Stock Market Analysis
Overseas Markets End Poor Quarter; ASX Set to Trade Lower
Markets finished the quarter sharply lower in all markets with China beign the poorest performer, giving a negative lead for the ASX. The key triggers for the late selloff in the U.S. included the Moody’s rumored downgrade of Spain’s credit rating and apprehension ahead of key employment data due Friday. In Europe banks saw some respite as the ECB backed off on the need to pay $US545 billion in government debt by 1 July.
The SPI Futures is below the key level of 4500 the ASX is set to open sharply lower as the SPI closed down 30 points (or 0.9%) at 4,232. Key levels today are 4350 and 4150. Expect our market to trade lower again today, with negative leads from overseas. The proposed RSPT tax will continue to be in focus, but miners and energy still weighed on markets overnight.
US Markets
Sectors were all lower in the U.S overnight, their is investor apprehension ahead of key employment data due Friday and they also have a short week next week. In the last half of the year the key sectors that were down over 10 per cent including: Materials, Energy, IT, Telecom and Healthcare. The sellers stepped in during the last hour of trading.
The Dow down 96 points, or 1.0 per cent, to 9,774 (down 4.5% for Qtr), while in the broader market the S&P 500 index down 10 points, or 1.0 per cent, to 1,030 (down 5.9% for Qtr) and the tech-heavy Nasdaq ended lower 26 points or 1.2 per cent at 2,109 (down 6.3% for Qtr). With the significant pullback in the past quarter has led analyts to look for value and the stocks in the U.S. are the cheapest relative to bonds in the past three decades, also forecast earnings yield are said to be running at 8.8% for the index.
European Markets
In European, investor concerns were heightened as UK consumer confidence dropped to a 6 month low falling to -19 in June, after government’s emergency budget on 22 June cut $US128 billion in government spending, equal to 5.7% of its GDP and in Germany’s unemployment falls for a 12th month to 7.7 per cent. EU banks had some relief as the ECB says it is only rolling over one-third of the expected $US540 billion of debt which falls due 1 July. In the London FTSE 100 index up 3 points, or 0.1 per cent, to 4,916 points (down 13.5% for Qtr). The German DAX continues to outperform up 13 points, or 0.2 per cent, to 5,965 points (down 3.7% for Qtr).
Asian Markets
The key news in Asia continues to point to a slowing economic recovery. The Chinese markets have fallen to 14-month lows on concerns their fiscal tightening will stunt their economic growth. The market is 30% off last years highs bringing their price-earnings ratio to 18, the lowest in a decade. With such a pullback analysts are starting to look for value and Morgan Stanley suggests that the 19 June decision to end the yuan’s two-year peg to the US dollar will help curbs their inflation and asset bubbles, and that China is a buying opportunity. China’s market rose 65% in the year after they last eased their exchange rate policy back in 2005. In Japan the Nikkei index of the Tokyo Stock Exchange down 1.9% to end at 9,382 (down 3.6% for Qtr). The benchmark Hang Seng Index was down 0.6% at 20,129 (down 5.6% for Qtr). , and China was down 1.2% at 2,398 (down 22% for Qtr).
Commodities Overview
Oil prices dropped 9.7 per cent in the past quarter, the first losing quarter since 2008. The benchmark crude NYMEX for July delivery down US$0.31 to settle at US$75.63 a barrel. Copper prices finished lower for the first quarter in five, below the key $US3.00 a pound, Copper for July delivery up 2.0 cents to settle at $US 2.94 a pound. Gold closed higher, with August gold up $US3.50 to settle at $US1,245.50 an ounce.
Key News International Drivers Today
US – employment report due Friday
ECB – banks had some relief as the ECB says it is only rolling over one-third of the expected $US540 billion of debt which falls due 1 July.
EU – Germany’s unemployment falls for a 12th month to 7.7 per cent
UK consumer confidence dropped to a 6 month low falling to -19 in June
CHINA – Chinese markets have fallen to 14-month lows
G20 – meeting agrees to cut deficits in half by 2013 government deficits, and to stabilise their debt-to-output ratios by 2016.
Markets Overview
Overseas Markets End Poor Quarter; ASX Set to Trade Lower
SP500: down 2.0% at 1,030 – Below 200 day Moving Average (down 5.9% for Qtr)
DOW down 1.0% at 9,774 – Below Key Support Level (down 4.5% for Qtr)
NASDAQ: down 1.2% at 2,135 (down 6.3% for Qtr)
Dollar Index: Higher at 86.05 on lower Euro
A$ lower at 83.98
FTSE: up 0.1% at 4,917 – Financials & Miners Weigh (down 13.5% for Qtr)
DAX up 0.3% at 5,938 – Breaks 6,000 level (down 5.6% for Qtr)
CHINA: down 1.3% at 2,398 – Slowing Growth Concerns (down 5.6% for Qtr)
HSI down 0.6% at 20,129 (down 5.6% for Qtr)
Oil: down 2.3% ($75.94) (down 5.6% for Qtr)
Good Week Ahead of Hurricane Season
Gold: up 0.3% at ($1,242.40) (down 5.6% for Qtr)
Commodities Lower
SPI: Below key Level 4500 ASX
SPI down 0.7% at 4,232 (down 12% for Qtr)
ASX News Today
The SPI Futures is below the key level of 4500 the ASX is set to open sharply lower as the SPI closed down 30 points (or 0.9%) at 4,232. Key levels today are 4350 and 4150. Expect our market to trade lower again today, with negative leads from overseas. The proposed RSPT tax will continue to be in focus, but miners and energy still weighed on markets overnight.
AUD – higher at 83.98
AAX - bad news continues as Ausenco the mining service provider saya it will book a $6.8 million after-tax, non-cash impairment charge in its 1H10 accounts, following a review of its energy business.
CDU – Cudeco rallied ahead of a long-awaited upgrade to resource at Rocklands copper project, which company expects within a week.
COF – Coffer has reaffirmed its earnings guidance for the FY10 but says it will cut jobs as a result of theuncertain economic environment.
DOW – Downer the engineering group is to sell its stake in MB Century Drilling to Mohamed Al Barwani Holding Company LLC and use the funds to repay shareholder loans.
LLC – Lend Lease has signed a project development agreement that formalises its $2.5 billion proposed redevelopment of Brisbane’s Ekka showground.
PPX – PaperlinX confirms that it will pay a scheduled distribution of $3.3655 per security on its Step-up Preference Securities.
QAN – Qantas is facing increased competition at the low-fare end of the market but business travel is picking up.
RIO - will spend $450 million to acquire shares in Canada-based miner Ivanhoe, to ensure Ivanhoe has funds to develop their jointly held Oyu Tolgoi copper and gold project in Mongolia.
UPGRADES – Deutsche Bank expects commodity price weakness to continue into third quarter but upgrades forecasts for 2011 and 2012, leading to earnings
upgrade, these include “buy” for Macarthur Coal (MCC), Extract Resources (EXT), Western Areas (WSA)
Economic Reports out today:
New PM & Wayne Swan – watch out for more on RSPT tax
RBA to report its index of commodities
PWC will release the PMI on manufacturing
Market volatility will continue near term, some speculative accumulation is underway. We the suggest trading strategy is to tighten stops. Be prepared to take profits and open/hold short positions. We expect to have flat to lower leads from the U.S. ahead of their employment report and the shortened week next week.
Market Summary
ASX – to open lower again
US & UK/Europe – Broadly Lower…
US ADRs – Broadly Lower!!!…
BHP down 2.2% & RIO down 4.0%; AWC down 2.7%
ANZ down 1.7% & NAB up 0.8%
NEM up 1.0%, JHX down 0.5%, NWS down 1.8%
Commodities Stock Index down 0.7%
Gold Stocks Index down 0.1%
Oil Stocks Index down 0.8%
By Michael Hevern
Head of Research
Tags: Asian Markets, ASX, ASX News, BHP, European Markets, Nasdaq, Resource super profits tax, RSPT, S&P500, stockmarket, trading, US Market wrap
