US Treasury Talks Up The US Dollar, Pushing Commodities Prices Lower
US stocks closed up marginally, with the US Treasury suggesting there is no need for further US dollar weakness. This will hurt commodities prices near-term. Asian markets ended mixed as China reported its economy grew at a moderate and robust pace in the third quarter, continuing to show that the government is successfully engineering a soft landing towards more sustainable growth for the economy. European stocks ended higher overnight, as the German economy is now expected to grow by 3.4 percent (up from previous estimates of 1.4 percent back in April). The ASX is likely to trade lower, as commodities prices fell overnight.
The SPI Futures is below the key resistance level of 4720 the ASX is set to open lower as the SPI Futures closed up -0.1% (or 4 pts) at 4,634. The key levels for our index today are 4700 and 4600. M&A activity continues to drive specific stocks. The ASX is set to trade lower today, led by the miners and financials, with mixed leads from the Europe and US. Options volatility is subdued at the moment, which gives investors access to “cheap” protection, so investors may consider taking this opportunity to protect their portfolios.
US Markets
US stocks closed up marginally. US Treasury Secretary Timothy Geithner ahead of the G-20 meeting, said the major currencies are “roughly in alignment now”suggesting there is no need for further US dollar weakness. This may trigger a change in market conditions, as traders and commodities speculators have enjoyed a free ride on the back of the weakening US dollar. The Dow Jones traded close to its highest level since September 2008 after a raft of corporate earnings and data showing a decline in jobless claims. Early gains were fueled by better-than-expected corporate earning reports. Tech stocks continue to report well, as corporates look to IT for productivity improvements in the jobless recovery. eBay shares rose 6 percent after reporting a strong quarterly profit. But miners were weighed down by the rise in the US dollar and banking stocks were weak as investors continued to try to assess the impact of potential regulation that may require banks to buy back bad-mortgages, that were granted in the GFC. The sectors supporting the markets included the Industrials (up 0.8%) and Consumer Discretionary (up 0.6%), while the Materials, Energy and Financials sectors ended flat for the session. The Dow closed up 0.4% (or 39 points) at 11,147, while in the broader market the S&P 500 index up marginally 0.2% (or 2 points) at 1,180 and the tech-heavy Nasdaq ended up marginally 0.1% (or 2 points) at 2,460.
European Markets
European stocks ended higher overnight. The positive investor sentiment was driven by better-than-expected corporate earnings in the U.S. and Germany. European sentiment was also strengthened by a forecast the German economy minister, that Germany could expect growth of 3.4 percent this year, rather than 1.4 percent as projected in April. The German economy is critical to the performance of the eurozone and has been driving the economic recovery out of the GFC. In London the FTSE 100 index closed up 0.5% (or 29 points) at 5,758, the German DAX up 1.3% (or 86 points) at 6,611, while in France the CAC was up 1.3% (or 50 points) at 3,877.
Asian Markets
Asian markets ended mixed. Chinese stocks declined after data showed the Chinese economic growth slowed moderately in the third quarter as inflation rose, with the 3Q GDP rose 9.6% (but down from 10.3% from the previous quarter) and CPI rose to 3.6% the highest level in 23 months. The data supported the surprise move by the Chinese government’s rate hike, as it continued to withdraw stimulus and took measures to cool sectors such as the property market. Banks and brokerage houses led losses in China as investors took profit. Some metal stocks gained after commodity prices staged a rebound on the NYSE Thursday. Tokyo stocks fell, led by exporters and currency-sensitive stocks that are being hurt by the yen at 15-year highs. In China the SSE Composite closed down -0.7% (or -20 points) at 2,984, while in Hong Kong the Hang Seng Index was up 0.4% (or 93 points) at 23,649 and in Japan the Nikkei 225 Index was down marginally -0.1% (or -5 points) at 9,376.
Commodities
The Dollar Index up 0.4% at 77.46 on lower Euro, while the Australian Dollar last traded lower at 97.45. Commodities were generally lower.
Commodities were lower due to the stronger US dollar. Benchmark crude NYMEX for December delivery was down -2.3% (or $US-1.87) to settle at $US80.67. Copper prices fell, Copper for December delivery was down -0.3% (or -1.3 cents) at $US3.7755 5. Gold prices back-off record highs, are around key $US1,380 level, with December gold was down -1.5% at $US1,323.20.
Key News International Drivers Today
US - Dow Jones pushes towards 2-year highs. Better-than-expected corporate earnings.
EU – German economy is now expected to grow by 3.4 percent.
CHINA – China reported its economy grew at a moderate and robust pace in the third quarter. Government stands firm on access to credit.
JAPAN – Exporters weigh as Yen at 15-years highs.
Markets Overview
|
Market |
Movement |
|
The Dow Jones Industrial Average |
Up 0.4% (or 39 pts) at 11,147 |
|
The S&P 500 |
Up Marginally 0.2% (or 2 pts) at 1,180 |
|
The Nasdaq |
Up Marginally 0.1% (or 2 pts) at 2,460 |
|
|
|
|
The FTSE 100 |
Up 0.5% (or 29 pts) at 5,758 |
|
The German DAX |
Up 1.3% (or 86 pts) at 6,611 |
|
The Fench CAC |
Up 1.3% (or 50 pts) at 3,877 |
|
|
|
|
The Dollar Index |
Up 0.37% at 77.46 |
|
The Australian Dollar |
Last traded at 97.45 |
|
The Commodities Index |
Down -1.15% at 295.6 |
|
|
|
|
Crude Oil Futures |
Down -2.3% at $80.67 |
|
Gold Futures |
Down -1.50% at $1,323.20 |
|
Copper Futures |
Down -0.34% at $3.7755 |
|
SPI Futures |
Up Marginally 0.1% (or 4 pts) at 4,634 |
|
|
|
|
|
|
|
Market |
Movement |
|
SSE Composite (China) |
Down -0.7% at 2,984 |
|
Hang Seng Index (Hong Kong) |
Up 0.4% at 23,649 |
|
Nikkei 225 Index (Japan) |
Down Marginally -0.1% at 9,376 |
ASX News Today
The SPI Futures is below the key resistance level of 4720 the ASX is set to open lower as the SPI Futures closed up -0.1% (or 4 pts) at 4,634. The key levels for our index today are 4700 and 4600. M&A activity continues to drive specific stocks. The ASX is set to trade lower today, led by the miners and financials, with mixed leads from the Europe and U.S. Options volatilty is subdued at the moment, which gives investors access to “cheap” protection, so investors may consider taking this opportunity to protect their portfolios.
AGK- AGL Energy Ltd has defended its gas exploration program in NSW Hunter Valley, saying the company has a long history of safe dealing in dangerous commodities.
AMC- Amcor the packaging firm says trading in Q1 this financial year is ahead its pcp, but warned that a stronger Aussie dollar could affect FY11 earnings.
BHP- BHP remains determined to pursue its bid for Potash Corp, but Saskatchewan appears about to urge government to block BHP Billiton’s $US40 billion hostile bid for Potash Corp.
BLK- Blackmores the supplements distributor, has posted a net profit after tax of $7.8 million in the September quarter, up 13.1 percent on the pcp.
MMX- The Federal Court has ruled that Chameleon Mining (CHM) is not entitled to any interest in the Jack Hills project in WA or to any of Murchison’s shares in Crosslands Resources.
FMG- Fortescue Metals has hit back at a news article saying there’s a $US2 billion cost blow-out at its Solomon Project. It is on a global roadshow to raise further funds.
ILU- Iluka Resources has reported higher production of its high value products, rutile and zircon, reflecting stronger global demand.
LEI- Leighton Holdings says the ASIC has decided not to grant the relief sought by the company’s German parent Hochtief.
MOL- Moly Mines has secured an agreement to sell all the production from its Spinifex Ridge iron ore project to Chinese group Hanlong (first shipment due in December).
NCM- Newcrest the world’s fourth biggest gold company, reported a sharp jump in quarterly production following its takeover of Lihir, it produced 674,219 ounces of gold in the September quarter (up 79% on pcp).
ORG- Origin saysits LNG JV with ConocoPhillips found traces of carcinogenic contaminants in a number of its exploratory coal-seam gas (CSG) wells in Queensland state.
STO- Santos says 3Q production was down 9 percent, with lower output from flood-hit activities in Cooper Basin in SA.
TAH- Tabcorp the gambling firm, has completed the institutional component of its $430 million capital raising.
TEN- Ten Network is back in the black with a $150 million for the year to 31 Aug’10 and welcomes the interest of its new major shareholder, James Packer.
TSE- Transfield Services has had a healthy flow of business in early FY11 and will pursue organic and acquisitive growth to boost capabilities in key areas.
TLS- Telstra says its long-term earnings will improve after a radio access network sharing joint venture agreement with Vodafone Australia ends in 2012.
WES- Wesfarmers has reported 1Q sales up 4.3 percent and is cautiously optimistic on the Christmas trading period.
Economic Reports :
Q3 International Trade Price: Export & Import
Companies:
SAI Global Ltd (SAI) Full year 2010 AGM
PaperlinX Ltd (PPX) Full year 2010 AGM
Woodside Petroleum (WPL) Q3 2010 Activities Report
Ex-Dividends
None
Market Summary
ASX – to open lower
US & UK/Europe – Mixed
US ADRs – Braodly Lower
RIO up
AWC down 1.5%
ANZ down 2.5% &
NAB down 3.6%
NEM down 2.1%
JHX down
NWS down 0.4%
Commodities Stock Index down 0.2%
Gold Stocks Index down 1.5%
Oil Stocks Index down 0.4%
By Michael Hevern
Head of Research
