Online Stockmarket Trading Update

* US stock markets jumped higher from the open overnight, as traders got back into the game after the holiday-shortened week last week.
* European stock markets surged overnight with a broad rally, after reports indicated the eurozone regional leaders were making progress in resolving the eurozone debt crisis, which threatens to cripple the global financial system.
* Asian stock markets surged yesterday, as investors cheered the reports of measures designed to resolve the European debt crisis.
* Commodities prices traded higher, as Gold prices higher to $US1,685 and while crude-oil closed around $US98.

The SPI Futures is trading around the key pivot level of 4250, ending up 0.6% (or 26 points) at 4,104. The key levels for our index today are 4050 to 4180.

Yesterday Aussie shares started the week on positive note, on the back of hopes of an Italian bailout by the IMF. The International Monetary Fund is reported to be setting up a EUR 600 billion ($A820 billion) rescue fund for Italy, to be used to refinance EUR 300 billion in debt due for repayment in 2012.  Such a bailout would give the ECB some breathing space to resolve the debt issues of the other PIIGS economies.

Shares in the All Ordinaries (XAO) generally eased again, closing up 1.7% at 4126, as the S&P/ASX 200 (XJO) closed up 1.9% at 4058.

Aussie traders are expected to go bargain hunting again today, after the sharply higher leads from the US and European markets. Traders’ fears over the eurozone debt crisis subsided after encouraging comments from Germany and France over the need for an action plan, and in the US the “Black Friday” figures outperformed those of last year. We continue to have a busy week for AGMs and production reports, see below for details.

Economics News Today

*  Government Federal Budget Review.

US Markets 

US stock markets jumped higher from the open overnight, as traders got back into the game after the holiday shortened week last week.  

The Dow Jones Index has snapped a four-day losing streak, as all the DOW components finished well in the green. In the broader markets the S&P 500 and the tech-heavy Nasdaq outperformed up over 3% for the session, after recovering from last week’s fall of -4.8%, the worst Thanksgiving-week performance since the middle of last century.

Energy, financials, materials and industrials sectors all jumped over 3%.  The New York Stock Exchange put into effect its Rule 48 before the market open, which is designed to smooth trading in sessions when stocks stage big swings, a moved that the exchange has made several times since markets turned volatile in August.

Financial stocks finished performed well, but finished off session highs, as Morgan Stanley stock analysts cut their ratings on the US large-cap banking sector citing slowing global growth and the chance of a 4Q recession in Europe.

Retail sales on Black Friday rose 6.6% and sales for the four days starting on Thanksgiving increased 16%, according to ShopperTrak. The National Retail Federation said shoppers spent 9.1% more on Black Friday than the same time last year.  The SPDR S&P Retail exchange-traded fund rose 3.5% on the back of these figures.

Most of the company groups that make up the S&P index traded higher with Materials up 3.8%, Energy up 3.8%, Financials up 2.9%, Technology up 3.3%, Industrials were down -0.2%, while Consumer Staples were up 0.4%.

The Dow Jones closed up 2.6% (or 291 points) at 11,523, the S&P 500 index closed up 2.9% (or 34 points) at 1,193, the Nasdaq ended up 3.5% (or 3.5 points) at 2,527, and the smaller cap Russell 2000 was  up 4.8%.

European Markets

European stock markets surged overnight with a broad rally, after reports indicated the eurozone regional leaders were making progress in resolving the eurozone debt crisis, which threatens to cripple the global financial system.  The Stoxx Europe 600 index rose 3.8%.  

Investors cheered the news from the Wall Street Journal (WSJ) which claimed French and German officials are set to agree on a new stability pact to contain the crisis. Also a report indicated the International Monetary Fund (IMF) could provide between EUR400 and EUR600 billion in financial assistance to Italy, though the IMF denied that it is in bailout talks with the Italy.  

Financials were among the biggest gainers with French banks surging. BNP Paribas SA jumped 10.3% and Societe Generale SA rose 9.6%. Also stocks exposed to global economic growth made substantial gains after having been sold-down heavily in recent weeks.  The French CAC 40 index surged above the 3,000 level, as the German DAX 30 index jumped close to 5%.

In London the FTSE 100 index closed up 2.8% (or 148 points) at 5,312, the German DAX was up 4.6% (or 252 points) at 5,645 while in France the CAC was up 5.5% (or 156 points) at 3,012. Spain was up 4.6% and Italy ended up 4.6%.

Asian Markets

Asian stock markets surged yesterday, as investors cheered the reports of measures designed to resolve the European debt crisis.  Europe remains the focus for global markets and stocks are now oversold due to the ongoing pessimitic news about the eurozone debt crisis.  

Investors were buoyed by news that eurozone leaders and the IMF are looking to take some substantial action to address the worsening crisis.  Across the region the banks and growth-sensitive resource stocks rose strongly, as there was strength in many commodities with the hint of some action on the debt crisis front in the eurozone.

In China the SSE Composite closed up 0.1% (or 3 points) at 2,383, while in Hong Kong the Hang Seng Index was up 2.0% (or 348 points) at 18,037 and in Japan the Nikkei 225 Index was closed up 1.5% (or 127 points) at 8,287. the South Korean KOSPI was up 2.0% for the session, while the Indian market was up 3.0%.

Commodities

The Dollar Index was lower at 79.22 on a higher Euro, while the Australian Dollar last traded higher at 98.97. Commodities prices traded higher.

For the session the benchmark crude NYMEX for December delivery was up 1.0% (or $US0.97) to settle at $US97.75.  Copper prices are seeking a support level as Copper for December delivery was up 2.8% (or 9 cents) at $US3.2680.  December gold was up 1.5% (or $US25.30) at $US1,685. 

ASX News Today

BHP – CEO Marius Kloppers noted that the European debt crisis was having a negative impact on bank financing. Mr Kloppers went on to say that BHP Billiton expects steel output in China to continue at current rates for some time, which is below historical highs, however he did expect iron ore demand from Chinese steel mills to stabilise around current levels, after recent fluctuations.

CNA – CNA shareholders have approved a plan by Rio Tinto and Japan’s Mitsubishi to buy the remaining shares in coal miner Coal and Allied Industries.

GBG – Gindalbie Metals confirmed it has completed the full acquisition of the Warriedar Iron Ore Joint Venture from Royal Resources Limited.

Insurers –  (IAG/QBE/SUN) Insurers estimate the damage from the fires in Western Australia’s Margaret River region will be in the tens of millions of dollars.

QAN – Qantas warned that it expects its underlying pre-tax profits to be between $140 and $190 million for the first half, after they booked costs of around $650 million from higher fuel prices and costs due to its disruptive industrial dispute.  Qantas estimates that the industrial dispute with three unions representing long-haul pilots, aircraft engineers and ground crews will cost around $194 million in the first half.

NFK -Norfolk Group, the engineering company, has signed an $82 million contract with BHP Billiton for work on rail signalling systems in the Pilbara region of Western Australia.

RIO – Rio Tinto has surprised the market by revealing plans to expand its flagship iron ore operations in Western Australia beyond previous expectations.  However the expansion which will lift its iron ore production in the Pilbara from 225 million tonnes per year to 353 million tonnes by 2015, meaning that the capital costs for the project will also rise higher than previous guidance and an overall spending increase on capital projects by 17 percent in 2012, which would add to cost pressures particularly since iron ore spot prices have dropped 30% since September. 

Ex-dividend Date

Commodities Stock Index  up 3%
Gold Stocks Index up 2.6%
Oil Stocks Index  up 3.8% 

US ADRs – Broadly Higher

BHP  up 5.0% & RIO up 5.7%; AWC up 10%
ANZ up 5.3% & NAB up 5.7%
NEM  up 2.3%, JHX up 4.2%, NWS up 3.3%

By Michael Hevern
Head of Research