Originally published by CMC Markets
Nervous investors ignored a firm lead from US markets yesterday, selling equity market exposures. However, they are unlikely to ignore this morning’s weaker lead.
While last night’s US market action was a nervous wobble that still leaves major indices comfortably above support levels, it has been enough for already nervous local markets to continue where they left off yesterday. Sellers are in the ascendancy at the market open.
A weak open this morning has seen the S&P/ASX 200 index resume its downtrend, making lower highs and lows after a brief pause.
Weak commodity and oil prices are not going to help the Australian market today with mining and oil stocks likely to be under pressure.
Investors in gas producing companies this morning find themselves in the same position as bank shareholders recently, with yesterday’ decision to introduce a mechanism to limit exports, increasing political risk to investors in this sector. This comes at a time when share prices are already under pressure due to falling oil prices. Higher political risks will add to the already very large price and engineering risks assumed by investors providing capital to supply these resources and may add to required rates of return for any future projects.