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Bonds v Commodities

Sentiment on this morning’s market opening looks like depending on a tussle between strong commodities prices on the one hand and rising bond prices plus the muted stock market reaction to US tax reform finalisation on the other. The impact of trading associated with the expiry of futures and option contracts will throw a wild card into this mix over the next couple of days.

The latest data from the World Steel Association reflects the healthy state of this market with world production up 3.6% on November last year.  A great year for Bluescope Steel shareholders looks like finishing on an even stronger note. The company unveiled a substantial upgrade to half-year guidance this morning on the back of buoyant conditions in the Australian steel market.

Energy stocks are also likely to be supported this morning on the back of a meaningful 6.5m barrel reduction in US oil inventory last week. The recent decline in crude inventories sends the oil market into the New Year with a defensive buffer against the possibility of rising shale oil production.

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