Morning Market Wrap
US Market sees late session selling; Likely to Weigh on ASX Today
US stocks closed lower after an 80 point sell-off late in the session, led by financial companies down over 3% on tightening credit markets. Concerns over the uncertainty of the implications of the US government’s financial reforms plan and the continuing European sovereign debt issues.
Our markets are expected to trade weaker today. Miners continue to pressure government on the resources tax (RSPT). The SPI Futures is below key level of 4400, the ASX is set to open lower as the SPI closed down 70 points (or -1.6%) at 4,346; US negative lead. Volatility continues, key levels today are 4200 and 4450.
The Dow Jones Industrial Average saw late session sell-off and was down 126 points, or 1.24 per cent, at 10,066, closing at its lows. In the broader market the Standard & Poor’s 500 closed down 14 points, or 1.29 per cent, at 1073. The Nasdaq composite closed down 15 points, or 0.69 per cent, at 2213.
In Europe a Spanish bank had to be rescued, which caused investor concern over contagion in Europe’s Banking system over credit and bad debt issues. European stock markets closed mixed on overnight. In the U.K. the FTSE 100 index ended up 7 points, or 0.13 per cent, at 5069 and across in the German DAX 30 ended down 23 points, or 0.40 per cent, at 5805 and in France the CAC 40 ended up flat at 3430.93.
CHINA was up 3.5% at 2,673 and is trying to find support at these levels, while in Hong Kong the HSI closed up 0.6%.
Oil prices stabilised overnight, pausing a three-week drop that has seen prices fall as much as 25 per cent amid market concerns over the eurozone’s debt crisis and a fragile global economic recovery. New York Light sweet crude for delivery in July, settled up 17 US cents at $US70.21 a barrel. Gold for June delivery rose $US17.90 to settle at $US1194.00 an ounce. Silver for July delivery rose 34.9 US cents to settle at $US18.00 an ounce. Copper for July delivery settled 8.65 US cents higher at $US3.1475 a pound.
US Market Sees Late Session Selling
SP500: down 1.3% at 1,073 – Financials Lead Selling
DOW down 1.2% at 10,066
Broadly Lower – on Europe Debt Issues
NASDAQ: flat at 2,213
Dollar Index: Higher as Euro Falls Towards 4-year Lows
A$ down 82.41 (at 10-month Lows)
FTSE: down 0.2% at 5,063 – Financials Weigh
DAX down 0.4% – Europe Runs Scared
Markets Sell-off over Debt & Bank Bailouts
CHINA: up 3.5% at 2,673 – Finding Suport?
HSI up 0.6%
Oil: down 0.7% a ($70.21)
Recovers from 3-Week 25% Sell-off and focus still on spread of oil spill in Gulf of Mexico
Gold: up 1.0% at ($1,194)
SPI: Below Key 4400 ASX
SPI down (-1.6%) at 4346
The SPI Futures is below key level of 4400 the ASX is set to open lower as the SPI closed down 70 points (or -1.6%) at 4,346; U.S. negative lead. Volatility continues, key levels today are 4200 and 4450.
AUD – bounces drifts towards 10 months lows as investors exit risk.
BHP – disappointed by misrepresentation about the level of taxes it pays on its Australian operations.
BRM - Brockman ts relationship with Sinosteel and the development of its flagship Pilbara iron ore project is not affected by the proposed Resources Super Profits Tax (RSPT).
ERA – assessing implications of radioactive waste from the Ranger uranium mine said to have flowed into world heritage-listed wetlands in Kakadu National Park.
HSP – Healthscope says it will open its books to a private equity consortium offering a $1.8 billion takeover proposal for the private hospitals operator and pathology provider.
QAN – Faces more headwinds, as code-share partner British Airways’s cabin crew union strike in UK.
RIO – says resources tax (RSPT) increases sovereign risk for Australian projects comparable to any of its projects in other deveoping countries
SIP – Sigma the drugs maker and distributor last week’s t/o came from Aspen Pharmacare Holdings Ltd.
WOR – WorelyParsons 50:50 JV has been awarded a contract to manage the development of a major new bauxite mine and alumina refinery in Saudi Arabia. Revenue to Worley is estimated to be $100 million
TLS – ACCC is seeking to fine Telstra $40 million for its refusal to grant competitors access to Telstra-controlled telephone exchanges.
Market volatility will continue near term, as world investors come to terms with the ramifications of the credit squeeze and new regulatory regimes, and investors continue to have concerns over European debt issues.
We think that the trading strategy is to get small, reduce you exposure to equities, start to look for value. Be aware of short covering rallies.
ASX – to open lower
US & UK/Europe – US Late Sell-off; Europe Closed Mixed
U.S. ADRs – Broadly Lower!!!…
BHP down 1.7% & RIO down 0.9%; AWC dwon 2.9%
ANZ down 0.5% & NAB up 0.6%
NEM flat, JHX down 0.5%, NWS down 1.3%
Commodities Stock Index down 1.8%
Gold Stocks Index up 0.4%
Oil Stocks Index down 2.5%
By Michael Hevern
Head of Research