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Markets Surge on Surprisingly Upbeat Economic Data

U.S. and European markets bounced overnight. The early gains resulted from comforting Chinese PMI manufacturing data and Australia’s growth reports and were added to once the U.S. ISM Manufacturing report came in better-than-expected. Commodities rose sharply pushing miners higher.  Asian markets generally traded higher on the Aussie Growth and Chinese PMI reports. The ASX is likely trade higher again today.

The SPI Futures is above the key level of 4400 the ASX is set to open higher again as the SPI Futures closed up 1.7% (or 75 pts) at 4,568. The key levels for our index today are 4600 and 4450. M&A activity continues to drive specific stocks. Expect to see our market trade higher as the earnings season comes to an end (see below).  The market will again be supported by yesterday’s rosey 2Q GDP report, which showed GDP is tracking at a better-than-expected annualised 3.3%.

US Markets

U.S. stocks traded sharply higher overnight, as investors tried to forget their worst August in nearly a decade.  Strong manufacturing data in China and the U.S. and growth figures from Australia set the tone for investors. U.S. manufacturing activity expanded in August for a 13th straight month, with the ISM manufacturing better-than-expected rising to 56.3, from 55.5 in July, as the improving numbers were fueled by strong employment and production data.  The gains were broad-based with Energy, Consumer Discretionary and Industrial sectors all up over 3.5 percent.  The Dow closed up 2.5% (or 255 points) at 10,269, while in the broader market the S&P 500 index up 3.0% (or 31 points) at 1,080 and the tech-heavy Nasdaq ended up 3.0% (or 63 points) at 2,177.

European Markets

European stocks closed higher.  EU markets were buoyed by the upbeat China and Australian economic reports. The German market is still out performing and bounced off key monthly support levels overnight, as stocks are now trading at their cheapest levels relative to earnngs since 2008. However, in the U.K. investors had to battle with poor U.K. manufacturing data, as U.K. manufacturing suffered a sharp slowdown last month amid uncertainty about the extent of public spending cuts. The PMI index dropped from 56.9 to 54.3, where a figure above 50 means that companies are reporting rising activity. Growth in activity is at its lowest in nine months and manufacturing output is now expanding at its slowest rate in 11 months. The slower growth came as the equivalent index for the eurozone hit a six-month low, last week. In London the FTSE 100 index closed up 2.7% (or 141 points) at 5,366, the German DAX up 2.7% (or 159 points) at 6,084, while in France the CAC was up sharply 3.8% (or 138 points) at 3,623.

Asian Markets

Asian stock markets generally rose, as strong economic data from Australia and China helped investors move to a “risk-on” bias. The much anticipated Chinese , figures released Wednesday showed the China’s official Purchasing Managers Index (PMI) rose to 51.7 in August from 51.2 in July, while a separate PMI produced by HSBC also rose to 51.9, confirming Chinese manufacturing remains in expansion mode. Investors Chinese PMI manufacturing data showed the government-engineered economic growth is stabilizing at a moderate pace. Chinese companies are reported to be preparing an alternate bid for Canada’s Potash Corp. Even Japan managed to close higher after rebounding off 16-month lows earlier in the week.  In China the SSE Composite closed down -0.6% (or -16 points) at 2,623, while in Hong Kong the Hang Seng Index was up 0.4% (or 87 points) at 20,624 and in Japan the Nikkei 225 Index was up 1.2% (or 10296 points) at 8,927.

Commodities

The Dollar Index  down -0.9% at 82.46 on higher Euro, while the Australian Dollar last traded flat at 89.13. Commodities were generally higher.

Wheat prices climbed 3%. Oil prices jumped above $US74 again.  The benchmark crude NYMEX for September delivery up sharply  3.0% (or $US2.12) to settle at $US74.048. Copper prices rose, Copper for September delivery was up 3.1% (or 10.3 cents) at $US3.4640. Gold prices are around 2-month highs, are above key $US1,200 level, with December gold was down marginally -0.2% at $US1,244.20.

Key News International Drivers Today

US – U.S. manufacturing activity expanded in August for a 13th straight month. Companies continue to report earnings this week.

Markets Overview

Markets Surge on Surprisingly Upbeat Economic Data

SPI: Above key Level 4400 – SPI up 1.7% at 4,568….

ASX News Today

The SPI Futures is above the key level of 4400 the ASX is set to open higher again as the SPI Futures closed up 1.7% (or 75 pts) at 4,568. The key levels for our index today are 4600 and 4450. M&A activity continues to drive specific stocks. Expect to see our market trade higher as the earnings season comes to an end (see below).  The market will again be supported by yesterday’s rosey 2Q GDP report, which showed GDP is tracking at a better-than-expected annualised 3.3%.

AEC- Ammtec has unanimously rejected a revised offer from chemicals manufacturer Campbell Brothers, saying it does not reflect Ammtec’s strong earnings outlook.

AGO- Atlas Iron has boosted its reserve figures, which should support its aim of increasing production to 12 Mtpa by the end of 2012.

BHP- Japanese steelmakers have agreed with BHP to a seven percent cut in coking coal prices for the three-month period ending 31 Dec’10.

BHP- Canada’s Potash Corp says BHP Billiton is calling its customers “to sow seeds of doubt and confusion about the future” of the Canadian company.

CXG- Coote Industrial has posted a $124.6 million annual loss due to significant writedowns on its assets.

CXY- Cougar Energy says it may need to fold, unless the the Qld government lifts an Environmental Protection Order which has stopped work at its Kingaroy CSG pilot plant.

LEI- Leighton has finalised a $220 million contract in the United Arab Emirates (UAE) to complete its landmark “Buildings by Daman” project at Dubai International Financial Centre.

NUF- Nufarm the agricultural chemicals supplier, has maintained its annual profit guidance, but has increased its net debt estimate.

NWS- News Corp grew its profits thanks to “Avatar” and a rebounding advertising market.

QBE- QBE Insurance says CEO Frank O’Halloran will remain and dismissed reports it’s searching for a new boss.

Economic Reports:

AIG Services Index
Negotiations to resolve hung parliament

Companies:

MTS – Metcash Ltd Full year 2010 AGM

Dividends

IAG – Insurance Australia Group Ltd

Market Summary

ASX – to open Higher
US & UK/Europe – Sharply higher

US ADRs –  Broadly Higher!!!…

BHP up 5.5% &

RIO up 7.3%;

AWC up 7.0%

ANZ up 5.1% &

NAB up 6.0%

NEM up 2.3%,

JHX up 0.2%,

NWS up 4.3%

Commodities Stock Index up 2.7%
Gold Stocks Index down 0.5%
Oil Stocks Index up 4.0%

By Michael Hevern
Head of Research

Tags: ASX, BHP Billiton, Commodities, Crude Oil, European Markets, gold, oil, Stock Market Analysis, stockmarket, US Market wrap

This entry was posted on Thursday, September 2nd, 2010 at 7:26 am and is filed under ASX Trading News, Stock Market Analysis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.