Shell’s exit from the Woodside register proved to be one of the leading catalysts for a bout of profit taking on the Australian stock market. There are reports that investors sold other stock in order to make way for their newly acquired Woodside holding.

After a 7% rally in the ASX 200, selling gathered significant momentum yesterday and looks like continuing on the open this morning thanks to the overnight sell-off in commodities. While the spot iron ore price firmed yesterday, oil and other industrial metals fell. This will put mining and energy stocks under pressure in early trading.

News of a downturn in China’s home sales feeds into the consensus outlook for gradually moderating growth in China. On the other hand, confirmation of really solid GDP growth in Germany and Italy, confirms a picture of synchronised global growth, even if China comes off the boil a little.  This synchronised global growth should put a solid floor under commodity demand and ensure that current selling of commodities will be a “pull back”, not a major trend reversal.

Solid, European GDP growth led to a sharp rally in the Euro overnight. Where to from here may depend on whether the US economy can rise to the occasion with good retail sales and CPI data tonight.

Weaker commodity prices have kept the Aussie Dollar subdued against $US and sharply weaker against the Euro. Forex traders as well as investors in retail stocks will focus on this morning’s Wage Price Index. This will feed into the market outlook for inflation, interest rates and consumer spending.

Dulux produced a solid result this morning, marginally ahead of consensus expectations. It is encouraging to see that management is confident in the outlook for the domestic renovation market for the coming year.