US Markets end a dismal May ahead of Bank Holiday, giving a negative lead for ASX.
US stocks fell on Friday ending their worst month in more than a year, with energy and financial sectors weighing heavily. Economic data showed consumer spending, a key driver for economic growth, was flat last month and below forecasts, despite lower prices.
The SPI Futures is above the key level of 4400 the ASX is set to open lower as the SPI closed down 42 points (or 0.9%) at 4,424 (up 1.9% for week). Key levels for the SPI are 4250 and 4650. Expect lower trading volumes today due to the US holiday tonight; the RBA is expected to hold rates Tuesday and the US report key employment numbers next Friday.
The US markets have a holiday Monday, so they have already ruled off their May figures and the picture is bleak. The Dow Jones Industrial average dropped 122.36 points, or 1.19%, to 10136 (falling 0.6% last week and down 7.9% for May). The Dow had its worst May percentage performance since 1940 and is now down 2.8% for the year to date.
In the broader market the Standard & Poor’s 500 index declined 13.65, or 1.2%, to 1089, Friday, (up marginally 0.16% last week but is down 8.2% for May). The S&P 500 had its worst May percentage performance in history and is now down 2.3% for the year to date.
The Nasdaq composite fell 20.64, or 0.9%, to 2257, (falling 1.3% last week and down 8.3% for May), the Dow had its worst May percentage performance in 10 years and is now down 0.5% for the year to date. Last week Apple took over Microsoft as the biggest tech company by market cap, but Techs weighed on the Dow in May with Cisco one of the worst performers tumbling of 14% for May. Only Microsoft had a bigger percentage monthly decline in the Dow’s 30 index plunging 16% in May.
European markets were spooked late in their session as Fitch Ratings lowered its rating on Spain’s debt to AA+ from AAA, but said the country’s outlook is stable. The downgrade came despite this week’s passage of austerity measures by the Spanish government. This renewed investor broader fears about European credit on Friday, sparking a slide in stocks in the last session of the market’s worst month since February 2009.
In the U.K. the FTSE 100 index ended down 7 points, or 0.1 percent , at 5,187 points (up 2.7% last week), and across in Germany, the DAX 30 ended up 9 points, or 0.1 percent, at 5,927 points (up 2.1% last week), and in France the CAC 40 ended up 0.1 percent, at 3,657 (up 2.9% last week).
Oil prices fell overnight, as attempts to cap the Gulf of Mexico oil spill failed again. New York Light sweet crude for delivery in July, settled down $US0.86 to settle at $US74.09 a barrel. Gold for June delivery fell $US0.30 to settle at $US1213 an ounce.
US Markets
U.S. Markets Sees Selling Ahead of Long Weekend
SP500: down 1.2% at 1,089 Energy & Financials Weigh (up 0.1% for week)
DOW down 1.2% at 10,136 (down 0.6% for week) – Holds Above 10,000
NASDAQ: down 0.9% at 2,257 (up 1.4% for week)
Dollar Index: Up at 86.48 on Lower Euro
A$ lower at 84.73 (strongly off 10-month Lows)
FTSE: down 0.1% at 5,188 – Financials Weigh (up 2.7% for week)
DAX up 0.2% – Europe Lower on Spain Debt Rating Downgrade (up 2.1% for week) – Germany is Pushing for Strong Euro
CHINA: flat at 2,656 – Finding Suport? (up 3.0% for week)
HSI up 1.7%
Oil: down 0.8% ($74.09) (up 6.0% for week)
Recovers from – oil spill in Gulf of Mexico Stil a Problem
Gold: flat at ($1,213) (up 3.5% for week)
Commodities Lower
SPI: Just Above Key 4400 ASX
SPI down 0.9% at 4,424 (up 1.9% for week)
ASX
The SPI Futures is above the key level of 4400 the ASX is set to open lower as the SPI closed down 42 points (or 0.9%) at 4,424 (up 1.9% for week). Key levels for the SPI today are 4250 and 4650. Expect fewer active traders today due to U.S. holiday tonight.
AUD – holds, strongly off 10 months lows as China eases investor concerns.
CMJ – Shareholders have overwhelmingly approved on-market share buyback scheme.
GNS – Gunns up sharply as chairman John Gay’s retirement, on speculation that the controversial pulp mill proposal is in serious doubt. Shares up 43%.
JHX – says proposed HQ move to Ireland is not a stepping stone to the U.S. Shares up 4.1%.
KIL – in a trading halt. KFM Diversified Infrastructure and Logistics Fund will raise up to $64.5 million capitalraising for new investments through a placement and rights issue. Insto placement of $28 million (at 78cps) and a fully underwritten one-for-10 rights issue at the same unit price, raising $36.5 million.
QAN – April passenger numbers increased 5.3% YoY and reconfirmed guidance.
STO – edging closer to proceeding with its $7.7bn Gladstone liquified natural gas (GLNG) project in Qld.
WES – Wesfarmers says the government’s proposed resources super profits tax (RSPT) will adversely affect the value of its operations in the coal sector, although they are not able to quantify the impact.
VBA – Virgin shares plunged to a 9-month low after the airline lowered full year profit guidance by up to three quarters. Shares down 28%.
Market volatility will continue near term, but investors should take heart from China’s support of Europe.
We the suggest trading strategy is to accumulate, using covered calls and tight stops. Resources Rent Tax will continue to be topical.
Summary
ASX – to open lower
US & UK/Europe – US and Europe end lower
U.S. ADRs – Broadly Lower!!!…
BHP down 3.2% & RIO down 2.6%; AWC down 3.8%
ANZ down 1.2% & NAB up 0.2%
NEM down 2.0%, JHX flat, NWS down 1.3%
Commodities Stock Index down 2.2%
Gold Stocks Index down 0.9%
Oil Stocks Index down 2.2%
By Michael Hevern
Head of Research
