Morning Market Wrap
US recovers from early selloff; Spanish debt weighs on Europe; ASX set to recover from late selling yesterday.
The Australian stock market is expected to open firmer today after the U.S. recovered from early losses to close flat on the day. US stocks recovered from an early 200 point sell-off as bargain hunters stepped in again, led by financial companies. Traders are looking to either provide support at these key levels or are taking profits on their short positions.
The SPI Futures is below key level of 4400 the ASX is set to open higher as the SPI closed up 65 points (or 1.5%) at 4,339; U.S. positive lead. Volatility continues, key levels today are 4200 and 4450.
The Dow Jones Industrial Average saw steady buying after an early sell-off of over 200 points falling below the key 10,000 level.
The Dow ended down 22 points, or 0.23 per cent, at 10,043, closing at its lows. In the broader market the Standard & Poor’s 500 closed down 0.4 points, or 0.04 per cent, at 1074. The Nasdaq composite closed down 2.6 points, or 0.12 per cent, at 2211. Economic reports help investor sentiment with consumer confidence rising in May to 63.3 ahead of analyst forecasts and the highest reading in two years.
In Asia and Europe financial markets were sold off because of fresh turmoil in the Spanish banking sector, resulting in the prospect of severe austerity measures in the eurozone that could derail the fragile global economic recovery. Tensions in the Korean Peninsula also hurt investor sentiment with North Korea saying it will severe all ties with South Korea and cutting communications links in protest at Seoul’s claims that it had torpedoed one of its warships.
European stock markets closed sharply lower over Spanish debt concerns, many closing below key support levels, extending their recent heavy losses on growing concerns that the European debt crisis threatens GFC Mark II. Many countries are being forced to slash spending to balance the public books, resulting in lower economic growth or even recession. In the U.K. the FTSE 100 index ended down 128 points, or 2.5 percent, at 4941 points up 7 points, and across in the German DAX 30 ended down 135 points, or 2.3 percent, at 5670 points. and in France the CAC 40 ended up 99 points, or 2.9 per cent, at 3331.
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 eurozones debt crisis and a fragile global economic recovery. New York Light sweet crude for delivery in July, settled dropped $US1.46 to settle at $US68.75 a barrel.
Gold for June delivery rose $US4 to settle at $US1199 an ounce. Silver for July delivery fell 21.9 US cents to settle at $US17.781 an ounce. July copper settled down 10.55 US cents at $US3.0420 a pound.
Our markets are expected to trade higher after the big sell-off late yesterday. Miners continue to pressure government on resources tax (RSPT), but gold stocks are holding up well. Expect bargain hunters to step in early.
ASX
The SPI Futures is below key level of 4400 the ASX is set to open higher wer as the SPI closed up 65 points (or 1.5%) at 4,339; U.S. positive lead. Volatility continues, key levels today are 4200 and 4450.
US Markets
US Markets Sees Early Session Selling but Recovers
SP500: flat at 1,074 – Financials Lead Recovery
DOW down 0.2% at 10,043
Looking for Support
NASDAQ: down 0.1% at 2,210
Dollar Index: Higher as Euro Falls Towards 2001 Lows
A$ up 82.86 (off 10-month Lows)
FTSE: down 2.5% at 4941 – Financials Weigh
DAX down 2.3% – Europe Runs Scared
Markets Continue Sell-off over Debt & Bank Bailouts (Spain)
CHINA: down 1.9% at 2,622 – Finding Suport?
HSI up 0.6%
Oil: down 2.1% a ($69.96)
Recovers from 3-Week 25% Sell-off and focus still on spread of oil spill in Gulf of Mexico
Gold: up 0.3% at ($1,198)
Commodities Recover
SPI: Below Key 4400 ASX
SPI down (1.5%) at 4339
ASX News
The SPI Futures is below key level of 4400 the ASX is set to open higher as the SPI closed up 65 points (or 1.5%) at 4,339; U.S. positive lead. Volatility continues, key levels today are 4200 and 4450.
AUD – bounces drifts towards 10 months lows as investors exit risk.
BANKs – down over 3% yesterday. Bargain hunters likely to step in.
FLT – Flight Centre has upgraded its fiscal 2010 guidance as they continue to trade ahead of expectation. Shares up 2.9%.
FMG – Fortescue says its share price may fall due to “socialist style funding” proposal of the the government’s proposed Resources Tax (RSPT). Shares down 7.5%.
GBG - Gindalbie says its Karara iron ore project will proceed despite the proposed resources tax (RSPT), with reduced returns though. Shares up 3.6%.
GNC – 1H10 results due today
MRE – Minara is looking offshore to more desirable tax jurisdictions as the proposed Resources Tax (RSPT) threatens syphon the miner’s earnings at a higher rate than BHP. Shares up 6.3%.
RIO – AGM in Melbourne today, expect more commentary on the Resources Tax
TAH – Trade at 3-week high up 2.8% with highest volume in 9-months (7.5 million) as PE firm TPG is rumoured to be interested in t/o.
Economics Reporting today:
ABS – will release data on construction work done in the March quarter.
Westpac-Melbourne Institute index of economic activity for March.
Department of Treasury executive director, revenue group, David Parker, will address a business forum.
Market volatility will continue near term, as world investors come to terms with the ramifications credit squeeze and new regulatory regimes, and investors continue to have concerns over European debt issues.
We the suggest 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 higher
US & UK/Europe – US recovers from early selloff; Europe Closed Lower
US ADRs – Mixed!!!…
BHP up 0.2% & RIO up 1.9%; AWC down 1.5%
ANZ down 0.7% & NAB down 2.3%
NEM up 2.2%, JHX down 3.0%, NWS down 1.2%
Commodities Stock Index up 0.9%
Gold Stocks Index up 3.2%
Oil Stocks Index up 0.2%
By Michael Hevern
Head of Research
