Although the overnight futures market says the ASX should start with a bit of a bang today, investors should watch for the impact of a sharp fall in iron ore prices overnight which could develop into something more substantial.
The share futures market has the ASX200 opening up 46 points this morning after a solid night offshore as fears about Greece receded and US markets rose ahead of the Fed’s big set of announcements early Thursday morning, our time.
On Wall Street, the S&P 500 added 11.86 points, or 0.6%, to 2,096.29, the Dow Jones Industrial Average jumped 113.31 points, or 0.6%, to 17,8904.48 and the Nasdaq Composite rose 25.58 points, or 0.5% to 5,055.55.
American investors seem to be now more accepting of the idea of a US rate rise later this year.
Here the big factor yesterday was the turnaround in sentiment towards banks and other financials caused by Warren Buffett’s surprise $500 million deal with IAG, and talk of more investment in the Australian market by Berkshire Hathaway.
That has boosted the market confidence here, especially in the four big banks which are seen as targets investment by Buffett’s fund managers.
And that renewed confidence in the banks was seen in the way the ASX recovered most of its early losses yesterday afternoon after the IAG announcement, and then continued in the overnight trading in the share price index – the key futures market for the the ASX.
But a weather eye should be kept on iron ore stocks, starting with the big miners, such as BHP Billiton and Rio Tinto.
Iron ore prices fell for a third consecutive session overnight, thanks to renewed concerns about the strength of the Chinese steel mills.
The fall saw the price of benchmark iron ore for immediate delivery to the port of Tianjin in China down 3.7% to $US62.10 a tonne. That takes the fall in the last three trading sessions to around 5%.
And while it is still up 35% from the low of $US46.70 hit in early April, falling steel pricers in China are starting to impact confidence in the sector.
