Markets higher, but what about China?

Strong commodities prices and a positive lead from the US have helped push Australian sharemarkets higher this morning.

At 12.30pm the S&P/ASX200 was up 1.2% on yesterday’s close to 5536.3, following a 2.08% lift on the US Dow Jones Index overnight to 12,619.27.

The good mood on US markets overnight stemmed from some less-than-usually-disastrous results from finance companies. For example, JP Morgan’s announcement of a 50% drop in profits for the 2007-08 first quarter met with a positive result from the market, pushing its shares 5% higher in early trading.

But while the mood is picking up in the financial sector, there may be reason for some creeping doubts for those watching commodities, despite current high prices for energy and resources.

Inflation in China hit 8% in March, up from 6.6% in February, caused mainly by soaring food prices. That is likely to mean the Government’s 4.8% inflation target is out of reach and could see stronger measures to limit demand – not good news for those who hope our exposure to China will protect us from any downturn in the US.

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