Posts Tagged ‘gold’

    • Stock Market Analysis: U.S. Jobs Report Shocks, As Focus Turns To Earnings

    Sunday, July 10th, 2011

    * U.S. stocks closed lower on Friday but still higher again for the week. The disappointing monthly nonfarms employment report prompted investors to take profits early.
    * European stock markets fell on Friday after the weak U.S. jobs, and bank shares weighed on markets due to concern over how they fared in the latest stress tests. The Stoxx Europe 600 finished down -0.4% for the week.
    * The Asian region has gained for a third week with exporters and energy producers leading the way.
    * Commodities prices traded generally lower, however gold prices held on to recent gains.

    The SPI Futures is trading around the key pivot level of 4600, ended down -0.9% (or -40 points) at 4,600. The key levels for our index this week are 4700 and 4500.  Australian shares are set to trade lower today after negative leads from key markets in the U.S. and Europe, and news of disappointing U.S. nonfarm jobs data, and as investors digest details of the proposed Carbon Tax.  In the U.S. the unemployment rate remains stubbornly high up at 9.2%. 

    The details of the Carbon Tax have been revealed with 500 “polluting” companies to be taxed from 1 July 2012 starting at $23/tonne of carbon produced and released into the atmosphere, to increase by 2.5% per annum, and after three years this pricing will be set by an Emissions Trading Scheme.

    See below for ASX listed companies in the news today.

    Economics News Today

    * May Housing Finance Approvals

    U.S. Markets

    U.S. stocks closed lower on Friday but still closed higher again for the week. The disappointing monthly nonfarms employment report prompted investors to take profits early. 

    The Dow Jones Index recovered from sharp early losses but still closed lower for the session for its biggest daily loss since 24 June.  The S&P 500 stock index fell with all 10 sectors in the red, as financials, industrials and energy stocks gave back their gains from earlier in the week, while the tech-heavy Nasdaq Composite fell for the first drop in nine sessions.

    For the week the Dow Jones edged up 0.6%, up three of the past four weeks, and is up 9.3% for the year, while the Nasdaq rose 1.4% for the week and is up 7.8% for the year. 

    The key data for the session came from the Labor Department which reported that U.S. nonfarm payrolls rose 18,000 last month well below the 97,000 which was expected, with small gains in the private sector barely enough to outweigh continued government job losses. The jobless rate increased for a third straight month to 9.2% in June (up from 9.1%), the highest since December 2010. The disappointing nonfarms report is in direct contrast to data released over the past two weeks which showed improving manufacturing and retail sales as well as a big jump in private-sector employment, as measured by Automatic Data Processing (ADP).

    Investor sentiment is still surprisingly resilient and will turn this week to corporate earnings reports for a catalyst to push markets to new highs for the year. Earnings have underpinned the market’s run over the past 2 years and the bulls are looking for earnings to beat forecasts that have been ratcheted back over the past couple of months, due to softer economic data.

    All ten company groups that make up the S&P index traded higher: Materials were down -0.8%, the Financials sector was down -1.3%, Consumer Staples were down -0.6%, Energy was down -0.8%, while Industrials were down -1.3%, and the Technology sector was down -0.5%.

    The Dow Jones closed down -0.5% (or -62 points) at 12,657, the S&P 500 index closed down -0.7% (or -9 points) at 1,344, the Nasdaq ended down -0.5% (or -12 points) at 2,860, and the smaller cap Russell 2000 was down -0.7%.

    European Markets

    European stock markets fell on Friday after disappointingly weak U.S. jobs data saw investors rush to take profits, and bank shares weighed on markets due to concern over how they fared in the latest stress tests. The Stoxx Europe 600 index was down -0.8%, pushing the index to a loss for the week of -0.4%.

    The results of the second round of European bank “stress tests” will be released Friday. The European Banking Authority will publish a bank-by-bank breakdown, complete with data on each of the 91 lenders’ credit and government-debt exposures. Italian banks were particularly hard hit by concerns over their results from the tests. 

    The Italian market sold-off -3.5% on the session for its biggest 1-day decline since mid-February.  Also weighing on sentiment was news that the Italian economic minister, who is considered the author of Italy’s recently approved EUR47 billion 3-year austerity program, will resign. Spanish banks were also hit by similar concerns and the markets dropped -2.5% for the session. 

    In London the FTSE 100 index fell below the 6,000 level, with B-Sky-B down -7.6% on concers that the News Corp takeover could fall over.  In Germany the market retreated from year-highs to finish modestly lower.  The London and German markets ended flat for the week.

    In London the FTSE 100 index was down -1.1% (or -64 points) at 5,990, the German DAX was down -0.9% (or -68 points) at 7,403, while in France the CAC was down -1.7% (or -66 points) at 3,913. 

    Asian Markets

    Asian markets closed the week before the data U.S. nonfarms data was released and finished generally higher on hopes for a solid employment report. 

    Stocks in the Asian region have gained for a third week with exporters and energy producers leading the way as concerns eased over the Europen debt crisis and the U.S. economic slowdown and as China raised interest rates.  In Japan the Nikkei Stock Index rose to a four-month high above 10135 and has risen 2.7% over the week. 

    In Hong Kong the Hang Seng Index rose while in China the Shanghai Composite Index was flat ahead of the release of the June inflation figures.

    Chinese inflation accelerated to the fastest pace in three years, with CPI increasing 6.4 percent in June according to the National Bureau of Statistics released Saturday, this reading was above the 6.2% forecast by analysts.  Producer Prices (PPI) also rose 7.1% (up from 6.8% in May). Chinese Trade Surplus hit a 7-month high, widening more than forecast to $US22.3 billion in June, as imports grew at their slowest pace since 2009.  This data will put pressure on the central bank to continue with tightening of monetary policy in an attempt to engineer a soft landing. 

    In Australia the S&P/ASX 200 index gained to close above 4650, with banks leading the broad advance.
    In China the SSE Composite was up 0.1% (or 4 points) at 2,797, while in Hong Kong the Hang Seng Index was up 0.9% (or 196 points) at 22,726 and in Japan the Nikkei 225 Index was up 0.7% (or 67 points) at 10,137. The South Korean KOSPI was up 0.3% for the session, while the Indian market was down -1.2%.  

    Commodities

    The Dollar Index was higher at 75.18 on a lower Euro, while the Australian Dollar last traded higher at 107.55. Commodities prices were generally lower. For the session the benchmark crude NYMEX for July delivery was down -2.5%% (or -$US2.47) to settle at $96.48. Copper prices are still below 2-year highs, as copper for July delivery was down -0.7% (or -2.9 cents) at $US4.4005.  July gold was up 0.7% (or $US11.00) at US1,542.60.

    ASX News Today

    BUG – Buderim Ginger says the lack of supply coupled with high demand has been pushing up prices for ginger and macadamia nuts.

    CFU – Ceramic Fuel Cells group says as Australia’s carbon debate heats up, it has a solution to offset growing energy demands: its BlueGen fuel cell unit converts natural gas and renewable fuels into high-quality power and heat.  CFU began selling BlueGen units in May 2009, and posted a loss of $8.4 million for the six months to 31 Dec’10, due to a 37 percent drop in sales revenue and the impact of a stronger Aussie dollar.

    CSR – CSR Building materials company is assessing a number of opportunities for bolt-on acquisitions and says the sale of its Brendale property will be completed in 2H12.

    CXY – Cougar Energy has been ordered to shut down its trial UCG plant near Kingaroy, by the Queensland government.

    GDO – Gold One International increased production in the June quarter by 9 per cent from the March quarter.

    LYC – Lynas, Australia’s biggest rare earths company, has teamed up with German giant Siemens to produce magnets for use at wind farms.

    NWS – News Corp has ceased the publication of the 168-year old tabloid News of the World, and the public outrage over the phone hacking scandal in Britain has forced the government to push back a decision on Rupert Murdoch’s bid for pay-TV giant BSkyB until September.

    RMD – ResMed the supplier of equipment to treat sleeping and respiratory disorders, has acquired BiancaMed Ltd, an Irish company that supplies a sleep monitoring device.

    TAN – Tandou the cotton and grain grower is forecasting a turnaround in its profitability due to a doubling of income from its expanding water entitlements business.

    TWR – Tower, New Zealand’s only listed insurance company, has completed the purchase of reinsurance cover in the event of another catastrophe in the current financial year.

    WPG – WPG Resources has received South Australian government approval to develop Peculiar Knob, the nation’s highest grade undeveloped iron ore deposit.

    Local Corporate Reporting

    None

    Ex-dividend Date

    Norfolk Group (NFK)
    ldings Ltd (TTA)
    Group Limited (FIR)

    Market Summary

    ASX – to open lower
    US & UK/Europe – lower
    US ADRs – Broadly Lower

    BHP down -1.0% & RIO up 1.8%; AWC up 2.9%
    ANZ down -0.9% & NAB down -1.1%
    NEM  down -0.4%, JHX up 1.4%, NWS down -3.4%

    Commodities Stock Index down -0.6%
    Gold Stocks Index down -0.1%
    Oil Stocks Index down -0.8% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

    Written on 10 July, 7:15am

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    Stock Market Analysis: U.S. & European Markets Approach 2011 Highs

    Friday, July 8th, 2011

    * U.S. stock markets continued higher overnight, after surprising strength in jobs and improving retail sales. The major Non-Farms jobs report is due out Friday and next week’s start of the season of corporate earnings reports.
    * European markets closed higher overnight, with the Stoxx Europe 600 finishing 0.4% higher.  The ECB has acted to support Portugal after it was downgraded last week and strong U.S. employment data surprised analysts.
    * Asian stock markets closed mixed yesterday.  Banks mostly rose after the Chinese central bank lifted its benchmark deposit and lending rates by 0.25 percentage point.
    * Commodities prices traded generally higher again. Copper prices are at 10 week highs.

    The SPI Futures is trading around the key pivot level of 4600, ending up 0.7% (or 32 points) at 4,617. The key levels for our index today are 4660 and 4580.  Australian shares are set to trade higher today after positive leads from key markets in the U.S. and Europe, and news of surprising jobs data both locally and in the U.S.  Locally the unemployment rate remained steady at 4.9% but with jobs growth improving.  The details of the Carbon Tax will be revealed on Sunday.  The U.S. Non-Farm Payrolls report is due out Friday. Investors are likely to go bargain hunting today, with many stock valuations looking attractive, particularly if markets can break to new highs.

    See below for ASX listed companies in the news today.

    U.S. Markets

    U.S. stock markets continued higher overnight, after surprising strength in jobs and improving retail sales.  The Dow Jones Index finished higher for a seventh day of gains in eight sessions and looks set to test its April 29 closing high of 12810. 

    In the broader markets the S&P 500 and the Nasdaq both closed higher and are within sight of their 2011 highs. The financial, energy, materials, consumer staples and technology sectors all posted strong gains. 

    Investor sentiment was boosted by the June U.S. ADP private sector jobs gains that showed 157,000 jobs were created, almost double analysts’ expectations, and other data showed that new claims for unemployment benefits fell by more than expected last week. This jobs data bodes well for tonight’s U.S. nonfarm payrolls employment report. Monthly retail sales results were strong and this pushed consumer staples stocks higher. 

    In commodities crude oil futures were higher above $US98 a barrel, while gold futures continued with their recent gains. Copper prices are at 10-week highs. The U.S. dollar was flat against the euro, and steady against the yen.

    All ten company groups that make up the S&P index traded higher: Materials were up 1.5%, the Financials sector was up 1.6%, Consumer Staples were up 1.4%, Energy was up 1.5%, Industrials were up 1.1%, and the Technology sector was 1.2%.

    The Dow Jones closed up 0.7% (or 93 points) at 12,720, the S&P 500 index closed up 1.1% (or 14 points) at 1,353, the Nasdaq ended up 1.4% (or 38 points) at 2,873, and the smaller cap Russell 2000 was up 1.5%.

    European Markets

    European markets closed higher overnight, with the Stoxx Europe 600 finished 0.4% higher.  The ECB has acted to support Portugal after it was downgraded last week and strong U.S. employment data surprised analysts. 

    The European Central Bank is supporting Portugal by suspending the minimum credit-rating threshold on the Portuguese government debt used for collateral with the central bank, and the Portuguese market jumped 1.8%. 

    Markets in Europe gained as a stronger than expected U.S. survey of private-sector hiring and data showed new unemployment claims falling slightly last week.

    News of central bank moves on interest rates left markets unmoved, as the expected ECB decided to lift interest rates by 0.25 points to 1.5%, while the Bank of England left its rate on hold. 

    In London, the FTSE 100 index rose, as hedge-fund manager Man Group jumped 3.6% after reporting record quarterly sales of $US9 billion.  The German market rose within sight of its 2011 high, with automobile makers were higher after BMW reported a 16% rise in global car sales in June.

    In London the FTSE 100 index was up 0.3% (or 52 points) at 6,054, the German DAX was up 0.5% (or 40 points) at 7,471, while in France the CAC was up 0.5% (or 19 points) at 3,979. 

    Asian Markets

    Asian share markets ended mixed yesterday, with China bank shares rising in Hong Kong on hopes of the interest-rate increase by the Chinese PBOC central bank, the last for the year.   

    In Japan the Nikkei Stock Index ended flat at its highest level since the March earthquake and at 4-month closing highs.  Utilities stocks were sold-off due to growing uncertainty after the government said it is considering special stress tests for all nuclear plants. 

    In China the Shanghai Composite lost ground, while in Hong Kong the market was flat. Chinese banking shares mostly rose after the People’s Bank of China (PBOC) lifted benchmark deposit and lending rates by 0.25 percentage points after market on Wednesday, in order to keep inflation in check.

    The SSE Composite was down -0.6% (or -16 points) at 2,794, while in Hong Kong the Hang Seng Index was up 0.1% (or 12 points) at 22,530 and in Japan the Nikkei 225 Index was down -0.1% (or -11 points) at 10,071. The South Korean KOSPI was up 0.4% for the session, while the Indian market was up 1.9%.         

    Commodities

    The Dollar Index was flat at 74.91 on a lower Euro, while the Australian Dollar last traded higher at 106.82. Commodities prices were mixed.

    For the session the benchmark crude NYMEX for July delivery was up 2.1% (or $US2.02) to settle at $98.67. Copper prices are still below 2-year highs as copper for July delivery was up 2.1% (or 9.2 cents) at $US4.4180.  July gold was up 0.1% (or $US1.50) at $US1,531.90.

    ASX News Today

    APD – APN Property Group will buy 67.5 percent of ING Healthcare Pty Ltd, the manager of the ING Real Estate Healthcare Fund.

    AUN – Austar the regional pay-tv provider has urged caution following media reports that Foxtel is about to formalise its bid for the company. Elsewhere some of News Corp’s advertisers have said they may pull out of its UK publications.

    BHP – BHP Billiton has suspended rail and port operations at its Port Hedland iron ore facility due to a death at the site.

    BKN – Bradken the Australian mining equipment supplier says earnings will be boosted by $28 million (6%) after it bought two other supply companies.

    CEU – ConnectEast Group, the operator of Melbourne’s EastLink motorway, said average daily revenue during 2010/11 gained 11.2 percent from a year earlier.

    CSR – Building materials company CSR is assessing a number of opportunities for bolt-on acquisitions and says the sale of its Brendale property will be completed in 2H12.

    CXY – Cougar Energy will cease its coal gasification activites in southern Queensland after cancer-forming chemicals such as benzine were found in the ground water.

    ELD – Elders Ltd, Australia’s largest livestock agent, gained after saying it would resume live cattle exports to Indonesia next month.

    GDO – Gold One International increased production in the June quarter by 9 per cent from the March quarter.

    NWS – News Corp will cease the publication of its UK News of the World tabloid on Sunday after phone mailbox allegations have been unveiled.

    RMD – ResMed, the supplier of equipment to treat sleeping and respiratory disorders, has acquired BiancaMed Ltd, an Irish company that supplies a sleep monitoring device.

    SGT – Optus been ordered to pay a fine of $5.26 million after losing a case about misleading advertising.

    Local Corporate Reporting

    EDT Retail Trust (EDT)   General Meeting

    Ex-dividend Date

    Trafalgar Corporate (TGP)

    Market Summary

    ASX – to open higher
    US & UK/Europe – higher
    US ADRs – Broadly Higher

    BHP up 1.8% & RIO up 1.8%; AWC up 2.9%
    ANZ up 1.2% & NAB up 2.3%
    NEM  up 0.8%, JHX up 2.0%, NWS flat

    Commodities Stock Index up 1.3%
    Gold Stocks Index up 0.3%
    Oil Stocks Index up 1.5% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    Stock Market Analysis: European Debt Crisis Remains the Focus

    Monday, June 27th, 2011

    * U.S. stock markets dropped on Friday to finish the week modestly lower, as investors chose caution ahead of the weekend, with problems with the PIIGS economies and some major tech stocks disappointing.
    * European stock markets ended mixed, as the Stoxx Europe 600 index reached its lowest point since March. The markets have fallen for an eigth straight week, their longest losing streak since 1998.
    * Asian share markets rallied on Friday.  Regionally airlines rose due to the pullback in crude oil prices, while elsewhere Chinese banks and Japanese exporters helped lead the broad advance Friday, however the energy sector weighed.
    * Commodities prices traded mixed.  Gold traded sharply lower again.

    The SPI Futures is trading below the key pivot level of 4600, ending down -0.9% (or -41 points) at 4,456. The key levels for our index this week are 4580 and 4400.  Australian shares are set to trade sharply lower today after negative leads from key markets in the U.S. and Europe.  Investors are likely to be finalising their portfolios for the end-of-year cleanout.  Look for miners and banks to again be the focus as we run into the end of the month.

    Note that the Greek government votes on their austerity measures this week. Overnight comments from Chinese premier Wen Jiabao pledging “we will consistently continue to support Europe and the euro”, should be a positive for markets today.

    See below for ASX listed companies in the news today.

    U.S. Markets

    U.S. stock markets dropped Friday, finishing the week modestly lower, as investors chose caution ahead of the weekend, with problems with the PIIGS economies and some major tech stocks disappointing.

    Investors were spooked as a number of Italian banks were suspended from trading due to “high volatility” and rumours that a number of them may not pass their stress tests next month. 

    The Dow Jones Index and the S&P 500 finished lower with energy and tech stocks being the big decliners, while the utilities sector was the only one in the green.  The Dow Jones index finished the week down -0.6%, while in the broader market the S&P 500 finished down -0.2%, both indices are lower for their seventh weekly drop in the past eight.  The technology-heavy Nasdaq index bucked the trend and rose 1.4% for the week, snapping a five-week losing streak, however for the session the index fell again, as technology stocks struggled following disappointing quarterly reports from Oracle and Micron Technology.

    In economic data U.S. orders for durable goods exceeded economists’ expectations, while first-quarter gross domestic product ticked up to 1.9%, but the data still points to a slowing economy as there was a rise in U.S. weekly jobless claims and a fall in new home sales, while in Asia manufacturing numbers from China were weaker. The Dow Jones closed down -1.0% (or -115 points) at 11,935, the S&P 500 index closed down -1.2% (or up -15 points) at 1,269, the Nasdaq ended down -1.3% (or -34 points) at 2,653, and the smaller cap Russell 2000 was down -0.6%.

    All ten company groups that make up the S&P index traded lower: the Energy sector was down -1.9%, the Technology sector was down -1.7%, Industrials were down -1.1%, Consumer Staples were down -1.0%,  the Financials sector was down -0.6%, and Materials were down -0.6%.

    European Markets

    European stock markets ended mixed on Friday, as the Stoxx Europe 600 index shed 0.6%, reaching its lowest point since March. The markets have fallen for an eigth straight week, their longest losing streak since 1998.

    Investors had plenty to worry about, as the fear of contagion escalated when some Italian banks were suspended from trading.  The suspensions came as unconfirmed reports speculated a number of Italian banks will not pass their “stress tests” next month.  Moody’s Ratings Agency recently warned that a group of Italian banks face possible ratings downgrades to their creditworthiness. 

    Investors had started the European session on a positive note with strong gains on hopes that European leaders will prevent a Greek debt default, but they jumped ship on fears of contagion on the news about the Italian bank suspensions.  Italian sovereign 10-year yield spread over German bunds jumped sharply to 213 basis points, the widest since the euro was established in January 1999.   The euro has now reached an all-time low against the Swiss franc as fears of contagion increase. 

    International Monetary Fund (IMF) and EU aid is contingent on the Greek parliament approving a stringent austerity plan later this week.  In London the market ended higher, depiste the Bank of England Governor saying the euro-zone fiscal crisis represented the largest single threat to U.K. financial stability.  In Germany the market closed lower on the session.

    In London the FTSE 100 index was up 0.4% (or 23 points) at 5,698, the German DAX was down -0.4% (or -28 points) at 7,121, while in France the CAC was down -0.1% (or -3 points) at 3,785. 

    Asian Markets

    Asian share markets rallied on Friday.  Regionally airlines rose due to the pullback in crude oil prices, while Chinese banks and Japanese exporters helped lead the broad advance Friday, however the energy sector weighed. 

    In Hong Kong the Hang Seng Index jumped as did the Chinese Shanghai Composite Index.  Even the Japanese the Nikkei Stock Index ended higher. 

    Chinese Premier Wen Jiabao sparked buying in the regional banks after commenting that China’s efforts to curb inflation have worked, with price gains now back within a controllable range. Investors had been expecting more monetary-policy tightening to control prices. 

    The premier also pledged support for Europe as the region battles with its sovereign debt crisis, saying that China will remain a long term investor in European markets: “we will consistently continue to support Europe and the euro”.  This should be a positive for markets today.

    In China the SSE Composite was up 2.2% (or 58 points) at 2,746, while in Hong Kong the Hang Seng Index was up 1.9% (or 413 points) at 21,172 and in Japan the Nikkei 225 Index was up 0.8% (or  82 points) at 9,677.  The South Korean KOSPI was up 1.7% for the session, while the Indian market was up 2.9%.

    Commodities

    The Dollar Index was higher at 75.67 on a lower Euro, while the Australian Dollar last traded lower at 105.10. Commodities prices were mixed.

    For the session the benchmark crude NYMEX for June delivery was up 0.2% (or $US0.14) to settle at $91.23. Copper prices are still below 2-year highs as Copper for June delivery was up 1.4% (or 5.8 cents) at $US4.1175.  June gold was down -1.2% (or -$US19.60) at $US1,502.60.

    ASX News Today

    APA - APA Group, the owner of Australia’s largest gas distribution and storage network, will buy a wind farm in WA for $171 million and fund the acquisition through an institutional placement that seeks to raise $300 million.

    ARU – Arafura Resources announced 9-12 month delay to the bankable feasibility study for its Nolans rare earths project and the need for an extra A$50 million-A$60 million to pay for the study.

    AIRLINES – Qantas and Virgin have cancelled NZ flights out of mainland Australia over the weekend due to volcanic ash clouds.

    ASX – The Australian Securities Exchange and Chi-X Australia Pty Ltd have reached an agreement for the provision of clearing and settlement services.

    BHP – BHP will invest a further $US488 million in the development of its Jansen Potash project in Saskatchewan in Canada, and has increased the estimated cost of its upgrade to the Worsley alumina refinery in Western Australia to $US2.995 billion.

    CTX – Caltex Australia has forecast a sharp fall in 1H11 because of the strong Australian dollar, high oil prices and refinery outages, sending its share price down by almost -7 percent to a 10-month low.

    FGL – Foster’s Group Ltd has rejected a $9.51 billion all-cash takeover offer from international beverage giant SABMiller plc, saying the bid undervalues the company.

    MMX – The proposed commodities port at Oakajee in WA is in doubt after a major foundation customer ceased operations at its iron ore mine.

    QRN – QR National Ltd, the rail operator, has renewed a coal haulage contract with Stanwell Corporation Ltd, transporting up to 3.7 million tonnes each year up to the end of 2020.

    SGT – SingTel Optus has reached an $800 million agreement with the government to migrate its customers to the national broadband network (NBN).

    TFS – TFS Corporation the sandalwood supplier, has completed the raising of $US150 million through the issue of senior secured notes and options.

    TLS – Telstra has confirmed it has reached agreement with the federal government to progressively disconnect its copper network and participate in the roll out of the national broadband network (NBN).  The $2 billion estimate for the capex needed to remediate some of its infrastructure to support the NBN deal is a negative surprise.

    WHC – Whitehaven has a new substantial holder as JCP Investments now have a 5% stake.

    Local Corporate Reporting

    None

    Ex-dividend Date

    None

    Market Summary

    ASX – to open lower
    US & UK/Europe – sharply lower
    US ADRs – Broadly Lower

    BHP up 0.3% & RIO down -0.1%; AWC down -0.7%
    ANZ down -1.3% & NAB down -0.3%
    NEM  down -3.2%, JHX down , NWS down -0.9%

    Commodities Stock Index down -1.6%
    Gold Stocks Index down -2.2%
    Oil Stocks Index down -1.5% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.
    Written on 27 June, 7:15am

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    Stock Market Analysis: Global Growth Is Faltering

    Friday, June 24th, 2011

     * U.S. stock markets recovered from an early sell-off overnight in volatile trading, as investors struggled with a slump in crude oil prices and weak economic data.
    * European stock markets slumped as IEA intervention in oil markets surprised investors, and disappointing global economic data saw investors head for the exits.
    * Asian major stock markets ended mostly lower yesterday as investors fretted over news about slowing U.S. economic growth and worries about the prospect of further tightening in China.
    * Commodities prices traded sharply lower. The gold price has broken key support levels.

    The SPI Futures is trading below the key pivot level of 4600, ending flat at 4,488. The key levels for our index today are 4520 and 4440.  Australian shares are set to trade lower today after negative leads from key markets in the U.S. and Europe.  Investors are likely to be finalising their portfolios for the end-of-year cleanout.  Look for miners and banks to again be the focus as we run into the end of the month.  It is Ex-Dividend day today with a raft of companies and trusts going Ex-Div today, see below for details.

    Also see below for ASX listed companies in the news today.

    U.S. Markets

    U.S. stock markets recovered from an early sell-off overnight in volatile trading, as investors struggled with a slump in crude oil prices, weak economic data and reports that there has been progress with Greek austerity plans. 

    Investors sold off stocks early in reaction to the Fed Reserve downgrading its assessment of the U.S.economic performance, estimating growth will be down to 2.7%-2.9% (down from previous estimates of 3% in April). The Fed also said that unemployment is likely to remain high, from 8.6% to 8.9% (currently running at 9.1%). 

    The Dow Jones Index fell, finishing just above the 12000 level. The S&P 500 stock index also closed lower, while the tech-heavy Nasdaq Composite managed to finish in the green. The primary market movers included news that the International Energy Agency (IEA) will release 60 million barrels from its strategic emergency reserves in the next month, in order to push crude oil prices lower in a time of peak demand, in an attempt to help the sluggish economic growth. Investors were also discouraged by weekly initial jobless claims which were below economists’ expectations, indicating persistent weakness in U.S. employment as highlighted by the Fed yesterday. 

    Markets recovered and surged late in the session following reports that the EU and IMF have made a breakthrough agreement with Greece on a 5-year Greek austerity plan to assist Greece in its debt crisis, however these reports are yet to be confirmed officially.  Energy, Financials and Consumer Discretionary stocks were the hardest hit in the session.

    The Dow Jones closed down -0.5% (or -60 points) at 12,050, the S&P 500 index closed down -0.3% (or -4 points) at 1,284, the Nasdaq ended up 0.7% (or 18 points) at 2,687, and the smaller cap Russell 2000 was up 0.4%.

    All ten company groups that make up the S&P index traded lower: Consumer Staples were up 0.4%, the Technology sector was up 0.7%, the Financials sector was down -1.0%, the Energy sector was down -1.1%, Industrials were down -0.2% and the Materials sector was down -0.1%.

    European Markets

    European stock markets slumped overnight, with the Stoxx Europe 600 index shedding 1.4%, reaching its lowest point since March.

    IEA intervention in oil markets surprised investors as they said they would release 60 million barrels of oil to ease prices, and disappointing global economic data saw investors head for the exits. 

    Investors had to digest a raft of sobering economic reports:
    * Chinese data showed manufacturing activity in the largest Asian economy fell to the slowest rate of expansion in 11 months.
    * U.S. initial jobless claims were higher than expected.
    * Private-sector growth across the Euro-zone while was the weakest since September 2009.Â
    * The president of the European Central Bank (ECB) also warned that instability risks in the European banking system were extremely high. 

    Markets will remain on edge until the Greek Parliament votes next week on further austerity measures.  The Greek ASE Composite index fell 2.3%.

    In London and in Germany the markets were down over 1.7% for the session, as cyclical stocks and basic resource stocks were the worst hit due to fears over the faltering global growth.

    In London the FTSE 100 index was down -1.7% (or -99 points) at 5,674, the German DAX was down -1.8% (or -129 points) at 7,149, while in France the CAC was down -2.2% (or -84 points) at 3,788. 

    Asian Markets

    Asian major stock markets ended mostly lower yesterday, as investors fretted over news about slowing U.S. economic growth and worries about the prospect of further tightening in China. 

    In Japan the Nikkei Stock Index ended lower as exporters suffered after the U.S. Federal Reserve’s comments about the world’s largest economy facing a susstained slow down in economic growth.

    In Hong Kong the Hang Seng Index lost ground, weighed down by banks again.  Chinese data released by HSBC showed Chinese growth is slowing, in a preliminary reading of its gauge of Chinese manufacturing activity, which fell to an 11-month low of 50.1 in June (from 51.6 prevously).  The data indicates Chinese growth is slowing, which should ease the pressure on the government to tighten monetary policy in China.  The Chinese Shanghai Composite Index defied the regional trend by rallying 1.5% as interest rate sensitive stocks led the gains.

    The SSE Composite was up 1.5% (or 39 points) at 2,688, while in Hong Kong the Hang Seng Index was down -0.5% (or -101 points) at 21,759 and in Japan the Nikkei 225 Index was down -0.3% (or -32 points) at 9,597.  The South Korean KOSPI was down -0.5% for the session, while the Indian market was up 1.0%.      

    Commodities

    The Dollar Index was higher at 75.30 on a lower Euro, while the Australian Dollar last traded lower at 104.51. Commodities prices were sharply lower.

    For the session the benchmark crude NYMEX for June delivery was down -3.7% (or -$US3.48) to settle at $91.93. Copper prices are still below 2-year highs as Copper for June delivery was down -1.2% (or -4.9 cents) at $US4.0375.  June gold was down -2.1% (or -$US32.80) at $US1,521.50.

    ASX News Today

    APA - APA Group, the owner of Australia’s largest gas distribution and storage network, will buy a wind farm in WA for $171 million and fund the acquisition through an institutional placement that seeks to raise $300 million.
    ARU – Arafura Resources announced a 9-12 month delay to the bankable feasibility study for its Nolans rare earths project and the need for an extra A$50 million-A$60 million to pay for the study.
    BLD – National Bank has increased its stake in Boral to 7.2% (up from 6.1%).
    CSL –  CSL says the US Food and Drug Administration (FDA) has sent a warning letter to CSL stating that the company’s manufacture process of an influenza vaccine was not up to standard.
    EPG – Crown Ltd says it has no current intention of increasing its interest in either Tabcorp Holdings Ltd or Echo Entertainment Group Ltd.
    MMX – The proposed commodities port at Oakajee in WA is in doubt after a major foundation customer ceased operations at its iron ore mine.
    PDN – Paladin shares rose sharply on rumours its is a takeover play.
    QRN – QR National Ltd, the rail operator, has renewed a coal haulage contract with Stanwell Corporation Ltd, transporting up to 3.7 million tonnes each year up to the end of 2020.
    QAN – Qantas Airways expects full year earnings to rise to at least half a billion dollars on its profitable domestic business.
    SGT – SingTel Optus has reached an $800 million agreement with the government to migrate its customers to the national broadband network (NBN).
    TFS – TFS Corporation, the sandalwood supplier, has completed the raising of $US150 million through the issue of senior secured notes and options.
    TLS – Telstra has confirmed it has reached agreement with the federal government to progressively disconnect its copper network and participate in the roll out of the national broadband network (NBN).  The $2 billion estimate for the capex needed to remediate some of its infrastructure to support the NBN deal is a negative surprise.
    WHC – Whitehaven has a new substantial holder as JCP Investments now have a 5% stake.

    Local Corporate Reporting

    None

    Ex-dividend Date

    Ardent Leisure Group
    Aurora Absolute
    Australian Education
    Agricultural Land
    Aurora Global Trust
    Australian Infrastrusture
    Astro Jap Prop Group
    Australand Property
    Aurora Sandringham
    APA Group
    Aspen Group
    Aurora Property
    Australian Enhanced
    Adelaide Managed
    Aus Social Infr Fund
    BWP Trust
    Challenger Diversified Property
    Carindale Property
    ConnectEast Group
    CFS Retail Property
    Charter Hall Group
    Challenger Infrast.
    Cromwell Property
    Commonwealth Property
    Charter Hall Office
    Charter Hall Retail
    Duet Group
    Dexus Property Group
    Goodman Group
    Growthpoint Property
    Hastings Diversified
    Hastings High Yield
    ING Real Estate
    Investa Office Fund
    ALE Property Group
    LinQ Resources Fund
    MAp Group
    Mirvac Group
    Multiplex European
    Macquarie Winton
    Rabinov Prop Trust
    Reef Casino Trust
    Stockland
    Spdrmsciauselecthdy
    Transurban Group
    Thakral Holdings Group

    Market Summary

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

    US ADRs – Broadly Lower
    BHP down -1.3% & RIO down -0.7%; AWC down -2.2%
    ANZ down -1.1% & NAB down -1.0%
    NEM  down -0.2%, JHX down , NWS down -0.9%
    Commodities Stock Index down -0.6%
    Gold Stocks Index down -1.6%
    Oil Stocks Index down -1.3% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    Stock Market Analysis: Month-End Rally Pares Losses

    Wednesday, June 1st, 2011

    * US stock markets finshed the month on a positive note, despite weak US economic reports.
    * European stock markets closed higher overnight, buoyed by hopes that debt-laden Greece will get a second international bailout.
    * Asian stock markets jumped to complete a short month-end rally.
    * Commodities prices were mixed.

    The SPI Futures is trading below the key level of 4800, up 0.4% (or 20 pts) at 4,731. The key levels for our index today are 4750 and 4680.  Investors will be keenly awaiting the GDP figures which will be released today, but economists are forecasting GDP fell by -1.1% for the quarter, giving the worst quarterly performance since the recession of the 1990s.

    Australian shares managed a month-end rally as highlighted mid last week and we should see some follow-through today with positive leads from key markets in the U.S. and Europe. The GDP figures will be a dampener and will be closely watched, and the mining tax will be in focus again, as the spectre of the carbon tax weighs on sentiment. 

    Recent comments from the Treasurer are not very reassuring, as he said the natural disasters in Australia probably cut more than 1 percent from economic growth in the first quarter.  He went on to say “… 85 percent of Queensland’s 57 coal mines suffered production losses in the early part of the year”.  The OECD has forecast the Australian economy will advance 2.9 percent this year and accelerate to 4.5 percent by 2012.

    See below for ASX listed companies in the news today.

    Economic News Today

    * Australian PMI for May
    * Q1 Australian GDP  Figures

    US Markets

    US stock markets finished the month on a positive note, despite weak US economic reports.  News that the EU was considering a second bailout package for Greece to avoid default by that nation boosted seniment. 

    The gains were broad based and technology stocks outperformed. Apple jumped 3.1 percent higher after announcing that chief executive Steve Jobs will return from sick leave Monday to unveil a new operating system. 

    Economic news disappointed with the Conference Board reporting its consumer confidence index slid to 60.8 in May from 66.0 in April, due to increasing worries about unemployment and rising food and fuel prices.

    For the month the Dow Jones closed lower by -1.9%, the S&P 500 index closed down -1.8% and the Nasdaq ended down -1.5%.

    For the session the Dow Jones closed up 1.1% (or 128 points) at 12,441, the S&P 500 index closed up 1.1% (or 14 points) at 1,345, the Nasdaq ended up 1.4% (or 38 points) at 2,835, and the smaller cap Russell 2000 was up 1.4%.

    All ten company groups that make up the S&P index traded higher:  Technology sector was up 1.4%, the Energy sector was up 1.0%, the Financials sector was up 1.0%, Materials were up 1.0%, Industrials were up 0.9%, and Consumer Staples were up 0.7%.

    European Markets

    European stock markets closed higher overnight, buoyed by hopes that debt-laden Greece will get a second international bailout.  There was no doubt there was some “window dressing” by the fund managers after stocks had been sold down since mid-April, offering some “bargains”. 

    Markets were boosted by a strong performance in Asia as investors welcomed reports that Germany and the EU were becoming more accomodative on helping Greece.  If Germany agrees to a second bailout which would follow the EUR110 billion EU-IMF rescue package announced May 2010, then this could faciltate a more permanent solution to the Greek tragedy. 

    In London, the benchmark FTSE 100 index closed up led by the banks, following their broker upgrades from last week.  In Germany the market was higher on the back of the Greek bailout news. 

    For the month the German DAX index was lower by -3.3% and London’s FTSE 100 fell -1.7%. The Euro dollar traded higher overnight after a report that Germany may drop its call for Greece to restructure its debt.

    The FTSE 100 index was up 0.9% (or 51 points) at 5,990, the German DAX was up 1.9% (or 133 points) at 7,293, while in France the CAC was up 1.1% (or 7 points) at 4,126. 

    Asian Markets

    Asian stock markets jumped to complete a month-end rally. 

    In Japan stocks were boosted by data showing factory output lifted last month, raising hopes for Japanese recovery from the March earthquake and tsunami disaster. Export stocks were helpd as the yen slumped against the US dollar and euro after Moody’s warned that it may cut the Japanese debt rating.  

    In Hong Kong the market surged for the last day of May to end flat for the month, while Chinese stocks also managed a bounce after a dismal performance in May, having slumped -5.7%.  The Japanese market was down -1.6% for the month. 

    In Australia the monthly losses in the ASX/S&P 200 were pared by yesterday’s jump but the index finished lower by -2.5%. Investors will be keenly awaiting the GDP figures which will be released today, but economists are forecasting GDP fell by -1.1% for the quarter, giving the worst quarterly performance since the recession of the 1990s.

    In China the SSE Composite was up 1.4% (or 37 points) at 2,743, while in Hong Kong the Hang Seng Index closed up 2.2% (or 500 points) at 23,684 and in Japan the Nikkei 225 Index was up 2.0% (or 189 points) at 9,694.  The South Korean KOSPI closed up at 2,119, while the Indian market was up 1.4%.

    Commodities

    The Dollar Index was lower at 74.61 on a higher Euro, while the Australian Dollar last traded lower at 106.37. Commodities prices were mixed.

    For the session the benchmark crude NYMEX for June delivery was up 2.2% (or $US2.19) to settle at $102.78. Copper for June delivery was down -0.1% (or -0.6 cents) at $US4.1840.  June gold was down -0.1% (or -$US1.40) at $US1,534.90.

    ASX News Today

    BHP – BHP Billiton’s proposed expansion at its Olympic Dam mine in South Australia would make it the biggest mine in the world.

    GBE – Globe Metals and Mining the Africa-focused miner has released positive rare earth exploration results.

    GNS – Gunns the pulp mill owner said the facilitator of Tasmania’s forestry peace deal will soon put a settlement plan to the federal government.

    HIL – Hills Holdings Ltd has forecast annual earnings to fall by up to 40 percent, as it closes its Orrcon Steel pipe facility in NSW following “unsustainable” losses.

    LYC – Lynas Corporation says UN nuclear experts have opened investigations into whether plans for an Australian-built rare earth refinery present any threat of radioactive pollution.

    NHC – New Hope Corp has updated its JORC compliant reserves and resources statement, increasing coal resources by 56% to 1,539Mt while coal reserves increased by 12.4% to 544Mt. However it has blamed last summer’s floods for a 42 percent drop in quarterly sales.

    LLC – Lend Lease the construction company and property developer says its Abigroup arm has secured a $100 million contract for the maintenance of coal-related rail rolling stock in Queensland.

    OZL – OZ Minerals the single mine gold and copper producer, will trade on a post consolidation basis from Monday 30 May until 10 June. The number of shares on issue will reduce by a factor of 10 to 324 million.

    SDL – Sundance Resources the African iron ore explorer and developer, has refuted a report that its majority shareholder Hanlong Mining is considering a full takeover of the company.

    SGT – SingTel, Australia’s second-largest telecommunications company, says the proposed merger of Austar and Foxtel may raise competition concerns regarding content.

    VGH – Vision Group Holdings, the eye doctors, has reached an agreement with a former doctor partner who left the group and sought an earn out payment.

    WBC – Westpac plans to open two more branches in China after receiving final regulatory approval to open a branch in Beijing.

    WEC – White Energy Company expects to finalise work on the world’s largest coal briquetting plant and ramp-up to full production by the end of 2011.

    WHC – Whitehaven Coal Ltd has reached a heads of agreement with Japanese petroleum and energy giant Idemitsu Kosan Co Ltd to extend a coal joint venture in regional NSW. 

    Local Corporate Reporting

    Treasury Wine Estates (TWE)  – Q4 2011 Results

    Ex-dividend Date

    None

    Market Summary

    ASX – to open higher
    US & UK/Europe – closed higher

    US ADRs – Broadly Higher

    BHP up 1.0% & RIO  up 0.8%; AWC up 2.4%
    ANZ up 0.1% & NAB up 0.4%
    NEM  up 0.3%, JHX up 1.7% , NWS up 1.3%

    Commodities Stock Index up 1.1%
    Gold Stocks Index up 0.4%
    Oil Stocks Index up 1.3% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    Stock Market Analysis: Markets Prepare For Run Up Into Month’s End

    Thursday, May 26th, 2011

    * U.S. stock markets rose for the first session in three, as a commodities recovery supported the market again.
    * European stocks closed modestly higher overnight, as banks recovered.
    * Asian markets generally ended lower yesterday, as investors continued to be concerned over global growth prospects.
    * Commodities prices continued to recover.  

    The SPI Futures is trading below the key level of 4800, closing up 0.9% (or 40 pts) at 4,630. The key levels for our index today are 4680 and 4600.

    Australian shares are expected to start to recover today as investors look for “bargains” as we run up into the end of the month. Remember it is options expiry today.  Stocks have been battered this month with the index down 5.4% for May and down 8.6% since the April peak.

    Expect the miners, energy and mining services companies to see some buying and even the banks are starting to look attractive on a yield basis.  However the mining tax is again in focus again this week after the Western Australian government sharply increased the state iron ore royalities from the miners by $2 billion, and the spectre of the carbon tax is also weighing on sentiment.

    See below for ASX listed companies in the news today.

    Economic News Today

    *  Q1 Private New Capital Expenditure & Expected Expenditure.

    US Markets

    U.S. stock markets rose for the first session in three, as a commodities recovery supported the market again. 

    All three major indices rose, led by mining and energy stocks as financials and healthcare stocks provided some headwinds.  The energy sector continued to outperform as a Goldman Sachs report boosted crude oil price forecasts for the rest of the year. 

    Investors have started to seek out “bargains” that have resulted from the recent sharp sell-off in commodities as the energy, materials and industrial sectors were among the worst performing sectors for May and are down around 5%. 

    Commodities recovered again overnight helped by the US dollar, as gold, copper and oil all rose.  The US dollar is running into a key resistance and any pull-back will help commodities prices further. 

    Sentiment was helped as the Fitch Ratings credit ratings agency said it was unlikely to modify its ratings on German banks as a direct result of their exposure to Greek sovereign debt.

    The Dow Jones closed up 0.3% (or 38 points) at 12,395, the S&P 500 index closed up 0.3% (or 4 points) at 1,320, the Nasdaq ended up 0.5% (or 43 points) at 2,761, and the smaller cap Russell 2000 was up 1.3%.

    The ten company groups that make up the S&P index generally traded higher: the Energy sector was up 1.7%, Materials were up 1.4%, Industrials were up 0.9%, the Financials sector was up 0.1%, Consumer Staples were flat, the Technology sector was up 0.3%.

    European Markets

    European stocks closed modestly higher overnight, as banks recovered.  The Stoxx Europe 600 index ended up 0.7%. 

    Across the region airline stocks had some respite, up over 1.1% after airports in northern Germany began to reopen, having previously been forced to close due to an ash cloud from a volcanic eruption in Iceland.

    Sentiment on banks was boosted as the Fitch Ratings credit ratings agency said it does not foresee any rating movement on German banks as a direct result of their exposure to Greek sovereign debt.  

    In London the FTSE 100 rose, as banks rose over 2.2%, while in Germany the DAX also rose on the back of the Fitch’s comments.  Rising commodities prompted traders to seek out stocks aligned to global growth. 

    The FTSE 100 index closed up 0.2% (or 12 points) at 5,870, the German DAX was up 0.3% (or 20 points) at 7,171, while in France the CAC was up 0.3% (or 12 points) at 3,929.

    Asian Markets

    Asian markets generally ended lower yesterday, as investors continued to be concerned over global growth prospects.  However we expect them to find some support today as traders seek out “bargains”. 

    The Japanese market slid further with exporters lower and stocks aligned to Chinese growth also selling down. Komatsu was off 1.6% and Hitachi Construction Machinery down 2.2%.  Japanese automakers found some support after Toyota Motor said it planned to bring back domestic auto production next month to as much as 90% of targets set before the March earthquake. 

    In China shares sold off for a fifth straight session, due to worries about their slowing economic growth and rising inflationary pressure.  In Hong Kong the Hang Seng index ended flat. Glencore International, the Swiss commodities trading giant, had a weak debut (down 2.5%) on the Hong Kong market as worries over Chinese demand for commodities weighed. 

    The SSE Composite was down -0.9% (or -25 points) at 2,741, while in Hong Kong the Hang Seng Index closed moderately higher, up 0.1% (or 16 points) at 22,747 and in Japan the Nikkei 225 Index was down -0.6% (or -54 points) at 9,423.  The South Korean KOSPI was down -1.3%, while the Indian market was down -0.9%.  

    Commodities

    The Dollar Index was lower at 75.74  on a lower Euro, while the Australian Dollar last traded flat at 104.37. Commodities prices were higher.

    For the session the benchmark crude NYMEX for June delivery was up 1.6% (or $US1.61) to settle at $98.20. June gold was up 0.2% (or $US3.40) at $US1,527.30.

    ASX Market News

    ANZ – Goldman Sachs has downgraded ANZ and CBA to HOLD, and says NAB is their preference.
    ASB – Shipbuilder Austal has downgraded its earnings guidance for FY11, blaming the strong Australian dollar, and signalling a shift away from a “soft” European ferry market.

    CRZ – Carsales.com says it will buy back up to 10 percent of its issued capital over the next year to give it flexibility in capital management.

    CXY – Cougar Energy Ltd says it will open an office in Beijing to help support the growth of its underground coal gasification (UCG) projects in China and Asia.

    FPH – Fisher & Paykel Healthcare reported full year net profit down 11 percent at $A48 million, excluding one-off non-cash deferred tax charges, citing unfavourable exchange rate movements.

    ILU – Iluka Resources Ltd, the mineral sands producer, plans to boost production of zircon and high grade titanium ore after achieving price increases in the first half of calendar 2011.

    LLC – Lend Lease Group the construction company and property developer, is on track to deliver its target full year return on equity (ROE) of 15 percent.

    NAB – The National Australia Bank-owned Clydesdale Bank remains on review following NAB’s downgrade by Moody’s.

    PRG – Programmed Maintenance Services has posted a 58 percent drop in annual net profit but forecast an improvement in earnings in fiscal 2012.

    QAN – Qantas says it could take up to 3 weeks before it is known whether Qantas pilots will strike for the first time in 45 years.

    STO – Santos has discovered oil at Finucane South in the Carnarvon Basin, offshore Western Australia.

    TEL – Moody’s Investors Service has lowered the outlook on Telecom NZ, following the announcement that the telco is to separate into two companies after its network arm Chorus was chosen to have a cornerstone role in the government’s ultrafast broadband (UFB) initiative.

    VPG – Valad Property Group has suspended the public sale process for the Sheraton Noosa Spa and Resort, due to the impending sale of the company itself.

    WDC – Westfield Group has confirmed operational earnings guidance of $1.7 billion for 2011, as it sees continued strong performance across its portfolio.

     

    Local Corporate Reporting

    Austar United Communications (AUN)  Full year 2010 AGM
    GrainCorp Ltd (GNC)         Interim 2011 Results
    Perpetual Ltd (PPT)         Business briefing re market update
     

    Ex-dividend Date

    Freedom Food Limited (FNP)
    Orica Limited (ORI)
    SP AusNet (SPN)

    Market Summary

    ASX – to open higher

    US & UK/Europe – higher

    US ADRs – Generally Higher

    BHP up 0.2% & RIO  up 1.5%; AWC up 0.3%
    ANZ up 0.4% & NAB down -1.4%
    NEM  up 0.7%, JHX down -1.2% , NWS up 0.1%

    Commodities Stock Index up 1.1%
    Gold Stocks Index up 0.9%
    Oil Stocks Index up 1.0% 

    By Michael Hevern
    Head of Research
     
    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    Stock Market Analysis: Higher Commodities Prices Offer Markets Support

    Wednesday, May 25th, 2011

    * U.S. stock markets closed lower overnight for third straight session, despite buying in the energy sector.
    * European stock markets rebounded modestly overnight.  Resources stocks offered support as commodities prices rose.
    * Asian stock markets ended modestly higher yesterday, as investors went bargain hunting after a steep falls in global equities this month.
    * Commodities prices recovered.  

    The SPI Futures is trading below the key level of 4800, closing up 0.2% (or 10 pts) at 4,640. The key levels for our index today are 4680 and 4600.

    Australian shares are expected to start to recover today as investors look for “bargains” as we run up into the end of the month.  Stocks have been battered this month with the index down 4.6% for May and down 7.4% since the April peak.

    Expect the miners, energy and mining services companies to see some buying and even the banks are starting to look attractive on a yield basis.  However the mining tax is again in focus again this week after the Western Australian government sharply increased the state iron ore royalities from the miners by $2 billion, and the spectre of the carbon tax is also weighing on sentiment.

    See below for ASX listed companies in the news today.

    Economic News Today

    * Westpac-Melbourne Institute Indexes of Economic Activity Leading Index for April
    * Q1 Construction Work Done

    US Markets

    US stock markets closed lower overnight for the third straight session, despite early buying which was led by the miners and the energy sectors as commodities recovered on a weaker US dollar. 

    US markets have lost 2% in the past few days, with the Dow Jones down six of the past eight sessions, and the S&P 500 had its largest 1-day decline in two months yesterday.  These falls are setting up for a possible rally into the end of the month, though we would expect further weakness next month as the FED turns off the QE2 tap. 

    The Dow Jones finished lower for its lowest close since mid-April. The S&P 500 stock index falls were led by industrial and consumer discretionary stocks, however the energy sector offered support as a Goldman Sachs report boosted crude-oil price forecasts for the rest of the year. 

    In economic news the Federal Reserve Bank of Richmond said manufacturing activity in the central Atlantic region is contracting this month after seven months of expansion, while the service sector also slowed but remained in expansion. This data follows that of the Philly Fed and New York Fed from last week, both of which showed slowing manufacturing growth. New home sales increased 7.3% in April from a month earlier, more than economists expected, however sales still are down 23% from a year ago.

    Commodities recovered overnight helped by a US dollar.  The US dollar is running into a key resistance and any pullback will help commodities prices further.

    The Dow Jones closed down -0.2% (or -25 points) at 12,356, the S&P 500 index closed down -0.1% (or -1 points) at 1,317, the Nasdaq ended down -0.5% (or -44 points) at 2,746, and the smaller cap Russell 2000 was down -0.5%.

    The ten company groups that make up the S&P index had mixed results: the energy sector was up 1.4%, Materials were up 0.5%, the Financials sector was down -0.1%, Industrials were down -0.5%, Consumer Staples were down -0.5%, the Technology sector was down -0.3%.

    European Markets

    European stock markets rebounded modestly overnight.  Resources stocks offered support as commodities prices rose, while airlines across Europe were hit by news of a volcanic eruption in Iceland.  The Stoxx Europe 600 index rose 0.2%, recovering a from a 1.7% slump in the previous session. 

    Investor sentiment was buoyed as Greece, having accepted an international bailout, confirmed it had reached a preliminary agreement with the International Monetary Fund (IMF) and European Union (EU) for a new economic adjustment plan. However the Greece’s main opposition party has rejected the austerity measures. 

    In the UK the FTSE 100 rose, as the market sets up for some support into month’s end. Glencore International, the commodities trader, gained 2.1% ahead of its expected entry into the FTSE 100. 

    In Germany the DAX gained led by industrial and technology sectors, as a key German business confidence survey was stronger than expected, the Ifo Institute’s index of German business confidence was unchanged in May at a reading of 114.2 (analysts were expecting a fall to 113.7). 

    The FTSE 100 index closed up 0.4% (or 23 points) at 5,858, the German DAX was up 0.4% (or 29 points) at 7,150, while in France the CAC was up 0.2% (or 10 points) at 3,917.

    Asian Markets

    Asian stock markets ended modestly higher yesterday, as investors went “bargain” hunting after a steep falls in global equities this month. 

    In Japan the Nikkei Index finished higher, as manufacturing companies such as Komatsu climbed and Hitachi Construction Machinery added over 1.1%. Sony Corp. rose 2.7%, despite forecasting a huge loss for the fiscal year ending 31 March and warning that it expected a loss in the current financial year. 

    In China the Shanghai Composite index fell but finished off its lows, as Chinese stocks extended the previous session’s sharp decline on concerns about an economic slowdown in China.

    The SSE Composite was down -0.3% (or -7 points) at 2,767, while in Hong Kong the Hang Seng Index closed moderately higher, up 0.1% (or -20 points) at 22,730 and in Japan the Nikkei 225 Index was up 0.2% (or 16 points) at 9,477.  The South Korean KOSPI was up 0.2%, while the Indian market was up 0.1%.  

    Commodities

    The Dollar Index was lower at 75.92 on a lower Euro, while the Australian Dollar last traded flat at 104.75. Commodities prices were higher.

    For the session the benchmark crude NYMEX for June delivery was up 1.6% (or $US1.53) to settle at $99.22. Copper for June delivery was 0.6% (or 7.9 cents) at $US4.1085, and June gold was up 0.5% (or $US7.90) at $US1,524.50.

    ASX Market News

    BXB – Brambles the pallets supplier and documents manager is still targeting an annual operating profit from $US740 and $US780 million, after sales in the nine months to the end of March lifted 5%.

    CPB – Campbell Brothers, the global testing services group, has reported a 75.7% rise in full year net profit and says it expects further growth in its business in the current year.
    GDO  – Gold One International has signed a deal to acquire the South Africa-based Rand Uranium for $US250 ($A235.66) million.

    LLC – Lend Lease Group has agreed to sell its half interest in the King of Prussia shopping mall in the US for net proceeds of $US545 million and will use the money to repay debt in the UK.

    LYC – Lynas the rare earth miner expects demand from Europe and the U.S. to double, and increase by 50% in S.E. Asia within the next five years.

    MAK – Minemakers Ltd the phosphate explorer last week confirmed reports it was in talks with a state-owned Indian enterprise about jointly developing its Northern Territory project.

    PNA – PanAust the copper and gold producer is on track to commission a second mine in Laos in December 2011, with first production expected in the March quarter of 2012.
    RCR – RCR Tomlinson the engineering firm says it will acquire thermal power generator AE&E Australia, which went into administration late last year.
    RHL – Ruralco Holdings the rural supplier, has increased 1H11 profit by 31.5% and says the growth in new businesses provides a cautiously optimistic outlook for the next six months.
    RKN – Reckon, the accounting software provider, is seeing improved business conditions in 2011 as demand for its products recovers.

    RIO – Rio Tinto has seen a major investor express disappointment over increased pay packets for the miner’s senior management.

    SPL – Starpharma Holdings says a clinical trial has shown that its VivaGel product is effective in the treatment of bacterial vaginosis (BV).

    TEL – Telecom NZ says the New Zealand government has signed deals with Telecom and Christchurch City Council-owned Enable Networks to roll out an ultra fast broadband (UFB) network.

    TGA – Thorn Group says net profit increased 13 per cent for the year to 31 March, as it predicted a “substantial” increase in earnings in the current year.
    WES – Wesfarmers has downgraded its sales forecast for its Curragh mine in Queensland due to recent rainfall and a mechanical failure. 

    Local Corporate Reporting

    Iluka Resources Ltd (ILU)         Full year 2010 AGM
    Treasury Wine Estates (TWE)   Q4 2011 Results
    Westfield Group (WDC)               Full year 2010 AGM
    Programmed Maintenance Services (PRG)        Full year 2011 Results

    Ex-dividend Date

    Marbletrend Group (MBD)

    Market Summary

    ASX – to open higher
    US & UK/Europe – mixed

    US ADRs – Broadly Lower

    BHP up 1.5% & RIO  up 1.5%; AWC up 1.2%
    ANZ down -0.1% & NAB up 0.6%
    NEM  up 1.7%, JHX up 1.3% , NWS down -0.4%

    Commodities Stock Index up 1.2%
    Gold Stocks Index up 2.2%
    Oil Stocks Index up 1.4% 

    By Michael Hevern
    Head of Research
     
    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    Stock Market Analysis: Markets Consolidate

    Friday, May 20th, 2011

    * US stock market indices staged their second straight gain overnight, as commmodities prices consolidated.
    * European stock markets ended higher, helped by continuing gains in the U.S. markets.
    * Asian stock markets ended mixed yesterday.
    * In commodities prices consolidated.  

    The SPI Futures is trading below the key level of 4800, closing down -0.2% (or -11 pts) at 4,749. The key levels for our index today are 4760 and 4680. The ASX is set to consolidate as we have positive leads for markets in the U.S. and European markets. 

    Australian shares higher traded higher yesterday, led by resources stocks. BHP Billiton rose 1.2%, Rio Tinto rose 1.3%, Newcrest rose 2.3%, Fortescue Metals rose 1.6% and OZ Minerals rose 5.2%. Expect these stocks to consolidate today, while the banking sector appears to have shrugged off the Moody’s downgrade and commodities prices consolidated overnight.  The mining tax will be in focus again today after the WA Government sharply increased the state iron ore royalties from the miners by $2 billion.

    See below for ASX listed companies in the news today.

    Economics News Today

    * AOFM auctions $750 million of Oct 2014 bonds.

    U.S. Markets

    US stock market indices staged their second straight gain overnight, as corporate news outweighed disappointing economic news. 

    The Dow Jones finished higher led by Amex and McDonalds up over 1.2%, while the S&P 500 index rose, led by the industrial and telecommunications sectors, and the tech-heavy Nasdaq Composite rose for a third straight session. 

    The scale back of the Glencore International $US11 billion initial public offering is seen as a litmus test for the commodities super cycle going forward, and has helped the mood for commodities.

    LinkedIn, the professional networking site, had a successful IPO closing up 109% at $94.25, making it the best performing initial public offering for the year.  The success of this IPO has raised hopes that more IPOs may come to the market to help drive more capital off the sidelines. 

    Economic news was mixed: the weekly jobs report showed better-than-expected unemployment claims figures, however the Federal Reserve Bank of Philadelphia’s reading on mid-Atlantic manufacturing activity plunged to its slowest pace in months, and housing sales of previously occupied homes in the U.S. fell slightly in April.

    The Dow Jones closed up 0.4% (or 45 points) at 12,605, the S&P 500 index closed up 0.2% (or 3 points) at 1,343, the Nasdaq ended up 0.3% (or 8 points) at 2,823, and the smaller cap Russell 2000 was up 0.2%.

    Company groups that make up the S&P index generally traded higher: Industrials were up 0.6%, Consumer Staples were up 0.3%, the Technology sector was up 0.2%, while Materials and Energy sector were flat.

    European Markets

    European stock markets ended higher overnight, helped by continuing gains in the U.S. markets. The Stoxx Europe 600 index rose 0.7%. 

    The IMF is looking for a new head following the resignation of Mr Strauss-Khan, currently being held in the U.S. on sexual assault charges.  Germany is advocating that the new leader should be European because of the issues that the region faces near-term. 

    In London the FTSE 100 index rose 0.5% led by the miners and financials as investors look to add risk to their portfolios. Investec jumped 5.4% after the financial services group reported a 22% jump in fiscal year net profit.  BP rose 1.6% after Bank of America upgraded it to a “Buy”, however other energy stocks consolidated in light of crude-oil futures dropping below $US100 a barrel, after a string of disappointing U.S. data.

    Bank stocks gained across the European region, with Societe Generale up 0.6% and Barclays PLC stronger by 2.5%. In Germany, the DAX 30 index advanced as investors went looking for opportunities from the recent pullback.

    The FTSE 100 index up 0.5% (or 32 points) at 5,956, the German DAX was up 0.7% (or 55 points) at 7,358,  while in France the CAC was up 1.3% (or 49 points) at 4,027.

    Asian Markets

    Asian share markets ended mixed yesterday, with Japan in a “technical recession”.  

    The Japanese market sold-off after data showed their economy contracted sharply in the first quarter of 2011, as the March earthquake and tsunami resulted in gross domestic product (GDP) contracting -0.9% in the first quarter of 2011, and is now tracking at a -3.7% annualised decline. The fall marked the second consecutive quarter of contraction, taking Japan into what economists consider a “technical recession”.  Japanese utilities declined after the Prime Minister raised the possibility of splitting up electricity generation and distribution businesses, this sent power generators plummeting and Tokyo Electric Power Co. (Tepco) sold down -8.0%. 

    In China the SSE Composite was down -0.5% (or -13 points) at 2,859, while in Hong Kong the Hang Seng Index was closed up 0.7% (or 154 points) at 23,164 led by miners. In Japan the Nikkei 225 Index was down -0.4% (or -41 points) at 9,620, the South Korean KOSPI was down -1.9%, and the Indian market was up 0.3%.    

    Commodities

    The Dollar Index was higher at 75.12 on a lower Euro, while the Australian Dollar last traded lower at 106.65. Commodities prices consolidated.

    For the session the benchmark crude NYMEX for June delivery was down -1.6% (or -$US1.67) to settle at $98.40. Copper prices are higher still below 2-year highs as Copper for June delivery was down -1.3% (or -5.3 cents) at $US4.0480.  June gold was down -0.2% (or -$US3.40) at $US1,491.50.

    ASX Market News

    AUN – Austar the regional pay-tv provider has confirmed it is in discussions with Foxtel that may result in a takeover offer.

    BKN – Bradken the consumable products supplier to the resources and freight rail industries, has acquired Wear Protect Systems Pty Ltd (WPS) and two of its related companies for an upfront payment of $13.3 million and an earn-out over two years.

    BXB – Brambles, the pallets supplier and documents manager, is still targeting an annual operating profit between $US740 and $US780 million, after sales in the 9 months to the end of March lifted 5 percent.

    CDD – Cardno says the 1H11 financial year has been robust, but 2H11 profit will be lower than in the first half.

    JHX – James Hardie Industries has posted a net loss of $US347 million for the full year to 31 March 2011, and expects the key US housing market to remain flat in the current year.

    LEI – Leighton Holdings says its Asian subsidiary has won two major contracts worth $547 million to construct the South Island Line (East) rail project in Hong Kong.

    MAK – Minemakers Ltd shares jumped after the phosphate explorer confirmed reports it was in talks with a state-owned Indian enterprise about jointly developing its Northern Territory project.

    MAP – MAP Group, the airports owner, expects to pay distributions of 21 cents per stapled security in calendar 2011.

    QBE – QBE Insurance Group will raise $493 million through the placement of subordinated debt notes with overseas institutional investors.

    RCG – RCG Corporation the footwear business owner expects full year net profit at the upper end of earlier guidance.

    RIO – Rio Tinto has priced $US2 billion of fixed rate bonds, comprising $US700 million of 5-year, $US1 billion of 10-year and $US300 billion of 30-year SEC-registered securities.

    TSE – Transfield Services has reaffirmed annual profit guidance, as it sells a business unit in the United States for $US255 million.

     

    Local Corporate Reporting

    PanAust Ltd (PNA)              Full year 2010 AGM
    InvoCare Ltd (IVC)              Full year 2010 AGM
    Spark Infrastructure (SKI)    Full year 2011 AGM
    Spotless Group Ltd (SPT)    Trading statement 

    Ex-dividend Date

    None

    Market Summary

    ASX – to open flat

    US & UK/Europe – higher

    US ADRs – Generally Higher

    BHP down -0.9% & RIO  down -1.2%; AWC up 0.4%
    ANZ up 1.8% & NAB up 1.9%
    NEM  up 1.5%, JHX down -0.2% , NWS up 1.8%

    Commodities Stock Index down -0.3%
    Gold Stocks Index up 0.6%
    Oil Stocks Index up 0.2% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    Stock Market Analysis: Recovery In Commodities Supports Markets

    Tuesday, May 10th, 2011

    * U.S. stock markets rose overnight, led by the energy sector.
    * European stock markets traded lower, led by a fall in financial shares.
    * Asian share markets ended mostly higher as commodity prices rebounded.
    * Commodities prices recovered as crude oil and gold futures bounced.  

    The SPI Futures is trading below the key level of 4800, closing down -0.1% (or 3 pts) at 4,761. The key levels for our index today are 4800 and 4720.

    The Aussie market is set to trade sideways, but share prices will be dampened by the strong Aussie dollar.  Recovery in commodities prices and mixed leads from overseas should help investor sentiment, but investors will be cautious ahead of the Federal Budget due for release tonight.

    See below for ASX listed companies in the news today.

    Economics News Today

    * International Trade in Goods & Services Balance on Goods and Services for March
    * Australian Treasury – Australia Budget statement

    U.S. Markets

    U.S. stock markets rose overnight, led by the energy sector as crude oil prices rose 6% settling above $US102 a barrel, while gold prices rose 1.5%.  Investor sentiment improved, as a recovery in commodity prices and a rush of M&A activity helped overshadow concerns the Greek downgrade. 

    The crude oil price jumped as JP Morgan and Goldman Sachs said that the price of will rise into the end of the year.  Mining and Energy companies traded mostly higher, while commodity funds, especially for silver and gold, were some of the most heavily traded shares. 

    US investors shrugged off the problems with the eurozone after S&P’s downgrade of Greece’s sovereign debt.  The Dow Jones rose as McDonald’s was up 0.8% after its same-store sales rose 6% in April, the biggest monthly increase since October, while aluminium giant Alcoa jumped 2.2% as metal prices climbed.

    The Dow Jones closed up 0.4% (or 55 points) at 12,683, the S&P 500 index closed up 0.4% (or 5 points) at 1,340, the Nasdaq ended up 0.4% (or 13 points) at 2,828, and the smaller cap Russell 2000 was up 0.5%.

    All ten company groups that make up the S&P index generally traded higher: the Energy sector was up 1.8%, Materials were up 1.5%, Healthcare was up 0.6%, Industrials were up 0.4%, Consumer Staples were up 0.1%  while Financials closed down -0.3%. 

    European Markets

    European stock markets traded lower overnight, led by a fall in financial shares as concerns mounted over Greece’s debt burden and as Standard & Poor’s cut the country’s credit rating. The Stoxx Europe 600 index closed down 0.3% due to the resurfacing of eurozone debt concerns. 

    The Standard & Poor’s agency downgraded the Greek credit rating by two notches, citing concerns that eurozone officials are looking to extend the debt payment maturities of the European Commission’s portion of the nation’s EUR110 billion bailout.  Moody’s also placed Greek debt on review for potentially a multi-notch downgrade. 

    The banking and insurance sectors across the region sold off due to the increasing probability of the requirement of debt restructuring needed by Greece to address its debt problems.  This will weigh on balance sheets as European banks are big holders of Greek bonds. Bank shares were big losers. 

    In London the FTSE 100 index was down -0.6% (or -34 points) at 5,9742, the German DAX was down -1.1% (or -82 points) at 7,410, while in France the CAC was down -1.3% (or -51 points) at 4,007. 

    Asian Markets

    Asian share markets ended mostly higher yesterday, as commodity prices rebounded from their sharp sell-off of last week.  Commodities prices have been under pressure since the U.S. Federal Reserve last month cut its economic growth forecast for 2011 and as China’s manufacturing activity continued to slow in April. 

    Crude oil typically has seasonal strength from May through to the end of the year and the recent sell-off is seen as a good platform for oil to trade to test recent highs by year’s end. Both JP Morgan and Goldman Sachs have forecast that crude oil will trade higher as the year unfolds. 

    In Japan the Nikkei Index fell 0.7% due to concerns about potential power shortages, as saftey issues need to be addressed at other nuclear plants within the country. 

    In Hong Kong stocks climbed for the first time breaking an 8-session losing streak as investors went bargain hunting in property and resource shares.  The Chinese market bounced off its 200-day moving average. Resource stocks bounced as Nymex crude oil prices edged back over $US100 a barrel and as silver led precious metals higher.

    In China the SSE Composite was up 0.3% (or 9 points) at  2,872, while in Hong Kong the Hang Seng Index was up 0.8% (or 177 points) at 23,336  and in Japan the Nikkei 225 Index was down -0.6% at 9,794.  The South Korean KOSPI was down -0.3% due to worries that the Bank of Korea might raise interest rates again, while the Indian market was flat.

    Commodities

    The Dollar Index was higher at 74.67 on a lower Euro, while the Australian Dollar last traded around record levels at 107.83. Commodities were higher.

    For the session the Benchmark crude NYMEX for April delivery was up 5.4% (or $US5.37) to settle at $US102.62. Copper prices are higher but still below 2-year highs, with copper for April delivery up 1.0% (or 4.1 cents) at $US4.0410. April gold was up 0.8% (or $US11.70) at $US1,512.80.

    ASX Market News

    AAC – Australian Agricultural Company expects earnings of between $60 and $65 million in the FY11 and has launched an equity raising and share purchase plan to raise $86 million.

    AGO – Atlas Iron Ltd has signed an agreement to expand capacity at its Wodgina iron ore mine in the Pilbara WA by 75 percent to 7 million tonnes per annum (Mtpa).

    AAO – Australasia Consolidated has changed its direction from gold exploration to financial services, with the announcement of the first of several planned acquisitions in the sector.

    AWC – Alumina CEO has told shareholders to expect the aluminium market to grow by 12 per cent this year

    CTX- Caltex Australia the oil refiner, has flagged a lift in first half production.

    FGL – Foster’s Group will recover $256.7 million from the tax department after the ATO decided not to appeal a court decision that went in favour of the brewer.

    GCL – Gloucester Coal Ltd is in a trading halt as the coal miner prepares an announcement in relation to two potential takeovers and a new share sale.

    IPL – Incitec Pivot Ltd the explosives and fertiliser supplier, has booked a 25 percent lift in 1H11 profit and will build a $40 million ammonium nitrate emulsion plant at Port Hedland in the Pilbara region WA.

    ORG – Origin Energy has bought a 40 per cent stake in a Chilean geothermal exploration company.

    QAN – Qantas engineers will stop work for an hour on Friday following a breakdown in wage negotiations with the airline.

    RDF – Redflex Holdings the red light camera maker, is in a trading halt to holds meetings for shareholders to consider a $303.5 million takeover offer by Macquarie Group Ltd and The Carlyle Group.

    RFG – Retail Food Group has made an off-market takeover offer for all the shares in Oaks Hotels and Resorts, trumping a rival offer.

    SGM – Sims Metal Management, the world’s largest listed recycling company, says the strong metals prices which helped it report a 74 per cent jump in net profit and it has acquired UK metals recycling business Dunn Brothers Ltd.

    SPT – Spotless Group the maintenance and cleaning services firm has received a $657 million takeover offer from a private equity firm.  

    TAH – Tabcorp Holdings has been awarded the Victorian Keno Licence for the next 10 years, which is expected to add $20 million per annum to the gambling and gaming company’s earnings. 

     

    Local Corporate Reporting

    Grange Resources Limited (GRR)      Full year 2011 AGM 

    Ex-dividend Date

    AIR – Astivita Renewables (4 cents)
    TWD – Tamawood Limited (8 cents)

    Market Summary

    ASX – to open flat

    US & UK/Europe – mixed

    US ADRs – Broadly Higher

    BHP up 2.1% & RIO up 2.4%; AWC up 2.0%
    ANZ up 1.5% & NAB up 1.2%
    NEM  up 1.8%, JHX up 0.8% , NWSdown -0.4%

    Commodities Stock Index up 1.7%
    Gold Stocks Index up 1.6%
    Oil Stocks Index up 1.7% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    Stock Market Analysis: Leading Indicators – Divergence

    Friday, May 6th, 2011

    Traders are always looking for indications as to what the market will be doing in the near to medium term. A leading indicator is divergence, in which the price of the share or index moves away from an indicator, signaling a trend reversal.

    However the problem with divergence is that it is not good at timing signals, as it could last for months before the markets get back in sync. When markets reach a tipping point, the longer term investors are often the last to know, as we’ve seen recently within the silver market.

    The US markets may well be nearing such a tipping point. The S&P 500 index has had a negative start to May following a strong April, and this marks the first time the index has declined over the first three trading sessions of a month since October 2008. We also see that commodities prices have recently been hit across the board with crude oil, gold and silver prices all down. Silver prices are down 28 percent in just seven trading sessions. Another catalyst could be the market’s reaction to the impending end of the US Federal Reserve’s $600 billion asset-purchase program (QE2) in June.

    The savvy trader seeks clues of some early warning of a market turnaround, and there are some key market segments and inter-relationships that can be helpful in pointing to a turnaround.

    The US Markets

    The US markets have had a great run since the end of the GFC in early 2009, however the S&P 500 index had a negative start to March, which marks the first time the index has declined over the first 3 trading sessions of a month since October 2008 and this could be pointing to a change in investor sentiment.

    Divergence has appeared, as shown in the chart below. The momentum technical indicator for the S&P 500, which tracks the rate of change, has been showing negative divergence over the past few months.

    This divergence, along with a number of divergences as discussed below, could be signalling warning bells.

    Silver Price Turnaround

    The recent turnaround in the silver market shows what can happen when a divergence signal works.

    Divergence appeared (as shown in the chart below) with the momentum technical indicator. Negative divergence developed in the last few days of April.

    Divergence can work spectacularly, as shown with the silver market. The fantastic run of silver was splashed across the press last week, but silver prices have since plunged 28 percent in the past seven trading sessions.

    Inter-Market Divergence

    Divergence can develop between inter-related markets. Commodities prices have pulled back from record levels recently and the commodities markets influence the equities markets.

    The charts below show that divergence signals have developed between copper and the S&P 500 on a number of occasions over the past couple of years, with the copper price leading the equities markets in early 2009 and mid-2010.

    Copper is the key metal used by the manufacturing and construction industries and its fortunes are therefore closely tied to the equities markets. Divergence has again developed between copper and the S&P 500. Copper prices have been in steady decline over the last few months with copper futures falling 11% since settling at an all-time high in mid-February. Copper prices are now down 7% year-to-date, while the S&P 500 is still above its February high and is up 7.1% year to date. If history repeats itself, then the S&P 500 equities are setting up for a fall.

    The Aussie Market

    The Aussie market is tied closely to the fortunes of the commodities markets and has been under-performing the US markets, as shown in the charts below. It is good to note that in real terms the US markets have really under-performed Australia because their gains have been driven by the weakness in the US dollar.

    The divergences between copper prices and the Aussie market have also resulted in our equities prices following the lead of the copper price, and we too are setting up divergence in the current market.

    The Trade

    There are a number of indicators showing divergence, which could be a warning that markets are setting up for a turnaround. The sell-off in the silver market shows what can happen when markets get ahead of themselves.

    If copper prices continue to decline then equities may be in trouble, and another catalyst could be the market’s reaction to the impending end of the US Federal Reserve’s $600 billion asset-purchase program (QE2) in June.

    By Michael Hevern
    Head of Research

    MDS Financial Research
    MDS Financial Research monitors the market daily and highlights trading stocks when they are ready to run. Sign-up for a 14-day trial today.

    Market Analyser Software Trial
    The Market Analyser software provides you with access to the charts above using the following codes: S&P 500 [.GSPC], ASX S&P 200 [.AXJO], Copper [HGc1] and Silver [SIc1].

    You can sign up for a free trial of Market Analyser Gold, or for more information take a tour of the software.

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