Online Stockmarket Trading Update

* U.S. stocks fell modestly overnight in another rollercoaster session.  Investors had to deal with mixed signals.�
* European stock markets fell again overnight in a volatile session, as Spanish debt funding costs remained high.
* Asian stock markets eased again.  Investor sentiment was weighed by U.S. and European debt issues, but bargain hunters appeared to take tentative steps into the market late in the session.
* Commodities prices traded mixed, as gold prices hovered around $US1,675 and crude-oil closed around $US98.

The SPI Futures is trading around the key pivot level of 4250, ending down -0.6% (or -26 points) at 4,126. The key levels for our index today are 4080 to 4180.

Yesterday Australian stocks started lower again on the open, but bargain hunters tentatively entered the market in the afternoon session.  Investors remain cautious about the problems of debt financing in the euro zone’s PIIGS economies. However the markets in the Asian region have led the recent sell down, and traders appear to be starting to see some “value” in beaten down stocks.  The comments from Chinese Vice Premier Wang Qishan, who warned that a lasting global recession is on the cards continued to weigh on our miners, as commodities prices weakened.

Yesterday JPMorgan chief economist Stephen Walters said that owing to the ongoing debt crisis in Europe, there could see three RBA interest rate cuts in the next twelve months, with the first cut as early as December. 

Shares in the All Ordinaries (XAO) generally eased again yesterday, closing down -0.7% at 4204, and the S&P/ASX 200 (XJO) closed down -0.7% at 4133.

Aussie traders are again expected to start looking for some value today, despite the negative leads from the US and European markets. We continue to have a busy week for AGMs and production reports, see below for details.

Economics News Today

*  Q3 Construction Work Done Report

US Markets

US stocks fell modestly overnight in another rollercoaster session.  Investors had to deal with mixed signals, weighing slower-than-expected domestic economic growth and continued euro zone concerns with signs that the Federal Reserve may take new steps to introduce quantative easing to support the US economy.

The Dow Jones Index fell to its lowest level since mid-October, and has been down four of the past five sessions, falling -5% in that time. The S&P 500 index has lost -5.5% during its five consecutive sessions of losses, while the tech-heavy Nasdaq has lost ground in the past five sessions, its longest losing streak since July 2010.  

The losses came after the US government revised third-quarter growth to 2% from an initial estimate of 2.5%, but on the flip side Moody’s Investors Service reiterated its triple-A rating on the US and said the committee’s failure to agree would not by itself lead to a rating change. Also, the minutes from the Fed’s FOMC policy meeting boosted some hopes that the central bank may embark on more stimulative measures.  

In corporate news Hewlett-Packard dropped -0.8% after the technology company issued a disappointing earnings outlook for the current quarter and the next fiscal year. 

In commodities crude oil futures traded back above $98 a barrel, as tensions in the Middle East fueled concerns over supplies from that region, while gold futures rebounded from 4-week lows as a weaker dollar pushed the price higher.

All ten company groups that make up the S&P index traded lower with Materials down -0.9%, Energy down -1.0%, Financials down -0.7%, Technology down -0.3%, Industrials down -0.9%, while Consumer Staples were down -0.2%.

The Dow Jones closed down -0.5% (or -53 points) at 11,493 and the S&P 500 index closed down -0.4% (or -5 points) at 1,188. The Nasdaq ended down -0.1% (or -2 points) at 2,521, and the smaller cap Russell 2000 was down -0.8%.

European Markets

European stock markets fell again overnight in a volatile session, as Spanish debt funding costs remained high. The Stoxx Europe 600 index fell -0.7%.  

European markets had initially gained in the early session after Standard & Poor’s Ratings Services said the US credit rating was unaffected by news that a congressional super committee had failed to reach agreement on a deficit-reduction plan.  However losses came after the US government revised third-quarter growth to 2% from an initial estimate of 2.5% and as the Spanish government sold EUR3 billion in 3 and 6 month bills overnight, but at a much higher yield, as yields on 10-year Spanish government bonds remained elevated at 6.53%.  

Financials weighed yet again. This time Germany was in focus as Commerzbank AG shares plunged -15% after a Reuters report, citing unnamed sources close to the bank, claimed Commerzbank may need much more capital than previously expected to meet a 9% core capital buffer by the middle of 2012 as required by the European Banking Authority. Deutsche Bank AG fell -3.4%.

In France banks plunged another -5% due to concerns over a possible downgrade of the French economy.

In London the FTSE 100 index closed down -0.3% (or -16 points) at 5,207, the German DAX was down -1.2% (or -69 points) at 5,537 while in France the CAC was down -0.8% (or -24 points) at 2,870. Spain was down -1.5% and Italy was down -1.5%. 

Asian Markets

Asian stock markets eased again yesterday.  Investor sentiment was weighed by US and European debt issues, but bargain hunters appeared to take tentative steps into the market late in the session.  

Traders have been buffeted by the ongoing concerns over debt issues, with the special US debt-cutting super committee failing to reach agreement on how to reduce the nation’s budget deficit, and in Europe now there are concerns about France’s triple-A credit rating.  

Across the region the financials weighed again, but towards the end of the session we saw traders buying those beaten down growth sensitive stocks. In Japan, export companies saw gains of around 2% as the US dollar held strong against the yen.  Technology stocks saw some buying too, especially Chinese internet stocks which rose around 3% for the session.

In China the SSE Composite closed down -0.1% (or -1 point) at 2,412, while in Hong Kong the Hang Seng Index was up 0.1% (or 26 points) at 18,252 and in Japan the Nikkei 225 Index closed down -0.4% (or -34 points) at 8,315. The South Korean KOSPI was up 0.3% for the session, while the Indian market was up 0.8%.

Commodities

The Dollar Index was higher at 78.24 on a lower Euro, while the Australian Dollar last traded lower at 98.45. Commodities prices traded lower.

For the session the benchmark crude NYMEX for December delivery was up 1% (or $US1.00) to settle at $US97.92. Copper prices are seeking a support level as Copper for December delivery was up 1% (or 3 cents) at $US3.3350.  December gold was up 1.4% (or $US23.90 at $US1,675. 

ASX News Today

BSL – BlueScope Steel plans to sell $600 million in new shares at 40cps or a 34 percent discount to raise money to strengthen the company’s financial position by repaying debt. The fully underwritten, 4-for-5 entitlement offer will strengthen the balance sheet and proceeds will go to repaying debt.

CBA – Commonwealth Bank and National Australia Bank have each delayed plans to sell up to $1.5 billion of covered bonds in the international markets due to the impact of Europe’s debt crisis, banking sources say. They have defered the bond issue due to soaring borrowing costs in Europe.

CMW – Crowmwell Property Group announced a $145.4 equity raising, and a $186 million Brisbane office building acquisition.

CER – Centro the shopping centre operator has successfully completed the first hurdle in its bid for a restructure at a series of meetings for security holders to consider the move.

QAN – Qantas and the unions will face Fair Work Australia arbitration in an attempt to resolve the long-running industrial dispute with Qantas.

QRN – The Queensland government has declared victory in its privatisation of the state freight rail line.

TGA – Thorn Group expects to increase full year profit by more than 20 percent to $28 million as lower income households rent fridges and washing machines for longer. 

Ex-dividend Date

None

Commodities Stock Index down -0.8%
Gold Stocks Index up 1.0%
Oil Stocks Index down -1.2% 

US ADRs – Generally Lower

BHP  down -1.0% & RIO down -1.2%; AWC up 2.6%
ANZ down -1.0% & NAB up 0.4%
NEM  up 0.4%, JHX lower, NWS up 0.4%

By Michael Hevern
Head of Research