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Investors are finding it hard to ignore strong metals prices

World stock markets continue to fluctuate in relatively narrow ranges. Yesterday it was the turn for a minor down draft with US markets providing a negative lead for the ASX 200 index this morning.  However, the US profit reporting season is shaping up pretty well at this stage, and is helping support global stock markets at relatively high valuations.  

Mining stocks look like being a bright spot for the local market again today. It’s getting difficult to ignore the strong spot iron ore market which jumped sharply again yesterday. Fortescue Mining broke decisively through recent resistance and was assisted by comments at the AGM which confirmed guidance on cost control. While many expect iron ore prices to fall next year as supply increases, the current price strength based on better than expected demand naturally leads to doubts whether the bearish view is sustainable.

Markets are waiting on this morning’s CPI data to provide greater clarity on the outlook for Australian interest rates. The biggest potential for market reaction might come from a very weak read on underlying inflation. That outcome would increase anticipation for another RBA rate cut leading to Aussie Dollar selling and support for yield stocks. 

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