* US and European stock markets traded sharply lower overnight, after a number of US ratings agencies said the EU summit resolution would not stave off potential downgrades into the new year.
* Asian markets rose yesterday, but most only retraced their late Friday sell-off.
* Commodities prices traded lower, as Gold prices plunged to $US1,664 and crude-oil closed around $US98.
The SPI Futures is trading above the key pivot level of 4180, ending down -1.5% (or -64 points) at 4,196. The key levels for our index today are 4250 to 4150.
Yesterday the Australian share market had a strong recovery on open, after Friday’s late session sell-off. Trader sentiment was boosted by the positive leads from overseas markets after leaders at the EU summit discussed an action plan to address the region’s economic crisis. The 26 European Union members, excluding Britain, said that they are set to agree on the new fiscal rules that set out tougher spending measures, in order to reinstate investor confidence in the region’s sovereign bonds and to prevent a ballooning of sovereign debt which has triggered the current eurozone crisis.
In local economic news, the Australian Bureau of Statistics (ABS) reported that the monthly trade surplus narrowed to $1.59 billion in October from $2.56 billion in September, which was lower than expected and the smallest surplus since March, as Chinese demand for commodities fell. The ABS said iron ore exports to China fell $110 million or 3 percent in October, due to lower prices, as volumes for iron ore were up 6 percent, but prices fell 9 percent.
Also out yesterday was ABS housing data which showed the number of home loans approved in October expanded for a seventh month, boosting hopes that the housing market may be on the improve. Loans rose 0.7 percent for the month.
Aussie traders are expected to be cautious today, after the sharply lower leads from the US and European markets, as traders’ fears over the eurozone debt crisis resurfaced after Ratings Agencies said that the promises from the EU summit did little to address the current debt crisis.
See below for ASX listed companies in the news today.
Economics News Today
* Oct Lending Finance
* Q3 Dwelling Unit Commencements Housing Starts
* Nov NAB Business Survey
US Markets
US stock markets traded sharply lower overnight, after Ratings Agencies dissed the EU summit resolve. The Dow Jones Index finished just above 12,000, down -1.3%, while the selling was broad based with the S&P500 and the tech-heavy Nasdaq down over -1.3%.
US traders joined in the sell-off following drops in the European indexes and the euro dollar also fell sharply lower after the Moody’s Ratings Service said the EU summit did not do enough to address the eurozone sovereign debt crisis and the Fitch Ratings Agency was even more critical predicting a “significant” economic downturn in Europe as it evaluated the EU summit resolve.
The financial stocks posted the steepest declines in the S&P 500, but tech and materials stocks also took a substantial hit. A profit warning from Intel was another factor weighing on major indexes, and comes in the wake of the chip maker Texas Instruments also downgrading earnings for the new year. Materials stocks and commodities sold-down sharply following a report that the Chinese Communist Party leadership has no immediate plans to loosen monetary policy, which is also fuelling concerns over a slowing Chinese economy.
All ten company groups that make up the S&P index traded generally lower with the Materials down -2.3%, Energy down -2.3%, Financials down -2.4%, Industrials down -1.8%, Technology down -1.3%, and Consumer Staples down -0.3%.
The Dow Jones closed down -1.3% (or -162 points) at 12,021, the S&P 500 index closed down -1.5% (or -19 points) at 1,236, the Nasdaq ended down -1.3% (or -35 points) at 2,612 and the smaller cap Russell 2000 was down -1.6%.
European Markets
European stock markets retraced sharply overnight, as a number of US ratings agencies said the EU summit resolution would not stave off potential downgrades into the new year. The Stoxx Europe 600 index dropped -1.9%.
The Moody’s Investors Service said they will still review the ratings of all European Union countries during the first quarter of next year and that the crisis remains “critical and volatile”.
Financials across the region were heavily sold-down. Italian stocks gave back all of their gains from the previous session with the index finishing down -3.8%, as traders shook off a successful Italian bond auction, where the Treasury sold EUR7 billion of one-year bills at an average yield of 5.95% (down from 6.09%).
In Greece the market fell -2.1%, with losses led by the banks as the government resumed talks with inspectors from the International Monetary Fund (IMF), European Union (EU) and the European Central Bank (ECB) about a new bailout plan to help repay its sovereign debt.
In London the FTSE 100 index closed down -1.8% (or -101 points) at 5,428, the German DAX was down -3.4% (or -201 points) at 5,785, while in France the CAC was down -2.6% (or -83 points) at 3,089. Spain was down -1.7% and Italy ended down -2.0%.
Asian Markets
Asian stock markets rose yesterday, but most only retraced their late Friday sell-off. Traders were relieved that there were no surprises out of the EU summit.
Exporters and resource stocks were among the best gainers, as an agreement by European leaders at the EU summit to be more fiscally responsible boosted sentiment short-term, however details were sparse and the US Ratings Agencies have said overnight that eurozone downgrades are still likely into the new year.
The South Korean market rose over 1.3%, however the Chinese Shanghai Composite lost another -1%, due to concerns over the nation’s slowing economic growth, particularly with weakening exports to Europe.
In economic data this week China will be reporting their Money Supply figures, while top Chinese leaders will be meeting to set out China’s economic priorities for 2012, which is important considering the debt turmoil in Europe and the United States, which are the key export markets for the China. There will be a change in Chinese leadership at the beginning of next year.
In China the SSE Composite was down -1.0% (or -28 points) at 2,292, while in Hong Kong the Hang Seng Index was down -0.1% (or -10 points) at 18,576 and in Japan the Nikkei 225 Index was closed down -1.5% (or -129 points) at 8,653. The South Korean KOSPI was up 1.3% for the session, while the Indian market was down -2.2%.
Commodities
The Dollar Index was higher at 79.52 on a lower Euro, while the Australian Dollar last traded lower at 1.0069. Commodities prices traded sharply lower.
For the session the benchmark crude NYMEX for December delivery was down -1.5% (or -$US1.52) to settle at $US97.89. Copper prices are seeking a support level as Copper for December delivery was lower -2.6% (or 9.3 cents) at $US3.4480. December gold was down -2.8% (or -$U48.60) at $US1,664.
ASX News Today
AMP – Investment manager AMP Capital Investors will expand its presence in Japan through a partnership with a Japanese trust bank.
EXT – The regulator has said that the Chinese state-owned power company must launch a $2.2 billion takeover for Australian uranium company Extract Resources if the Chinese group is successful in its bid for Extract’s 43 percent shareholder.
LEI – Leighton Holdings subsidiary Thiess has won a $140 million contract with Australia’s largest electricity distributor Ausgrid to drill a 3.2km tunnel under Sydney’s central business district.
ORG – Origin says China Petrochemical Corp (Sinopec) has increased its stake in Origin Energy and US giant ConocoPhillips’ Australia Pacific liquefied natural gas (LNG) project.
QAN – Qantas is still in talks regarding the establishment of a premium Asian airline.
TCL – Toll road operator Transurban has refinanced $375 million of debt maturing in August 2012 with a new bank facility.
TEN – Ten Network says conditions in the advertising market are still difficult and were expected to remain so.
TLS – Telstra says its revised submission to the competition regulator regarding its participation in the national broadband network does not require further shareholder approval.
WES – Wesfarmers anticipates a $190 million writedown in its Coregas business as a result of amendments to its contracts with BlueScope Steel.
WHC – Whitehaven Coal and Billionaire Nathan Tinkler’s Aston Resources have agreed to a $5.1 billion merger.
Local Corporate Reporting
None
Ex-dividend Date
None
Market Summary
ASX – to open higher
US & UK/Europe – sharply higher
Commodities Stock Index down -3.0%
Gold Stocks Index down -3.2%
Oil Stocks Index down -2.5%
US ADRs – Sharply Lower
BHP down -3.2% & RIO down -3.5%; AWC down -6.6%
ANZ down -2.9% & NAB down -2.1%
NEM up 1.3%, JHX down -1.7% , NWS down -0.6%
By Michael Hevern
Head of Research
