* US stock markets ended lower for the week, as the eurozone debt crisis continued to weigh on investor sentiment. The quarterly occurrence traders refer to as “quadruple witching” did not impact volatility.
* European stock markets finished mostly lower. The Stoxx Europe 600 edged down again -0.4%.
* Asian stock markets closed broadly higher on Friday but were down for the week. Traders continue to show caution.
* Commodities prices traded higher, as gold prices moved higher to $US1,593 and crude-oil closed around $US94.
The SPI Futures is trading above the key pivot level of 4180, ending down -0.2% (or -10 points) at 4,124. The key levels for our index today are 4230 to 4100.
On Friday, Australian stocks broke their three-day losing streak following positive data from the US and a successful Spanish bond auction. However the indexes were lower by around -1% and down for a second week. There was concern among bank investors in the morning session after an unsourced report in the Australian Financial Review claimed that the banking regulator APRA had ordered the banking sector to stress test their portfolios for an economic shock within the next week. This test was said to include modelling of a contraction in gross domestic product, the unemployment rate climbing to 12 percent, as well as a 30 percent decline in house prices and a 40 per cent drop in commercial property values. However ANZ chairman John Morschel rejected the reports, describing the claims as “not correct”.
Retail shares were hammered on Friday after JB Hi-Fi released a profit warning after market close on Thursday, saying that even though sales were broadly in line with earlier guidance, profits had been hit by steep price deflation, particularly in TV panels, which had fallen by 20 percent to 25 percent and that earnings before interest and tax for the six months to 31 December would be about 5 percent below the previous corresponding period. JB hi-Fi shares plunged 15% on the news and the whole retail sector was down over -5% at one stage, but retailers did mange to finish off their lows for the session.
Shares in the All Ordinaries (XAO) closed up 0.5% at 4219 on Friday, and the S&P/ASX 200 (XJO) closed up 0.5% at 4152.
Aussie traders are expected to look for defensive bargains today, after the mixed leads from the US and European markets, as traders fears over the eurozone debt crisis remain elevated and US economic data boosted sentiment. The selling in the materials stocks is likely to ease, as commodities prices recovered. Note that on average the markets rise around 4.9% in the last two weeks of December and with the recent sell-off we are set up for some recovery in the next few trading days. Remember options expiry on Thursday.
See below for ASX listed companies in the news today.
Economics News Today
* Nov Foreign Exchange Transactions and Holdings of Official Reserve Assets
* Nov New Motor Vehicles sales
* Dec Consumer Inflationary Expectations Survey
* Dec RBA Bulletin.
US stock markets ended lower for the week, as the eurozone debt crisis continued to weigh on investor sentiment.
The Dow Jones Index finished below the 12,000 level, while in the broader markes the S&P 500 and Nasdaq crept higher on Friday, which also marked the quarterly occurrence traders refer to as “quadruple witching”, when stock and exchange-traded fund options expire, and when December index options, index futures and single-stock futures all expire simultaneously. Volatilty remained steady.
In economic data the US consumer price index was unchanged in November as a drop in energy costs offset a slight rise in food prices and other items, inline with expectations.
Most of the ten company groups that make up the S&P index traded higher with Materials up 0.7%, Energy up 1.1%, Financials up 0.5%, Industrials up 0.7%, Technology up 0.3%, while Consumer Staples were down -0.3%.
The Dow Jones closed down -0.1% (or -2 points) at 11,866, the S&P 500 index closed up 0.3% (or 4 points) at 1,219, the Nasdaq ended up 0.6% (or 14 points) at 2,555 and the smaller cap Russell 2000 was up 0.3%.
European stock markets finished mostly lower. The Stoxx Europe 600 edged down again by -0.4%. Markets continued to pull back as traders questioned the EU leaders’ ability and commitment to address the worsening debt crisis in the face of faltering economic growth and the threat of more credit downgrades from rating agencies.
Ratings agencies cast mixed opinions over the eurozone majors, as Standard & Poor’s threatened to cut sovereign ratings not only for many peripheral euro-zone countries but even Germany and France, both of which currently enjoy the top-notch AAA rating. The Fitch Ratings agency placed six eurozone nations including Spain, Ireland, Belgium and Italy on watch for downgrade, which cast a shadow over the eurozone. Fitch has spared France from possible cuts reaffirming its AAA rating, but has lowered France’s rating outlook to “negative” from “stable”, citing a 50/50 chance France could lose its AAA rating over the next two years. Investors chose caution on the news.
The debt laden Italian and Spanish economies are suffering from spiking eurozone borrowing costs which are at EU era highs. The eurozone problems with sovereign debt are threatening to impact on the French and the German economies which are the largest of the eurozone nations, and are now at risk of losing their top-notch investment rating.
In London the FTSE 100 index closed down -0.3% (or -13 points) at 5,387, the German DAX was down -0.5% (or -29 points) at 5,701 while in France the CAC was down -0.9% (or -26 points) at 2,972. Spain was down -0.4% and Italy ended down -0.3%.
Asian markets closed broadly higher on Friday but were down for the week. Traders continue to show caution as the news out of the eurozone becomes increasingly bleak. The Chinese Shanghai Composite, which is trading at close to 3-year lows, rose 2% on Friday, snapping a 6-week losing streak. The fortunes for Aisa into the new year will depend on global economic activity, Chinese demand, the US Fed QE3 and whether the EU leaders can implement some coordinated rescue plan for the PIIGS economies.
In China the SSE Composite closed up 2.1% (or 44 points) at 2,225, while in Hong Kong the Hang Seng Index was up 1.4% (or 258 points) at 18,285 and in Japan the Nikkei 225 Index closed up 0.3% (or 24 points) at 8,402. The South Korean KOSPI was up 1.2% for the session, while the Indian market was down -2.2%.
The Dollar Index was lower at 80.26 on a higher Euro, while the Australian Dollar last traded lower at 99.82. Commodities prices traded higher.
For the session the benchmark crude NYMEX for December delivery was down -0.4% (or -$US0.34) to settle at $US93.78. Copper prices are seeking a support level as Copper for December delivery was up 1.9% (or 6.4 cents) at $US3.3350. December gold was up 1.3% (or $U21.00) at $US1,593.
ASX News Today
ANZ – ANZ Bank says that the European debt crisis is increasing the cost of funds.
CCL – Coca Cola Amatil says its second half profit will fall by 0.5 percent because of a stronger Australian dollar. It also confirmed its exit from the Pacific Beverages brewing joint venture with SABMiller, and indicated it expects to pay up to $180 million for Foster’s ready-to-drink (RTD) spirits business.
BEN – Bendigo and Adelaide Bank will pay about $130 million for Bank of Cypress Australia, which caters to the Greek and Cypriot communities in NSW, Victoria and South Australia.
CTX – Caltex expects a drop in profit in 2011 due to challenging trading conditions and disruptions to its operations.
IAG – Insurance Australia Group has bought New Zealand’s second largest general insurer for $NZ380 million.
JBH – JB Hi-Fi released a profit warning, saying that even though sales were broadly in line with earlier guidance, profits had been hit by steep price deflation, particularly in TV panels, which had fallen by 20 to 25 percent and that earnings before interest and tax for the six months to 31 December would be down -5 percent.
Local Corporate Reporting
DuluxGroup Ltd (DLX.AU) Full year 2011 AGM
ASX – to open higher
US & UK/Europe – higher
Commodities Stock Index up 0.1%
Gold Stocks Index down -1.7%
Oil Stocks Index down -0.1%
US ADRs – Broadly Mixed
BHP down -0.6% & RIO down -1.1%; AWC down -2.6%
ANZ up 0.2% & NAB up 0.2%
NEM up 0.2%, JHX up , NWS down -0.2%
By Michael Hevern
Head of Research