Stock Market Analysis: Markets Weak Across The Globe

April 24th, 2012Michael

*  US stock markets sold-down from the open, joining in on the global sell-off across world markets.
*  European stock markets fell overnight, as traders were unnerved by political uncertainty in France and the Netherlands.
*  Asian stock markets fell yesterday after Chinese data showed April manufacturing activity continued to contract. Marekts across the region finished lower.
*  Commodities prices were lower, with Gold prices traded around $US1,638, while crude-oil closed around $US103.

Australian shares are expected to sell-off today, after stocks were sold-down overseas.  Markets sold down from the open in the European markets and in the US as traders chose caution ahead of a number of central bank meetings and political uncertainty in the eurozone.  Watch out for Australian CPI due out today.

The SPI Futures is trading above the key pivot level of 4250, ending down -0.5% (or -21  points) at 4,337. The key levels for our index this week are 4280 to 4360.

See below for ASX listed companies in the news today.

Economics News Today

*  Q1 CPI Figures (est. 0.7%).

US Markets

US stock markets sold-down from the open, joining in on the global sell-off across world markets.

Traders took their cue from eurozone traders who sold-down stocks after data showed that business activity in the eurozone’s private sector contracted the most in five months in April and political uncertainty reigned in France and the Netherlands.

In the broader market the falls were led by the materials, industrials and consumer staples sectors, as all 10 S&P500 sectors finished in the red.

In corporate news Wal-Mart slumped -4.7%, for its biggest percentage drop since January 2009, after bribery allegations in Mexico, while Kellogg plunged -6.1% after the cereal and snacks maker lowered its full-year profit and sales outlook, and saying its 1Q results were weaker than expected. Netflix posted a 4Q net loss smaller than expected but its shares dropped -4%.

All ten company groups that make up the S&P index traded mixed, with Materials down -1.2%, Energy down -0.1%, Financials down -0.7%, Industrials down -1.1%, Technology down -0.8%, while Consumer Staples were down -1.1%.

The Dow Jones closed down -0.8% (or -102 points) at 12,927, the S&P 500 index was down -0.8% (or -12 points) at 1,367, the Nasdaq ended down -1.0% (or -30 points) at 2,970 and the smaller cap Russell 2000 was down -1.5%.

European Markets

European stock markets fell overnight, as traders were unnerved by political uncertainty in France and the Netherlands. The Stoxx Europe 600 index sank 2.3%, closing at its lowest level since mid-January.

The German DAX broke down to 4-month lows, after a preliminary reading of German manufacturing purchasing managers’ index (PMI) by Markit showed business activity contracted at the fastest level since 2009.

In France the market was weak, giving back all its gains for the year, as traders sold-off after the first-round presidential election resulted in Socialist candidate Francois Hollande advancing to the next round.  Hollande is seen as less committed to fiscal austerity than the incumbant President Nicolas Sarkozy. France will face an election on May 6.

Adding further to the selling pressure in the region, Dutch Prime Minister Mark Rutte and his cabinet resigned after budget talks disintegrated over the weekend, which may lead to a loss of the country’s AAA credit rating and pave the way for an early election.

Traders are monitoring the bond market as the cost of funding in the PIIGS economies remains an issue as in contrast the yield on 10-year German Bunds fell to a record low of 1.55% as investors headed for safety.

In London the FTSE 100 index last closed down -1.9% (or -158 points) at 5,665, the German DAX was last down -3.4% (or -227 points) at 6,523 while in France the CAC was last down -2.8% (or -90 points) at 3,098, Spain was down -2.8% and Italy ended down -3.8%.

Asian Markets

Asian stock markets fell yesterday after Chinese data showed April manufacturing activity continued to contract.

Markets across the region finished lower.  Falls were led by the financials, but resource stocks also eased during the session. The HSBC preliminary “flash” reading of China manufacturing Purchasing Managers’ Index (PMI) showed that activity improved in April from March, but remained below the threshold of 50, indicating a contraction.  Traders exercised caution ahead of some key central bank policy setting board meetings in the US and Japan, and the French election. 

In China the SSE Composite last closed down -0.8% (or -18 points) at 2,388, while in Hong Kong the Hang Seng Index last closed down -1.8% (or -386 points) at 20,624 and in Japan the Nikkei 225 Index was closed down -0.2% (or -19 points) at 9,542. The South Korean KOSPI was down -0.1% for the session, while the Indian market closed down -1.6%. 

Commodities

The Dollar Index was lower at 79.37 on a higher Euro, while the Australian Dollar last traded lower at 1.0314. Commodities prices traded generally lower.

For the session the benchmark crude NYMEX for April delivery was down -0.8% (or -$US0.80) to settle at $US103.07.  Copper prices are backing off key resistance levels as Copper for April delivery was down -2.3% (or 8 cents) at $US3.6230. April gold was down -0.2% (or -$US3.60) at $US1,638.50. 

ASX News Today

BKN – Bradken the mining equipment maker, has cut its full year profit guidance due to increased costs and lower sales in its rail division. Full year EBITDA was previously expected to grow by between 25 and 30 percent but is now expected to come in 10 percent higher at between $210 million and $220 million.

BLD – Boral the building materials producer, has cut its full year profit guidance by $22 million due to the impact of heavy rain and weak housing activity on its operations.

BRM – Brockman Resources says Hong Kong-listed Wah Nam International has extended its takeover offer for iron ore explorer Brockman Resources as it seeks to take control.

BTA –  Biota, the anti infective drug developer, is set to quit Australia and move to the U.S., where the company says investors better understand the biotechnology sector. Biota Holdings has agreed to take over US firm Nabi Biopharma to create a $250 million group in its move to the US.

COK – Cockatoo Coal shares plunged -7.3 per cent after South Korea’s SK Networks Co Ltd decided not to buy a 40 percent stake in Cockatoo, after an internal review.

PSH – Penrice Soda Holdings, the chemicals business, has forecast a full year loss due to weakening demand for the soda ash it produces.

SPT –  Spotless Group, the industrial services company, is still negotiating with its private equity suitor 5 months after a first bid was made by suitor Pacific Equity Partners, and there remains no guarantee a deal will be done.

TLS – Telstra CEO has nominated cloud computing, media asset management and expansion into Asia as potential growth areas that could flow from the introduction of the national broadband network (NBN).

WES – Coles third quarter sales could fall short of rival Woolworths as shelf prices continue to fall, amid heavy discounting and food deflation.

Corporate News

Reporting today:  
Atlas Iron Ltd (AGO)             March Quarterly Report
Beach Energy (BPT)              Q3 2012 Activities Report
Mirabela Nickel Ltd (MBN)   March Trading statement conference
Newcrest Mining Ltd (NCM)  March Quarterly Results
Wesfarmers Ltd (WES)          Q3 2012 Sales conference call
Western Areas NL (WSA)     March Quarterly Activities Report  

Ex-dividend Date

Steamships Trading (SST)

Market Summary 

ASX – to open lower
US & UK/Europe – lower

Commodities Stock Index down -1.5%
Gold Stocks Index down -1.7%
Oil Stocks Index  down -0.7% 

US ADRs – Broadly Lower
BHP down -2.0%, RIO down -4.2%; AWC down -1.6%
ANZ  down -0.8% & NAB down -1.4%
NEM down -2.0%, JHX down -1.9%, NWS down -0.4%

By Michael Hevern
Head of Research
 

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