Morning Market Wrap
US suffers late session sell-off while the ASX will look to Miners and Energy sectors for support.
The Dow Jones Industrial Average saw a late sell-off of over 130 points falling below the key 10,000 level for the first time since 8 Feb’10.
The SPI Futures is below key level of 4400 the ASX is set to open flat as the SPI closed down 6 points at 4,294; US late sell-off. Volatility continues, key levels today are 4200 and 4450.
Overview
The Dow Jones Industrial Average saw a late sell-off of over 130 points falling below the key 10,000 level for the first time since 8 Feb’10. The Dow ended down 0.7 per cent at 9,974, closing at its lows.
In the broader market the Standard & Poor’s 500 closed down 0.6 per cent, at 1068. The Nasdaq composite closed down 2.6 points, or 0.12 per cent, at 2196. The US indices are now trading around 11 percent off their April highs. Economic reports helped investor sentiment, with the OECD raising global growth forecasts to 4.75%,
but European debt still weighed.
European stock markets closed higher, many closing around key support levels, Germany’s Angela Merkel confirmed the they would be pushing for a strong Euro. However the euro still traded down around $US1.22, near 4 year lows.
In the U.K. the FTSE 100 index ended up 97 points, or 1.97 percent, at 5038 points, and across in the German DAX 30 ended up 88 points, or 1.6 percent, at 5758 points, and in France the CAC 40 ended up 77 points, or 2.3 percent, at 3408.
Oil prices bounced sharply overnight, off a three-week drop that has seen prices fall as much as 25 per cent amid market concerns over the eurozone’s debt crisis and a fragile global economic recovery. It had its biggest one day gain since 30 Sep’09. New York Light sweet crude for delivery in July, settled up $US2.76 to settle at $US71.51 a barrel.
Gold for June delivery rose $US15.4 to settle at $US1213 an ounce. Silver for July delivery rose 52.5 US cents to settle at $US18.306 an ounce. July copper settled up 3.85 US cents at $US3.0905 a pound.
Our markets are expected to trade flat to lower after the big sell-off late in the U.S. Miners, energy and gold stocks are likely to hold up well.
US Markets
US Markets Sees late Session Selling
SP500: down 0.6% at 1,068 Financials Lead Recovery
DOW down 0.7% at 9,974
Broke Support at 10,000
NASDAQ: down 0.7% at 2,196
Dollar Index: Higher as Euro Falls Towards 2001 Lows
A$ up 81.89 (around 10-month Lows)
FTSE: up 1.9% at 5,038 – Financials Recover
DAX up 1.6% – Europe Recovers
Germany Pushing for Strong Euro
CHINA: up 0.1% at 2,626 – Finding Support?
HSI up 1.1%
Oil: up 3.1% a ($70.85)
Recovers from 3-Week 25% Sell-off and focus still on spread of oil spill in Gulf of Mexico
Gold: up 1.3% at ($1,213)
Commodities Higher
SPI: Below Key 4400 ASX
SPI flat at 4294
Local Market Today
The SPI Futures is below key level of 4400 the ASX is set to open flat as the SPI closed down 6 points at 4,294; U.S. late selloff. Volatility continues, key levels today are 4200 and 4450.
AUD – drifts towards 10 months lows as investors exit risk.
RICHLIST - Frank Lowy of Westfield claims number 1 for the first time ($5.04bn); Gina Rinehart finished second on the list with $4.75 billion; Visy’s Anthony Pratt ($4.6 billion) slips to third; and Andrew Forrest ($4.24 billion) comes in number four
CSR – Government FIRB bans BrightFood bid for 90 days.
BHP – Olympic Dam will return to full operation by the end of June
FGL – After 14 years FGL plans to split its beer and wine businesses into two listed companies. However they will also have to wiritedown $1.3billion in wine assests. Shares rose 7.4%.
OST – Whyalla steel works in South Australia faces closure if the government’s proposed mining tax proceeds in its current form
TAL – 1H results out today
TAH – has no knowledge of a mooted takeover bid for the company
RIO – the outlook for iron ore remains positive despite some caution about the near-term global economic
outlook.
AGMs: AUN, WDC, MAp
Economics Reporting today:
Ken Henry appears before the Senate Committee
ABS 11:30am reports 1Q o private capital expenditure -this reading reflects companies future spending plans (expected to grow by 2.5%)
WOW – CEO to speak at business lunch
BXB – CEO to speak at business lunch
Market volatility will continue near term, as world investors come to terms with the ramifications of the credit squeeze and new regulatory regimes, and investors continue to have concerns over European debt issues.
We think the trading strategy is to get small, reduce you exposure to equities, start to look for value. Be aware of short covering rallies.
By Michael Hevern
Head of Research
