* US stock markets sold off heavily late in the session, to finish modestly lower, despite early gains. Investor sentiment remains gloomy due to the Greek debt crisis and the IMF remarking that the US and eurozone may be falling back into recession.
* European stock markets ended higher overnight, as traders bet that Greece will get its next round of funding and the Federal Reserve will inject some more stimulus into the US economy.
* Asian share markets ended mixed yesterday in volatile trade.
* Commodities prices traded mixed, and Gold prices jumped to $US1,801 and while crude-oil closed up around $US86.
The SPI Futures is trading above the key pivot level of 4080, ended up 0.8% (or 33 points) at 4,081. The key levels for our index for today are 4000 to 4150.
Yesterday Australian shares extended the losses of the prior session, on light volumes. Investor sentiment was hurt by the “surprise” downgrade of Italy’s debt rating by the Standard and Poors Ratings agency overnight. The late rebound in the US share market was not sufficient to change the gloomy mood in Australia. The news of the Italian downgrade impacted investor sentiment across the board, including banks, energy and mining sectors which were all down, due to the prospects of slowing global growth as the eurozone debt crisis drags on. Sentiment was also dampened as commodities sold off heavily overnight, with copper plunging to a 9-month low and crude-oil trading at 3-week lows.
The All Ordinaries (XAO) was down -0.9% at 4125 today, the S&P/ASX 200 (XJO) closed down -1.0% at 4040. Most sectors finished in the red, with materials, financials and real estate trust sectors all down around 1.3%, while industrials were down 0.9%. However defensive sectors were fared better and actually finished in the green with HealthCare stocks closing up 0.8% and Consumer Staples stocks closed up 0.5%.
Stocks will may see some support today ahead of the US FOMC meeting outcome which is due to be announced tonight. Gold stocks are set to lead any gains.
Overseas stocks traded mixed overnight, as US and European markets worried about a Greek default, but traders kept a wary eye on the Fed meeting outcome. The US markets sold-off late in the session after reports that the Greek bailout resolution could be delayed, despite the Greek Finance Minister assuring that Greece is taking the neccessary measures to qualify for access to the next round of bailout funding.
See below for ASX listed companies in the news today.
Economics News Today
* July Westpac-Melbourne Institute Indexes of Economic Activity
* Sept Skilled Vacancies Index.
US Markets
US stock markets sold off heavily late in the session, to finish modestly lower, despite early gains. Investor sentiment remains gloomy due to fears about the Greek debt crisis and comments from the IMF that the US and eurozone may be falling back into recession, which wouild halt the prospects of the global economic recovery.
The Dow Jones Index closed flat, as investors initially bet on a rescue for Greece and more stimulus from the Federal Reserve, when it releases a anticipated policy statement tonight. However a late session sell-off was triggered following reports that the negotiations over the bailout package for the heavily indebted eurozone nations may drag on longer than expected.
The S&P500 stock index finished modestly lower, but the tech-heavy Nasdaq Composite sold-off almost -1%. Investors showed concern after a coalition of the International Monetary Fund, European Commission and European Central Bank were not expected to revisit the Greek situation until mid-October, draging on the resolution of the Greek situation.
In the broader market the financial, technology and energy sector all dragged on the market, but some defensive sectors finished in the green, namely healthcare and consumer staples. Gold prices jumped above $US1,800, while crude-oil closed above $US86 per barrel.
Traders are expecting the Fed Reserve to announce “Operation Twist” at the end of its 2-day meeting of its monetary policy tonight. The plan is expcted to involve the Fed attempting to push down long-term interest rates, while stimulating the economy by shifting the average maturity of its $US2.7 trillion balance sheet further out.
All ten company groups that make up the S&P index traded sharply lower: Industrials were down -0.7%, the Materials were down -1.2%, Energy sector was were down -0.6%, Financials sector was down -0.3%, Consumer Staples were down -0.5%, while the Technology sector was down -0.2%.
The Dow Jones closed up 0.1% (or 8 points) at 11,409, the S&P 500 index closed down -0.2% (or -2 points) at 1,202, the Nasdaq ended down -0.9% (or -23 points) at 2,590, and the smaller cap Russell 2000 was down -1.8%.
European Markets
European stock markets ended higher overnight, as traders bet that Greece will get its next round of funding and the Federal Reserve will inject some more stimulus into the US economy. The Stoxx Europe 600 index rose 1.8%.
The Greek finance ministry is telling creditors that Greece can meet its deficit reduction obligations, and is taking the necessary action to qualify for EUR8 billion in bailout funds, without which Greece will run out of money by mid-October.
The International Monetary Fund (IMF), has cut its forecast for global growth, citing slow private sector demand, burgeoning sovereign debt and bank capital adequacy and liquidity issues. They highlighted that the world is in danger falling into a double dip recession, as the recovery has weakened considerably and the global financial system is at risk of freezing up again. They downgraded US economic growth forecast to 1.5%, and the UK forecast to 1.1%, while the eurozone growth is expected to be 1.6%, with Germany the only EU country with forecast growth above 2%. The IMF went on to say that governments need to consider that austerity measures inhibit future growth prospects and that the eurozone needs to cut their interest rates going forward.
In London the FTSE 100 index gained 2%, as retailers and miners added to gains from drug stocks, while the German DAX 30 index rose almost 3%. The Italian market brushed off the Standard and Poor’s downgrade finishing up 1.9%.
In London the FTSE 100 index closed up 2.0% (or 104 points) 5,364, the German DAX was up 2.9% (or -155 points) at 5,572, while in France the CAC was up 1.5% (or 44 points) at 2,984.
Asian Markets
Asian share markets ended mixed yesterday in volatile trade. The downgrade of Italy’s sovereign debt rating spooked trades due to concern that the debt contagion issues may be getting out of control. In Japan the Nikkei Stock Index played catchup after returning from a 3-day holiday weekend, as exporters and financials traded lower. In Hong Kong the Hang Seng Index and the Chinese Shanghai Composite Index gained 0.4%.
In China the SSE Composite up 0.4% (or 10 points) at 2,448, while in Hong Kong the Hang Seng Index was up 0.5% (or 97 points) at 19,015 and in Japan the Nikkei 225 Index was down -1.6% (or -143 points) at 8,721, South Korean KOSPI was up 0.9% for the session, while the Indian market was up 2.1%.
Commodities
The Dollar Index was lower at 76.97 on a higher Euro, while the Australian Dollar last traded higher at 102.71. Commodities prices were mixed.
For the session the Benchmark crude NYMEX for September delivery was up 1.4% (or $US1.20) settle at $US86.76. Copper prices are still below key support level as Copper for September delivery was down -1.5% (or -5.5 cents) at $US3.7050. September gold was up 1.7% (or $US30.20) at $US1,801.50.
ASX News Today
JHX – The tax office has appealed to the High Court after the Full Federal Court found in favour of James Hardie Industries SE over a $242 million disputed tax assessment.
LEI – Leighton Holdings Ltd subsidiary Thiess has won a $100 million contract with Fortescue Metals Group Ltd for works on the Solomon Hub iron ore mine in Western Australia’s Pilbara region.
MAP – Traffic through Sydney Airport declined slightly in August from the same month a year earlier.
MTS – Metcash is free to takeover Franklins after the Federal Court has dismissed an interim application by the competition watchdog ACCC to prevent Metcash Ltd from going ahead with the deal.
NHC – New Hope Corporation says it has almost tripled its full-year profit, as coal exports rose to a record and the miner sold stakes in Arrow Energy and the Lenton project, but profit before non regular items fell 20 per cent to $147 million and revenue declined 11 percent.
SVW – Media, industrial services and investment group Seven Group Holdings Ltd (SGH) proposes to make an off-market takeover offer for the shares in National Hire Group Ltd that it does not already own.
QAN – Qantas passengers will not face delays on Wednesday after the union ruled out further strike action, saying people had been “inconvenienced enough”.
SRQ – Straits Resources will pay $US120 million to restructure an existing sales deal with a JP Morgan company for copper from its Tritton mine in NSW to reflect lower prices for the metal.
TPM – Telecommunications services provider TPG Telecom Ltd has
announced a 40 percent increase in full year net profits as the company enjoys strong subscriber growth in its broadband business.
Local Corporate Reporting
Alesco Corp Ltd (ALS) Full year 2011 AGM
New Hope Corp Ltd (NHC) Full year 2011 Preliminary results
Murchison Metals Ltd (MMX) Full year 2011 Results
Ex-dividend Date
GRR – Grange Resources.
Market Summary
ASX – to open higher
US & UK/Europe – EU higher, US lower
Commodities Stock Index down -0.6%
Gold Stocks Index up 2.9%
Oil Stocks Index down -0.3%
US ADRs – Broadly Lower!!…
BHP down -1.1% & RIO down -0.7%; AWC down -3.1%
ANZ down -0.1% & NAB down -1.4%
NEM up 5.5%, JHX down -1.1%, NWS down -0.2%
By Michael Hevern
Head of Research
