* US stock markets plunged overnight late in the session as investors were disappointed with the Fed comments and proposed action plan.
* European stock markets fell overnight with concerns about the Greek soveriegn debt crisis are weighing broadly on Europe, and the downbeat remarks from the IMF about global growth prospects also weighed.
* Asian share markets ended mostly higher yesterday, but expect a sharp sell-off today.
* Commodities prices traded lower, and Gold prices again fell, while crude-oil closed fell to around $US84.
The SPI Futures is trading below the key pivot level of 4080, ended down -2.0% (or -81 points) at 4,004. The key levels for our index for today are 3900 to 4100.
Yesterday the Australian share market bounced off the previous session lows, as volumes picked up in the afternoon session. Aussie investors woke to the news that the International Monetary Fund was warning of a global recession next year, as they downgraded their estimates for the world economic growth to 4 percent (from 4.3 percent). They said the US will grow 1.8 percent growth this year (down from 2.7 percent), while Europe is set to grow 1.6 per cent (down from 2 percent). Australia is set to outperform its peers, with forecasts of 1.8 percent growth this year (down from 3 percent) and growth of 3.3 per cent in 2012 (back from 3.5 per cent). The All Ordinaries (XAO) was up 0.7% at 4154 today, the S&P/ASX 200 (XJO) closed up 0.8% at 4072 and at 4.20 pm the SPI September futures contract was trading up 1.2% at 4092.
Aussie stocks are expected to be sold off heavily from the outset today, following on from the sharp falls in the US and Europe overnight. Fosters has finally accepted a revised $12.3 billion bid from SABMiller (at $5.53/share).
See below for ASX listed companies in the news today.
Economics News Today
* Annual Reserve Bank of Australia Report.
US Markets
US stock markets plunged overnight late in the session as investors were disappointed with the Fed comments and proposed action plan. The Dow Jones Index plunged 300 points in the last 2-hours of trading. The S&P 500 stock index and the tech-heavy Nasdaq Composite fell over -2%, again the bulk of the losses happened in the last hour of trading.
The Fed announced the much anticipated “Operation Twist” and said it would increase its share of longer term Treasurys by $US400 billion by June 2012 in an effort to make credit cheaper and spur spending and investment. The plan is to help keep mortgage rates low, and to allow the Fed to reinvest the proceeds from maturing agency debt and mortgage-backed securities into mortgage-related debt. The Fed triggered the sell-off with its read on the US economy and it was very concerned over the effects of the sovereign-debt crisis in Europe on global financial system. Three out of ten Fed officials voted against “operation twist” indicating that there is division in the Fed over the proposed way forward as the plan does not address business confidence or jump start economic growth.
There was nowhere to hide as the selling was broad-based with the materials, financial, industrails and technology sectors all sharply down over -4.2%. Banks took the brunt of the selling after Moody’s downgraded Bank of America and Citigroup’s credit ratings.Coal mining stocks sold down heavily as Walter Energy fell -12% after the metallurgical-coal producer forecast 2H11 earnings well below predictions. There was some green as Oracle and HP jumped 4.2% and 6.7%, after Oracle reported better than expected.
All ten company groups that make up the S&P index traded sharply lower again: Industrials were down -4.1%, the Materials were down -4.5%, Energy sector was were down -4.2%, Financials sector was down -5.0%, Consumer Staples were down -2.8%, while the Technology sector was down -1.5%.
The Dow Jones closed down -2.5% (or -284 points) at 11,124, the S&P 500 index closed down -2.9% (or -35 points) at 1,167, the Nasdaq ended down -2.0% (or -52 points) at 2,538, and the smaller cap Russell 2000 was down -3.7%.
European Markets
European stock markets fell overnight with concerns about the Greek soveriegn debt crisis are weighing broadly on Europe, and the downbeat remarks from the IMF about global growth prospects also weighed. The Stoxx Europe 600 index again dropped -1.6%. Across the region energy, banking and pharmaceutical shares drove the declines. French banks again sold down sharply. In London the FTSE 100 index fell -1.4%, as miners sold off after CEO Tom Albanese said that some of the RIO’s customers are requesting delays in metals shipments. The German DAX 30 index fell -2.5%, as automobile makes, banks and companies exposed to global growth sold off. The Greek market surprised rising 1.4%.
In London the FTSE 100 index closed down -1.4% (or -75 points) 5,288, the German DAX was down -2.5% (or -138 points) at 5,433, while in France the CAC was down -1.6% (or -48 points) at 2,936.
Asian Markets
Asian share markets closed mostly higher yesterday. The trading was dominated by the reaction to the IMF downgrade for global growth forecasts and the European sovereign-debt crisis, particularly Greece.
In China the SSE Composite up 2.7% (or 65 points) at 2,512, while in Hong Kong the Hang Seng Index was down -1.0% (or -190 points) at 18,824 and in Japan the Nikkei 225 Index was up 0.2% (or 20 points) at 8,741, South Korean KOSPI was up 0.9% for the session, while the Indian market was down -0.2%.
Commodities
For the session the Benchmark crude NYMEX for September delivery was down -2.4% (or $US2.12) settle at $US84.74. Copper prices are still below key support level as Copper for September delivery was down -0.7% (or -2.5 cents) at $US3.6920. September gold was down -0.1% (or -$US1.10) at $US1,782.90.
AAC – Australian Agricultural Company the beef produce says it could start building a new abattoir near Darwin in early 2012.
AGO – Atlas Iron has succeeded in its $240 million takeover of fellow iron ore miner FerrAus, gaining just under 95 percent of the target.
BHP – BHP Billiton CEO Marius Kloppers’ annual pay grew by 8.5 percent in the last financial year, to $US11.6 million.
DJS – David Jones the department store operator says it was looking to improve its long-term performance, despite full year profit falling by 1.5 percent to $168.1 million.
EPW – ERM Power the integrated energy firm has been given the nod by the WA government for its planned $500 million Three Springs power station in the Mid West region.
FGL – Foster’s Group Ltd says a decline in the Australian beer market is easing, and the market should grow again once the current period of economic uncertainty ends.
KMD – Kathmandu Holdings has quadrupled annual profit as sales shot up through the year.
MMX – Murchison Metals has reduced its full year net loss after stronger iron ore prices boosted sales revenue, and has scaled back activities at its troubled Oakajee port project in Western Australia’s Mid West.
QAN – Qantas passengers could face delays next week after the Transport Workers Union (TWU) flagged further strikes as part of an ongoing row over pay and conditions.
TEN – Ten Network has reportedly dumped The Late News and Sports Tonight from its news schedule on the back of declining ratings.
ASX Ltd (ASX) Full year 2011 AGM�
Regis Resources (RRL) Full year 2011 Results
ASX – to open sharply lower
US & UK/Europe – sharply lower
Commodities Stock Index down -4.0%
Gold Stocks Index down -2.1%
Oil Stocks Index down -3.9%
BHP down -4.8% & RIO down -6.3%; AWC down -6.0%
ANZ down -3.4% & NAB down -4.0%
NEM down -3.2%, JHX up 0.3%, NWS down -4.0%
By Michael Hevern
Head of Research
