Morning Market Wrap
Bernanke Upbeat as China considers it’s own resource tax and the ASX to trade Lower.
The markets faded after midday despite positive comments from the Federal Reserve chairman Ben Bernanke that the economic recovery is gaining traction. Selling in BP weighed on the markets.
The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 11 points (or 0.2%) at 4,372. Key levels today are 4300 and 4450. Expect our market to trade flat to lower ahead of the long weekend. China is taking steps towards imposing its own resources tax, undermining the miners case against the RSPT tax here.
Overview
The markets faded after midday despite positive comments from the Federal Reserve chairman Ben Bernanke that the economic recovery is gaining traction. Selling in BP weighed on the markets, as investors showed concerns that BP may not be able to recover from the oil disaster in the Gulf of Mexico, as an energy industry analyst reportedly said that the company could be forced to seek bankruptcy protection in about a month.
The selling was broad-based. The Dow Jones Industrial Average ended down 40 points, or 0.41 per cent, at 9,899 points, while in the broader markets the S&P 500 index, ended down 6 points, or 0.59 per cent, at 1,055 points and the hi-tech Nasdaq index ended down 11 points, or 0.54 per cent, at 2,158.
European stock markets ended higher overnight. This was despite the general feeling in Europe that its efforts to halt the debt crisis will come at the cost of economic growth for years to come, with only some sectors – such as exports – helped by a faster recovery in the US or Asia. European economies are likely to be weighed down for the foreseeable future by governments’ deep spending cuts. Germany and France have called on Europe to urgently speed up efforts to regulate financial markets, particularly crack down on speculative trading.
In the U.K. Fitch Ratings said Britain faced a “formidable” fiscal challenge over its debt issues. The FTSE 100 closed up 57 points, or 1.2 percent, at 5,085 points, while across in Germany the DAX 30 closed up 116 points, or 1.98 percent, at 5,984 points and in France the CAC 40 closed up 66 points, or 1.96 percent, at 3,446 points.
Asian markets were mixed with Japan’s Nikkei 225 index ended down 99 points, or 1.04 percent, at 9,439, its lowest close since late November, but it did manage to close above a key support lie of 9,400 points. In Hong Kong stocks closed higher as bargain hunters stepped in late, the Hang Seng Index ended up 133 points, or 0.69 percent, at 19,621. In China, the Shanghai Composite Index ended up 70 points, or 2.78 percent, to 2,583 points, as Export data beat forecasts.
Oil prices made strong gains on overnight as relatively upbeat comments by Federal Reserve chief Ben Bernanke and declining US inventories lifted the economic recovery outlook. NYMEX main futures contract, light sweet crude for delivery in July, rose $US2.39 to settle at $US74.38 a barrel.
Gold for August delivery fell $US15.70 to settle at $US1,229.90 per fine ounce, while July silver settled 28.8 US cents lower at $US18.189 an ounce. Copper for July delivery settled at $US2.85 a pound, down 7.05 US cents.
Key Overseas Drivers
Fed Chairman Ben Bernanke says the US economy is on track to grow 3.5 percent this year as it sees only a “modest” impact from the eurozone debt crisis, undermining the miners case against the RSPT tax here.
China is taking steps towards imposing its own resources tax
BP shares continue to slide as investors feared that intense political pressure from Washington over the Gulf of Mexico oil spill could force the group to axe its prized shareholder dividend.
World Bank expects the global economy to grow between 2.9 and 3.3 percent this year and in 2011 as developing countries lead the recovery from recession.
In the U.K. Fitch Ratings said Britain faced a “formidable” fiscal challenge over its debt issues.
Britain’s trade deficit rose to $5.9 billion in April from $5.72 billion in March.
Markets Overview
Berenanke Upbeat; China Considers Resource Tax; ASX to trade Lower
SP500: down 0.6% at 1,056 – Just Below “Flash Crash” Lows
DOW down 0.4% at 9,899 – Still Below 10,000�
NASDAQ: down 0.5% at 2,152
Dollar Index: higher at 87.95 on Lower Euro
A$ lower at 82.71 (above 10-month Lows)
FTSE: up 1.2% at 5,085 – Fitch Ratings says more severe spending cuts are necessary
DAX down -0.6% – Still in Uptrend
CHINA: up 2.8% at 2,584 – 13-month Lows as Suport becomes Resistance
HSI up 0.8% at 19,621
Oil: up 2.5% ($73.76)
BP Still Under Pressure Over Oil spill in Gulf of Mexico
Gold: down 0.9% at ($1,228.50)
Commodities Mixed
SPI: Below 4500 ASX
SPI down 0.3% at 4372
ASX News
The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 11 points (or 0.2%) at 4,372. Key levels today are 4300 and 4450. Expect our market to trade flat to lower aheaqd of the long weekend. China is taking steps towards imposing its own resources tax, undermining the miners case against the RSPT tax here.
AUD – holds at 82.71, above 10 months lows.
AXO – Aurox Resources says friendly merger with Atlas Iron Ltd has taken longer than expected but will soon be
completed and submitted to the corporate watchdog for review.
BBG – Billabong says the Supreme Court of Queensland has determined the company validly terminated its Indonesian licence agreement in 2005 .
CSL – Mayo Clinic unexpectedly withdraws multi-million dollar anti-trust law suit, leaving only a 4 litigants (vs 20 originally) to push the case through the U.S. law courts.
FMG – Andrew Forrest prepares for a private meeting with the prime minister today, but has described the process of consultation over the mining tax as a “charade”.
STO – Australia’s FIRB has no objection to Majellan’s acquisition of Stantos’s 40% interest in the Evans Shoal Natural Gas Field, which is off Australian shores.
TLS – is still committed to discuss with the government re the National Broadband Network
WTF- Wotif.com expects FY profit to rise as much as 29 per cent as occupancy levels in Australia remain strong.
Economic Reports out today:
ABS – Australian Bureau of Statistics releases its May labour force report at 11:30am.
RBA – Reserve Bank of Australia’s bulletin for the June quarter.
CPI – Melbourne Institute survey of consumer inflationary and unemployment expectations,
HIAH – Housing Industry Association Housing 100 report for 2009, and
RETAIL – Speakers today at a retail conference in Sydney include: Woolworths Ltd chief executive Michael
Luscombe, Harvey Norman Ltd boss Gerry Harvey and the managing director of the Wesfarmers-owned Coles, Ian McLeod.
Market volatility will continue near term, some speculative accumulation is underway.
We the suggest trading strategy is to tighten stops. Be prepared to open/hold short positions, look for value stocks.
ASX – to trade flat to lower ahead of the long weekend
US & UK/Europe – mixed leads
US ADRs – Broadly Lower!!!…
BHP down 0.1% & RIO down 0.3%; AWC down 1.9%
ANZ down 2.7% & NAB down 0.9%
NEM down 1.3%, JHX up 0.2%, NWS up 0.9%
Commodities Stock Index down 1.0%
Gold Stocks Index down 1.3%
Oil Stocks Index down 2.9%
By Michael Hevern
Head of Research
Tags: ASX News, BHP, Dow, gold, Rio Tinto, S&P500, stockmarket, trading, US Market wrap
