* US stock markets fell sharply overnight, backing off 5-year highs, and recorded their biggest falls since last November.
* European stock markets ended higher but closed before the concern surfaced over a hung parliament in Italy.
* Asian stock markets rose yesterday led by Japan, we expect to see selling today in the Asians market, as traders look for a reason to take profits as volatility jumps.
* Commodities prices were generally lower, Gold prices rose trading around $US1,593, while crude-oil closed around $US92.
The Aussie market backed off sharply from 4-year highs and is looking to open lower today, led by the miners, as commodity prices remained inder pressure overnight. Stock prices held in Europe but sold-down sharply in the US markets overnight, as traders reacted to the “too close to call”, Italian elections, which threatens to derail the eurozone debt bailout process. Volatility is picking up from the record lows of last week and trading volumes rose sharply.
SPI Futures is trading below the key level of 5000, ended down -1.1% (or -54 points) at 4988. The key levels for the ASX200 index today are 4970 to 5040. The Australian market earnings season continues again with AWE, Beach, QBE, Ramsay and others today, after most reporting stocks were active including Crown, Santos and others.
See below for ASX listed companies in the news today.
US Markets
US stock markets fell sharply overnight, backing off 5-year highs, and recorded their biggest falls since last November. The sellers were in control throughout the session and piled on late, on news that the Italian elections could results in a hung parliament.
The three benchmark indexes all ended down around -1.6%, the Dow Jones which finished well below the 14,000 level again but remains around 5-year highs as does the S&P500 index. The Dow Jones marked a “key day” reversal today, after reaching its highest level in over 5-years, it close at 5-week lows! The S&P500 has capped its longest winning streak in 2-years, as M&A and buyback activities pick up. All ten S&P500 sectors ended lower over -1.5%, with the biggest falls coming form the Materials, Energy, Financials and Industrials sectors all down over -2.2% for the session. The VIX volatility index surged 36% to 19, its biggest jump since August 2011. The S&P500 is still up 4.3% this year and is within 4% from all-time highs and the Dow Jones is around 4% from all-time highs.
Traders were already on edge ahead of this week’s “sequestration” (on March 1), where federal spending will be reduced by $US85 billion in the final seven months of this fiscal year and by $US1.2 trillion over the next nine years and traders will be looking to Fed Chairman Ben Bernanke to clarify the Fed’s position on easing. A number of retailers will also be reporting this week, giving some guidance on a reading of consumer spending in the US in the past quarter.
The Dow Jones closed down -1.6% at 13,784, the S&P 500 index down -1.8% at 1,487, the Nasdaq ended down -1.4% at 3,116 and the smaller cap Russell 2000 was down -2.2%.
European Markets
European stock markets ended higher but closed before the concern surfaced over a hung parliament in Italy.
The Europe Stoxx 600 ended down -0.1%. This index has still risen 1.2 percent this year as volatility reached its highest level in 2-weeks. The index is currentluy on track for a ninth month of straight gains, its longest winning streak since 1997. Trading volumes in Stoxx 600 companies jumped 17 percent above the monthly average. Of the over 270 Europe Stoxx 600 companies that have reported just 54 percent have exceeded earnings expectations, while about half beat on revenue, according to Bloomberg surveys.Traders sold miners again as commodity prices continued to be under pressure, but gold miners found some support.
The three benchmark indexes were all higher, but finished off their lows, on the back of concerns rose over political leadership in Italy and what this means to the ongoing eurozone debt crisis. In Germany the market traded around 2-week highs again. In London the FTSE ended just below its five-year highs.
In London the FTSE 100 was up 1.0% at 6,355, in Germany the DAX closed up 1.5% at 7,773, while in France the CAC closed up 0.4% at 3,721, while Spain closed up 0.8%.
Asian Markets
Asian stock markets rose yesterday led by Japan, the regional benchmark index held below its 18-month highs, due to rumblings in the commodities markets. We expect to see selling today in the ASX and Asian markets, as traders look for a reason to take profits as volatility jumps.
The MSCI Asia Pacific Index rose 0.6%, hovering below its highest closing level since August 2011. The buying was broad based as five stocks rising for every three losers. Markets had been holding up on the back of M&A and better-than-expected earnings, but the selling in commodities, rumoured to be emanating from a major hedge fund liquidating its position moved into equities yesterday. The index is still up around 11% from its November lows. Of the over 350 companies on the MSCI Asia Pacific index that have reported earnings so far this quarter, about half have exceeded profit expectations, while half missed sales projections, according to Bloomberg surveys (compares with 71% of SP500 beating on profits).
Asian traders sentiment was boosted by gains in China and Hong Kong markets despite the preliminary reading of a HSBC Purchasing Managers’ Index (Flash PMI) on Chinese manufacturing was 50.4 in February, compared to 52.3 in January, (a umber above 50 indicates expansion).
Chinese stocks rebounded from their biggest weekly drop in 20 months on the back of oil refiners and brokerage companies rising on improving earnings prospects, which offset the Flash PMI reading. In Japan the Nikkei index rebounded towards highs not seen since September 2008, as traders had pushed shares on speculation that the new BoJ Governor will be more accommodative.
In China the SSE Composite closed up 0.5% at 2,325, while in Hong Kong the Hang Seng Index ended up 0.5% at 22,820 and in Japan the Nikkei 225 Index was up 2.4% at 11,663.
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Commodities
The Dollar Index was higher at 81.78 on a lower Euro, while the Australian Dollar last traded lower at 1.026. Commodities prices traded lower again.
For the session the Benchmark crude NYMEX for March delivery was down -1.1% settled at $US92.10. Copper prices are looking for key support level as Copper for March delivery was down -0.3% at $US3.521, while March Gold was up 1.3% (or $US20) at $US1,593.
ASX News Today
AWC – Alumina says its full year net losses have blown out and the troubled aluminium producer is bracing itself for more uncertainty ahead.
BPT – Beach Energy shares rose after Chevron Australia announced it will take a stake in two gas exploration sites in the Cooper Basin.
BXB – Brambles the pallet supplier has maintained its growth forecasts as it looks to expand in central and eastern Europe after posting a 26 percent increase in first half profit.
CTX – Caltex Australia has returned to profitability as its refining businesses showed the results of recent structural changes.
EGP – Echo Entertainment Group the casinos operator, says building a new integrated casino resort in Brisbane could cost around $1 billion.
LEI - Leighton Holdings says the value of a contract held for work on the Gorgon natural gas project has more than doubled to nearly $1.8 billion.
IAG – Insurance Australia Group (IAG) has raised its performance targets for the full year after fewer natural disasters contributed to a sharp rise in its first half profit.
ILU – Iluka Resources is confident of a recovery in the mineral sands industry this year but it will not come quickly enough to save 200 jobs.
ORG – Origin the energy producer and retailer, predicts profits will fall further than expected in the second half as it moves to slash 850 jobs.
PFL – Patties Foods margins and caused its first half profit to drop of -16.5 percent due to stiff competition in the supermarket frozen food.
QBE – QNE has been urged by the Finance Sector Union (FSU) to reveal whether or not it plans to send 700 Australian jobs offshore to Manila.
TEN – Ten Network Holdings shares rose as investors hope new management may improve the struggling free-to-air broadcaster’s performance.
WHG – WHK the accounting firm is considering a $320 million merger proposal from wealth management firm SFG Australia.
WHC – Whitehaven Coal chairman Mark Vaile is adamant the miner’s growth plans are on track despite a bad year resulting in the resignation of respected chief executive Tony Haggarty.
Company Reporting
Abacus Property Group (ABP) Interim 2013 Results
AWE Ltd (AWE) Interim 2013 Results
Beach Energy (BPT) Interim 2013 Results
Charter Hall Group (CHC) Interim 2013 Results
FKP Property Group (FKP) Interim 2013 Results
Flight Centre Ltd (FLT) Interim 2013 Results
QBE Insurance Group Ltd Full year 2012 Results
Ramsay Health Care Ltd Interim 2013 Results
Transfield Services Ltd Interim 2013 Results
Whitehaven Coal (WHC) Interim 2013 Results.
Ex-dividend Date
Austin Engineering
Echo Entertainment
HFA Holdings Limited
Magellan Fin Group Ltd
Mortgage Choice Ltd
NRW Holdings Limited
Origin Energy
Platinum Asset.
Market Summary
ASX – to open lower
US & UK/Europe – US End Session Sharply Lower
US ADRs – Broadly Lower!!…
ANZ -0.2%, NAB -0.5%
BHP -1.8%, NEM +0.3%, RIO -1.0%
By Michael Hevern
D2MX Investment Advisor
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