* U.S. stock markets plunged as it was time for the bulls to be squeezed late in the session. The sell-off was sparked due to fears of further contagion among European banks and a delayed reaction to the Federal Reserve’s gloomy economic outlook.
* European stocks fell broadly as the French economy is expected to be the next country to have its credit rating downgraded.
* Asian stock markets ended higher yesterday, but they are set to give back their recent gains today. Gains in most markets were generally not as impulsive as in the U.S.
* Commodities prices traded generally higher, and gold prices remained around record levels again closing above $US1,790 and crude oil closed above $US80.
The SPI Futures is trading around the key pivot level of 4000, ending down -2.4% (or -99 points) at 3,995. The key levels for our index today are 3900 and 4050. Australian shares are set to give back their recent gains today, following on from the sharp falls from key markets in the U.S. and Europe, as sovereign debt contagion issues resurfaced in Europe, with France reported to be the next economy to be downgraded.
Locally company reporting continues and the unemplyment rate is expected to reamin at 4.9% in the report today. See below for ASX listed companies in the news today.
Economics News Today
* August Consumer Inflationary Expectations Survey
* July Labour Force
U.S. stock markets plunged as it was time for the bulls to be squeezed late in the session. The selloff was sparked due to fears of further contagion among European banks and a delayed reaction to the Federal Reserve’s gloomy economic outlook. The CBOE Market Volatility Index, known as the “fear gauge” surged 23% and has spiked to levels not seen since the GFC.
The Dow Jones Index plunged over 500 points again, as all 30 stocks sold off, more than reversing the previous day’s sharp gains. The S&P 500 stock index and the tech-heavy Nasdaq Composite lost over 4% in the session. Only 11 of the S&P 500 components finished in positive territory and all 10 of the S&P 500 sectors finished in negative territory.
The financial stocks led the falls with Citigroup and Bank of America plunging over 10%, while J.P. Morgan Chase was down 5.6% and American Express sold off 7.2%. The highlights in commodities markets were gold approaching $US1,800 per ounce, crude oil above $US80 and copper around US3.9 cents per pound.
All ten company groups that make up the S&P index traded sharply lower: Industrials were down – 5.1%, Materials were down -3.4%, the Energy sector was down -3.5%, the Financials sector was down -7.0%, Technology sector was down -3.9%, while Consumer Staples were down -4.3%.
The Dow Jones closed down -4.6% (or -520 points) at 10,720, the S&P 500 index closed down -4.4% (or 52 points) at 1,121, the Nasdaq ended down -4.1% (or -101 points) at 2,381, and the smaller cap Russell 2000 was down -5.2%.
Asian stock markets ended higher yesterday, but they are set to give back their recent gains today. Gains in most markets were generally not as impulsive as in the U.S. Bargain hunters went shopping for down-beaten stocks in the financials and mining sectors, while the performance was mixed among companies with a large exposure to demand overseas.
Early sentiment was helped by the strong rebound on Wall Street after the Federal Reserve pledged to keep rates low through mid-2013. But the bulls looked to be running out of steam as markets could not push through the gains of the early session. The Fed’s comments about a slowing U.S. economy also made the bulls wary.
In Japan the Nikkei Stock Index ended the day around the 9,000 level. In Hong Kong the Hang Seng Index climbed 2.3% after crashing nearly 15% over the past six days, while in China the Shanghai Composite finished 0.9% higher.
In China the SSE Composite was up 0.9% (or 23 points) at 2,549, while in Hong Kong the Hang Seng Index was up 2.3% (or 453 points) at 19,331 after crashing nearly 15% over the past six days. In Japan the Nikkei 225 Index was up 1.1% (or 94 points) at 9,039, the South Korean KOSPI was down -0.2% for the session, and the Indian market was up 1.6%.
The Dollar Index was higher at 74.72 on a lower Euro, while the Australian Dollar last traded lower at 102.04. Commodities prices were generally higher.
For the session the benchmark crude NYMEX for August delivery was up 2.9% (or $US2.29) to settle at $US81.59. Copper prices are still below key pivot level as Copper for August delivery was down -1.6% (or -6.5 cents) at $US3.9025. August gold was up 2.9% (or $US48.90) at $US1,789.80.
ASX News Today
CBA – CommBank of Australia reported Full Year Net profit up 13% as $6.39 billion, with earings up 12% and the fully franked dividend coming in at $1.88, but CBA forecast little improvement in credit demand and potentially higher funding costs.
BPT – Beach Energy the oil and gas producer reported a strong resource estimate for its Holdfast-1 and Encounter-1 shale gas wells in the Cooper Basin, South Australia.
CPU – Computershare’s full year profit declined by 10.4 per cent as the share registry services provider said it was cautious because of the current market volatility. Management was very cautious about the outlook and have not provided EPS guidance (they will provide an update at the AGM in November). Bloomberg consensus is factoring in US58.3 cents in EPS for FY12 and is likely to be downgrading this slightly to match FY11’s reported US55.67 cents.
DMP – Domino’s Pizza the fast food chain expects a 15 percent increase in profit in the current year.
HVN – Harvey Norman has posted a 1.7 percent increase in global sales for the year to June 30, announcing earnings of $6.18 billion.
MCC – Macarthur Coal says the European Commission does not need to review the planned takeover of Macarthur Coal by US giant Peabody Energy and the world’s biggest steel maker, ArcelorMittal.
NWS – News Corporation shares have plunged due to the ongoing UK phone hacking scandal and general market distress in recent days.
SGP – Stockland the property developer has posted a 58 percent rise in annual profit, and says it expects to maintain earnings in the current year.
TLS – Telstra is tipped to report a double-digit decline in net profit today, as its year-long bid to capture more customers eats into the bottom line.
WDC – Westfield Group the shopping centre owner is making its first new market entry in 11 years, acquiring 50 per cent of Almeida Junior, a Brazilian operation which does much the same as Westfield elsewhere.
WOR – WorleyParsons shares surged after the company announced it had won two new overseas contracts.
Local Corporate Reporting
TLS – Telstra Corporation Ltd full year results
SGT – Singapore Telecommunications Ltd and Optus first quarter results
AWC – Alumina Ltd first half results
AQP – Aquarius Platinum Ltd full year results
ASX – to open sharply lower
US & UK/Europe – sharply lower
US ADRs – Sharply Lower
BHP down -5.2% & RIO down -6.9%; AWC down -5.5%
ANZ down -3.5% & NAB down -2.6%
NEM up 0.7%, JHX down , NWS down -4.7%
Commodities Stock Index down -2.3%
Gold Stocks Index up 2.6%
Oil Stocks Index down -3.8%
By Michael Hevern
Head of Research
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