* US stock markets fell again overnight, as the U.S. will likely suffer a downgrade because of its debt issues.
* European stocks markets were generally lower, as the decision by Standard & Poors Rating’s Agency to further downgrade the Greek credit rating weighed on investor sentiment.
* Asian markets ended lower as well, due to increasing concern over the U.S. debt ceiling impasse and the prospect of a credit downgrade or even a debt default.
* Commodities prices traded generally lower, but gold prices remained around record levels again closing above $US1,615.
The SPI Futures is trading below the key pivot level of 4600, ending down -0.1% (or -4 points) at 4,427. The key levels for our index today are 4480 and 4400. Australian shares are set to open lower today following on from the negative leads from key markets in the U.S. and Europe, and this will likely pressure stock prices as the day unfolds. Trading volumes were light again yesterday and are likely to remain low today as investors choose caution until the U.S. resolves their debt-ceiling issue. We have a busy session of reporting ahead, see below for details.
In Australia the S&P/ASX 200 finished -1.8% lower yesterday as the U.S. debt shadow weighed on sentiment. The Aussie dollar remains around $US1.10, and the Australian market is at a pivotal support level.
See below for ASX listed companies in the news today.
U.S. Markets
U.S. stock markets fell again overnight, as the U.S. will likely suffer a downgrade because of its debt issues. The markets are facing their steepest weekly loss in a year.
The Dow Jones Index closed lower for a fifth session. In the broader market the S&P 500 falls were led by the industrial and energy sectors, while the tech-heavy Nasdaq ended flat for the session. The stalemate over the U.S. debt-ceiling debate is making investors increasingly nervous that the U.S. government will lose its AAA credit rating, which will have severe consequences, not the least of which will be increased borrowing costs and a likely impact on the perception of the US dollar being the world’s reserve currency.
In economic news data showed an unexpected drop in weekly jobless claims last week, with the claims figure dropping below 400,000 for the first time since early April, also the National Association of Realtors’s index for pending home sales increased 2.4% on a monthly basis, better-than-expected.
The debate between the White House and Democrats and their Republican rivals over the debt ceiling will likely continue throughout the weekend. The U.S. faces the possibility of a debt default if the rasing of the the federal government’s $US14.3 trillion debt ceiling is not approved by August 2nd, and at any rate the U.S. will likely suffer a downgrade because of its debt issues.
All ten company groups that make up the S&P index traded lower: Industrials were down -0.2%, Materials were down -0.2%, the Financials sector was up 0.1%, Technology was down -0.2%, while Consumer Staples were down -0.5% and Energy sector was were down -0.4%.
The Dow Jones closed down -0.5% (or -62 points) at 12,240, the S&P 500 index closed down -0.3% (or -4 points) at 1,301, the Nasdaq ended flat (or up 1 point) at 2,766, and the smaller cap Russell 2000 was down -0.2%.
European Markets
European stocks markets were generally lower, as the decision by Standard & Poors Rating’s Agency to further downgrade the Greek credit rating weighed on investor sentiment.
In London the FTSE 100 index ended higher but is still below the psychological 6,000 level, as Royal Dutch Shell said that net profits almost doubled to EUR6.0 billion in the June quarter as improved income from high oil prices offset a drop in output. In Germany the DAX 30 fell, as automobile makers weighed after Volkswagen slumped 4% despite Europe’s biggest car maker saying its net profit tripled in the 1H11.
In London the FTSE 100 index was up 0.3% (or 17 points) at 5,873, the German DAX was down -0.9% (or -63 points) at 7,190, while in France the CAC was down -0.6% (or -21 points) at 3,712.
Asian Markets
Asian markets ended lower yesterday, due to increasing concern over the U.S. debt ceiling impasse and the prospect of a U.S. credit downgrade or even a debt default.
Across the region exporters suffered after a drop in U.S. durable-goods orders for June, raising questions about future demand, while technology stocks followed their U.S. counterparts lower after some earnings misses.
In Japan the Nikkei Stock Index slumped to close down at the 9,900 level, as exporters were sharply lower and the yen remains strong.
In China the SSE Composite was down -0.5% (or -15 points) at 2,709, while in Hong Kong the Hang Seng Index was up 0.1% (or 30 points) at 22,570 and in Japan the Nikkei 225 Index was down -1.5% (or -146 points) at 9,901. The South Korean KOSPI was down -1.0% for the session, while the Indian market was down -1.2%.
Commodities
The Dollar Index was higher at 74.20 on a lower Euro, while the Australian Dollar last traded lower at 109.72. Commodities prices were generally mixed.
For the session the benchmark crude NYMEX for July delivery was down -0.3% (or -$US0.24) to settle at $97.16. Copper prices are still below 2-year highs as Copper for July delivery was up 0.5% (or 2.2 cents) at $US4.4655. July gold was up 0.1% (or $US0.70) at $US1,615.80.
ASX News Today
BHP – BHP is facing off workers at the world’s biggest copper mine in northern Chile, majority owned by BHP Billiton. Workers have filed a legal complaint against their employer for “anti-union practices” as their strike over pay went into its sixth day.
CXY – Cougar Energy will fight the Australian government order that it cease a controversial underground coal gasification (UCG) project in southeast Queensland.
DJS – David Jones will stock a range of new international and domestic brands as it tries to boost flagging sales at its stores across the country.
DOW – Downer EDI Ltd has supplied the second Waratah train to RailCorp.
GUD – GUD Holdings the consumer and industrial products supplier expects a “sound” financial performance in the 2012 financial year despite difficult conditions in the Australian retail sector.
MQG – Macquarie Group investment bank has not altered its earnings forecasts despite the negative impact of subdued financial market activity, and says a US default would hurt the business (very much an understatement).
ORG – Origin Energy has approved the first phase of its $20 billion two-train liquefied natural gas (LNG) project in Queensland.
QAN – Qantas is in dispute over the employment contracts of some cabin crew working for budget airline Jetstar.
SFR – Sandfire Resources has secured a $75 million debt facility from ANZ Bank for its highly regarded $400 million DeGrussa copper and gold project in WA.
WES – Wesfarmers says sales at the Coles supermarket chain rose 6.7 percent to $31.8 billion in the 2011 financial year, amid declining prices and consumer confidence.
Local Corporate Reporting
Austar United Comms (AUN) Interim 2011 Results
Australian Worldwide Exploration Ltd (AWE) June Quarterly Report
BrisConnections Unit Trusts (BCS) June Quarterly Report
Energy Resources of Australia (ERA) Interim 2011 Results
Gryphon Minerals (GRY) June Quarterly Report
Kingsgate Consolidated Ltd (KCN) June Quarterly Report
Origin Energy Ltd (ORG) Quarterly Production Report
Medusa Mining Ltd (MML) June Quarterly Report
Murchison Metals Ltd (MMX) Q4 2011 Activities Report
Northern Energy Corp (NEC) Q4 2011 Activities Report
Perseus Mining (PRU) June Quarterly Report
Platinum Australia Ltd June Quarterly Report
St Barbara Limited (SBM) June Quarterly Results
Ex-dividend Date
Alcoa Inc (AAI)
Cellnet Group (CLT)
Market Summary
ASX – to open lower
US & UK/Europe – lower
US ADRs – Broadly Lower
BHP down -0.7% & RIO down -0.4%; AWC down -0.9%
ANZ down -0.1% & NAB down -0.3%
NEM up 0.7%, JHX down -1.4%, NWS up 0.2%
Commodities Stock Index down -0.3%
Gold Stocks Index down -0.6%
Oil Stocks Index down -0.5%
By Michael Hevern
Head of Research
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