US markets again sold off late in the session to end flat. Stock prices initially rose as improving US economic data points to the recovery still being on track. European markets ended lower overnight, due to concerns over the euro-zone sovereign debt contagion weighing on investor sentiment. Asian markets fell yesterday, as Japan reported its first quarterly drop in business confidence for two years, while investors were spooked by the Chinese government wanting to target 4 percent inflation next year. Commodities prices were mixed.
Key themes for investors today include:
* response to regulatory banking reforms talks
* response to the completion of the sale of NSW state electricity assets and
* the Aussie dollar backing off US dollar parity
The SPI Futures is above its key weekly pivot level of 4700 and closed down -0.3% (or -13 pts) at 4,757. The key levels for our index today are 4760 and 4680. M&A activity continues to drive specific stocks.
The ASX is set to open lower this morning, as we had negative leads from overseas markets. Look to resource and banking stocks to weigh.
US Markets
US markets again sold off late in the session to end flat. Stock prices initially rose as improving US economic data points to the recovery still being on track. New York manufacturing activity surged in November better than expected. The Fed reported US industrial production staged a modest rebound in November (up 0.4 percent), while consumer prices slowed (up 0.1 percent) and capacity utilisation bounced back. This indicates the recovery is gaining momentum without pushing inflation higher, however high unemployment persists at 9.8 percent.
Share prices tracked lower as the session progressed and as euro-zone debt contagion concerns resurfaced. Goldman Sachs and Morgan Stanley fell more than 1.2% after analysts cut 4Q earnings estimates on the investment banks, citing lower than expected trading volumes in fixed income, currencies, and commodities.
The US dollar rose around 1 percent against the Euro, which has put pressure on commodities prices overnight. The sell-off was broadbased with the major laggards being financials (down -0.8%), energy (down 0.6%) and the materials sector (down -0.5%).
The Dow closed down -0.2% (or -19 points) at 11,457, while in the broader market the S&P 500 index was down -0.5% (or -6 points) at 1,235 and the tech-heavy Nasdaq ended down -0.3% (or -9 points) at 2,619.
European Markets
European markets edged lower overnight. Concerns over the euro-zone sovereign debt contagion weighed on investor sentiment, as Moody’s said it may downgrade its ratings on Spanish government debt (from AA1), citing Spain’s challenging refinancing needs next year and its complicated outlook for its banks and regional governments. Elsewhere Standard and Poor’s Ratings Services lowered its ratings outlook on Belgium from stable to negative. Irish lawmakers voted overnight to accept EUR67.5 billion in loans from the European Union and International Monetary Fund as part of the EUR85 billion package to bail out Irish banks and public finances. In the UK the market fell for the first session in five, with declines led by the miners and banks. In the euro-zone, German Chancellor Angela Merkel said European leaders will approve a permanent facility to rescue financially stressed governments tonight, but again opposed a plan for collective government debt issuance.
In London the FTSE 100 index closed marginally down -0.2% (or -9 points) at 5,882, the German DAX was down -0.2% (or -11 points) at 7,016, while in France the CAC was down -0.6% (or -22 points) at 3,901.
Asian Markets
Asian markets fell yesterday as well. The Japanese market traded slightly lower, as the Tankan quarterly survey reported a drop in business confidence, the first in two years. The report reflects that exporters are being hurt by the yen’s strength, poor domestic demand and the general global uncertainty.
Chinese and Hong Kong markets traded lower as investors were spooked by an announcement that the government is targeting 4 percent inflation for next year, up a percentage point from this year’s target but still well below the actual inflation level. Last week’s CPI data showed the consumer price index rose 5.1 per cent year-on-year in November, raising pressure for an interest rate rise.
In China the SSE Composite closed down -0.5% (or -16 points) at 2,911, while in Hong Kong the Hang Seng Index was down -2.0% (or -456 points) at 22,975 and in Japan the Nikkei 225 Index was down marginally -0.1% (or -7 points) at 10,310.
Commodities
Copper remained around record levels again, on continuing concerns that demand will outpace supply into 2011 driving prices higher. Gold was higher, but still below $US1,400 an ounce, and crude oil rose as well. The Dollar Index was up 1.1% at 80.23 on the lower Euro, while the Australian Dollar last traded at 98.54. Commodities were generally mixed.
Benchmark crude NYMEX for December delivery was up marginally 0.2% (or $US0.21) to settle at $US88.49. Copper prices backed off 2-year highs, with copper for December delivery down -2.6% (or -10.8 cents) at $US4.0940. Gold prices were off all-time highs again, with December gold down -1.7% at $US1,380.20.
Key International News Drivers Today
US - US markets drifted lower. Manufacturing and production improving.
EU – European markets ended lower on EU debt concerns. ECB pushes consideration of further stimulus.
CHINA – China is targeting 4 percent inflation in 2011. China’s prospect of implementing further tigthening measures.
JAPAN – Market holding above 10,000 at 7-month highs.
Markets Overview
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Market
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Movement
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The Dow Jones Industrial Average
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Down Marginally -0.2% (or -19 pts) at 11,457
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The S&P 500
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Down -0.5% (or -6 pts) at 1,235
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The Nasdaq
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Down -0.3% (or -9 pts) at 2,619
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The FTSE 100
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Down Marginally -0.2% (or -9 pts) at 5,882
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The German DAX
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Down Marginally -0.2% (or -11 pts) at 7,016
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The French CAC
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Down -0.6% (or -22 pts) at 3,901
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The Dollar Index
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Up 1.09% at 80.23
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The Australian Dollar
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Last traded at 98.54
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The Commodities Index
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Down Marginally -0.2% at 318.8
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Crude Oil Futures
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Up Marginally 0.2% at $88.49
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Gold Futures
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Down -1.7% at $1,380.20
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Copper Futures
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Down -2.6% at $4.0940
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SPI Futures
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Down -0.3% (or -13 pts) at 4,757
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Market
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Movement
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SSE Composite (China)
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Down -0.5% at 2,911
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Hang Seng Index (Hong Kong)
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Down -2.0% at 22,975
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Nikkei 225 Index (Japan)
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Down Marginally -0.1% at 10,310
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ASX News Today
AGK- AGL Energy shares slumped after an Origin consortium won the bid for NSW electricity assets, but AGL says it plans to poach customers from the successful bidders.
ANZ- ANZ Bank CEO Mike Smith says competition within Australia’s retail deposit market has never been so intense.
ASX- The ACCC competition watchdog will not oppose the $8.4 billion acquisition of the stock exchange operator ASX by Singapore Stock Exchange (SGX). But the Foreign Investment Review Board (FIRB) is still yet to pass judgement.
BBG- Surfwear retailer Billabong International has lowered its 1H11 profit guidance by 8 to 13 percent, due to weak sales and a stronger Aussie dollar. Shares slumped 9%.
BHP- the MRRT tax is back in the news, with issues over the details of the tax, particularly royalties.
BIG 4- International ratings agency Fitch Ratings says proposed banking reforms in Australia are no threat to its assessment of local banks.
BPT- Oil and gas producer Beach Energy has secured majority control of Impress Energy, after making a takeover offer earlier this month.
CRG- Crane Group has urged shareholders to take no action over a hostile $740 million takeover bid from NZ-based Fletcher Building.
CSR- CSR plans to return $800 million to shareholders after the sale of its sugar and energy business Sucrogen is complete.
DOW- Moody’s ratings agency has downgraded the debt rating of the funding arm of the Downer EDI-led rail consortium that is delivering rolling stock for NSW.
FMG- The Fitch ratings agency has assigned a BB+ rating on $US1.5 billion worth of unsecured notes to be issued by Fortescue Metals Group.
ORG- Origin Energy has been successful its bid for the retail businesses of NSW government power distributors Integral Energy and Country Energy, and the output of generator Eraring Energy for $3.25 billion.
PPT- Perpetual says its funds under management have declined slightly in November to $27.3 billion.
RIO- Rio Tinto will undertake $US1.06 billion worth of major works at two of its Canadian aluminium operations.
RIV- Speculation is mounting that an Indian consortium will launch a takeover bid for the coal miner Riversdale Mining.
SFX- Bulk minerals explorer Sheffield Resources Ltd has successfully listed on the ASX up 20% raising $7 million.
TEN- Ten Network Holdings Ltd has appointed Grant Blackley as the company’s new chief executive.
WBC- Westpac expects some of the legacies of the global financial crisis to linger for a “considerable time”.
Economic Reports:
Consumer Inflationary Expectations Survey for December
International Merchandise Imports for November
RBA Bulletin for December
FX Transactions and Holdings of Official Reserve Assets for November
Companies:
Elders Ltd (ELD) Full year 2010 AGM
Orica Limited (ORI) Full year 2010 AGM
National Australia Bank (NAB) Full year 2010 AGM
Ex-Dividends
None
Market Summary
ASX – to open lower
US & UK/Europe – EU Lower, US Flat
US ADRs – Broadly Lower
Commodities Stock Index down 1.0%
Gold Stocks Index down 1.8%
Oil Stocks Index down 0.8%
By Michael Hevern
Head of Research
The Master Swing Trader Toolkit is a powerful application oriented handbook that shows you how to identify and grow wealth from the opportunities resulting from the steep market crash. Additionally, this full-service volume offers prescriptions for prospering in the post crash environment and provides guidance for finding new, reduced-risk market prospects during virtually any economic scenario to come.
