back.

The deteriorating prospects on Chinese growth also dominated the concerns on the conflict between Turkey and Syria on the Crude Oil price where it was about 1.2% weaker. The conflict between the two nations would be closely watched by oil traders and if it worsens expect the price to bounce back. The US Holiday last Monday meant that Crude Oil inventory figures are released a day later. Due to deteriorating demand the inventory is expected to report an increase of 1.3 million barrels.

Australian Employment figures are due later today and the market needs a strong figure to lessen the selling pressure brought about by China’s growth prospects.

http://www.cmcmarkets.com/

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