Our market is expected to dip into the red this morning as investors catch their breath after last week's 200-plus point rally and a mildly positive finish to Wall Street on Friday.
The futures market is pricing in a 0.2% decline in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) at the open, but don't expect this to be a slow day as a rally in commodity prices will deepen debate on the sustainability of the surge in resource stocks.
The bulls have the upper hand with iron ore inching up 0.1% on Friday to $US56.01 a tonne – its highest level this month – and copper surged 3% to $U2.4140 a pound as it rose in sympathy with other base metals on news that Glencore will cut 500,000 tonnes of zinc production a year due to weak commodity prices.
We should get a positive response in BHP Billiton Limited's (ASX: BHP) and Rio Tinto Limited's (ASX: RIO) share prices as the stocks jumped 4.3% and 3.2% in London on Friday, but experts are divided on whether the recent rally is a mark of a new bull market for the sector or an opportunity to sell.
UBS sees the potential for miners to extend their rally and is taking a more favourable view on gold stocks even with the price of the precious metal adding 1.5% to $US1,156.53 an ounce, but Goldman Sachs is warning that the rally may fade if commodity prices fall further.
While there have been some positive signs for commodities recently, like the stablisation of Chinese economic data, the market is still oversupplied for a number of metals over the medium terms.
But the short-term optimism may not help OZ Minerals Limited (ASX: OZL) today as UBS downgraded the copper producer to "neutral" from "buy" after the stock surged 37% this month alone. It's a case of too much, too fast.
Another in the sector that could come under pressure is aluminum maker Alumina Limited (ASX: AWC), after its US-listed joint venture partner Alcoa reported disappointing third quarter results that triggered a selloff in the stock on Friday.
Outside of resources, Australia and New Zealand Banking Group (ASX: ANZ) will also be in focus today due to a potential change in its Asian growth strategy that was put in place by its outgoing chief executive Mike Smith.
The new chief is looking to stress-test the bank's Asian investments and focus on growing its domestic mortgage business, according to the Australian Financial Review.
Engineering consultancy Cardno Limited (ASX: CDD) will find itself in the spotlight as well as it is expected to present its plan to turnaround its embattled business following its strategic review.
Cardno better hope the new plan wins over investors given that management is trying to convince investors to reject a partial takeover bid from Crescent Capital.
Meanwhile, toll road operator Transurban Group (ASX: TCL) is expected to provide a trading update for the September quarter and will front investors at its annual general meeting today.
Don't get too comfortable fellow Fools, as I am expecting this month to remain volatile.
