Ever had one of those days when your usual morning routine delivers a rather unexpected result? Well, it happened to me early last week when I opened my Bloomberg screen to check the overnight market moves and had to look at the iron ore price several times before realising it had jumped $10 (or 19%) to $63.75 per tonne in one session. Maybe it’s no coincidence that Iron Maiden’s world tour started recently. The oil price was also up almost 6% and knocking on the door of $38 per barrel.
Investors may have gained some confidence from the easier fiscal and monetary policy settings proposed by China’s Premier over the weekend (although China’s share market hasn’t really rallied much), with commodities staging a solid rally. But like any elastic band stretched too far, markets snapped back to reality later in the week after the bad Chinese trade data gave traders an excuse to reacquaint themselves with reality. The monetary policy easing by the European central bank initially pushed markets higher but then sentiment changed as further rate cuts were ruled out.
Some are calling it a “Mr Miyagi (from the Karate Kid) market” at the moment with “risk-on” then “risk-off” trading in all markets currently.
Amongst all this, the Australian dollar is going from strength-to-strength at the moment, rallying through USD0.75 and causing a headache for the RBA officials that are trying to talk it down (ideally to USD0.65). And as far as interest rates are concerned, the market still has at least one rate cut fully factored in by September.