Stock Market Analysis
Overseas Markets Continue Lower; RBA to Hold Rates
Overseas markets continue to trade lower, with the U.S. giving us a negative lead. The Dow Jones finished at a none month low. European markets also finished a torrid week lower. This all points to a lower ASX today.
The SPI Futures is just above the key level of 4200 the ASX is set to open marginally lower as the SPI closed down 30 points (or 0.6%) at 4,213. Key levels this week are 4350 and 4000. Expect our market to trade flat to lower again today, given the negative leads from overseas.
US Markets
The U.S. markets were lower for a second week with its first seven day fall since 2008, after economic data is raising concerns of a double dip recession. U.S. employers eliminated jobs in June, adding to concern the economy is falling back into recession. The unemployment rate dropped to 9.5 percent (from 9.7 percent), also manufacturing is expanding at a slower pace due to fewer orders and demand with the ISM manufacturing index fell to 52.6 from 59.7 from the previous month. The U.S. is closed for Independence Day celebrations tonight.
The Dow down 46 points, or 0.5 per cent, to 9,686 (down 4.4% for week), while in the broader market the S&P 500 index down 5 points, or 0.5 per cent, to 1,022 (down 4.9% for week) and the tech-heavy Nasdaq ended lower 9 points or 0.5 per cent at 2,092 (down 6.1% for week).
European Markets
In Europe stocks declined for a second week on concerns on faultering recovery, and disappointing economic data. Benchmark stocks indices all fell last week in the EU countries. In the London FTSE 100 index down 32 points, or 0.7 per cent, to 4,838 points (down 4.3% for week). The German DAX pulls back 23 points, or 0.4 per cent, to 5,834 points (down 4.2% for week).
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 and the worst than expected PMI manufacturing data fro a second month falling from 52.1 from 53.9 in May. Goldman’s has lowered their 2010 growth forecasts for China from to 10.1 percent from 11.4 percent, but have left their 2011 forecasts at 10 percent.
In Japan the Nikkei index of the Tokyo Stock Exchange flat to end at 9,203 (down 5.7% for week). The benchmark Hang Seng Index was down 1.1% at 19,905 (down 3.8% for week) , and China was down 0.1% at 2,383 (down 7% for week).
Commodities Overview
Oil prices dropped 8.4 per cent in the past week. The benchmark crude NYMEX for July delivery down US$0.81 to settle at US$72.14 a barrel. Copper prices rose, still below the key $US3.00 a pound, Copper for July delivery up 3.9 cents to settle at $US 2.916 a pound. Gold was up, with August gold down $US1.00 to settle at $US1,207.40 an ounce.
Key News International Drivers Today
US – Response to the weak employment report from last Friday.
EU – Markets fall on continuing debt concerns
CHINA – Chinese markets have fallen to 14-month lows, as the PMI manufacturing data came in worst than expected.
Markets Overview
Overseas Markets Continue Below Key Levels; ASX Set to Trade Lower
SP500: down 0.5% at 1,016 – Below 200 day Moving Average (down 4.9% for week)
DOW down 0.5% at 9,686 – Below Key Support Level (down 4.4% for week)
NASDAQ: down 0.5% at 2,092 (down 6.1% for week)
Dollar Index: Lower at 84.41 on higher Euro
A$ higher at 84.14
FTSE: up 0.7% at 4,838 – Financials & Miners Weigh (down 4.3% for week)
DAX down 1.8% at 5,834 – Below 6,000 level (down 4.2% for week)
CHINA: up 0.4% at 2,383 – Slowing Growth Concerns (down 4.3% for week)
HSI down 1.1% at 19,905 (down 3.8% for week)
Oil: up 0.2% ($72.28) (down 8.4% for week)
Economic Growth Concerns
Gold: up 0.13% at ($1,207.40) (down 4.0% for week)
Commodities Lower
SPI: At key Level 4200
SPI down 0.6% at 4,213 (down 4.7% for week)
ASX News Today
The SPI Futures is just above the key level of 4200 the ASX is set to open marginally lower as the SPI closed down 30 points (or 0.6%) at 4,213. Key levels this week are 4350 and 4000. Expect our market to trade flat to lower again today, given the negative leads from overseas.
Resource Super-Profits Tax (RSPT) Deal
The government has given ground to the miners to the tune of $1.5 billion, but miners will pay more tax. The deal is:
* the headline tax rate will be reduced to 30% (from the original 40% rate)
* the trigger point at which the tax cuts in will be the bond rate plus 7 per cent
* existing projects will get concessions
* the tax will be applied to the point of extraction
* the tax gets a new name to “Minerals Resource Rent Tax”
* will only apply to iron ore and coal projects.
* oil and gas projects will fall under the existing Petroleum Resource Rent Tax.
This should give miners some support near term.
In other news:
AUD – higher at 84.14
AQA – Aquila says it is reviewing a decision to allow third party access to rail lines owned by BHP Billiton and Rio Tinto.
CSR – get formal bid from Brightfoods for sugar division for $1.65 to $1.7 billion.
DOW – Downer the engineering group says the potential default of one of its loan guarantors has not put at risk a $357 million funding facility needed to complete the Waratah Train carriages project.
FXJ – Fairfax has extended a $292 million tranche of its existing syndicated bank facility from April 2011 to April 2014.
LEI – signs $597million four year deal with India to build road network.
MOS – Mosaic gets $123 million takeover offer from AGL. Shares soared 67%, Thursday .
MTS – Metcash will buy the Franklins chain of 85 supermarkets in NSW from South African retailer Pick n Pay for $215 million
NAB – is seeking a second extension for AXA bid.
OILs – the current petroleum resource rent tax regime will be extended to all onshore oil and gas projects, including coal seam gas, at a 40 per cent tax rate. This impacts AOE, ORG, STO WPL.
RSPT – The watered down tax is now called the Minerals Resource Tax (MRRT). Miners says investments will resume. This will impact the big miners BHP, FMG, RIO.
Economic Reports:
Australian Performance of Services Index will be reported today.
ANZ – job advertising data
New car sales for June
RBA rate decision is due a 2:30pm Tuesday. They are expected to leave the interest rate at 4.5% says a consensus survey from Bloomeberg.
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. U.S. celbrate Independence Day tonight.
Market Summary
ASX – to open flat
US & UK/Europe – Broadly Lower…
US ADRs – Mixed!!!…
BHP up 0.5% & RIO up 0.2%; AWC down 0.4%
ANZ down 0.4% & NAB up 0.1%
NEM down 0.4%, JHX down 1.4%, NWS down 1.3%
Commodities Stock Index down 0.1%
Gold Stocks Index up 0.1%
Oil Stocks Index upo 0.1%
By Michael Hevern
Head of Research
Tags: Asian Markets, ASX, ASX News, BHP, BHP Billiton, Dow, European Markets, mining, Nasdaq, Rio, Rio Tinto, S&P500, stockmarket, trading, US Market wrap
