Stock Market Analysis
Rally Continues on Chinese Growth Report
Overseas markets gained overnight, extending their rally into a third week, as China reported its economy remains robust and companies announced another round of new takeovers. Global financial regulators also agreed to reforms that could help avoid another GFC credit crisis like that of 2008-09. The ASX is set to trade higher today.
The SPI Futures is just above the key resistance level of 4600 the ASX is set to open higher as the SPI Futures closed up 0.3% (or 14 pts) at 4,646. The key levels for our index today are 4700 and 4600. M&A activity continues to drive specific stocks. Oil prices jumped again overnight above the $US77 level. Options volatilty is subdued at the moment, which gives investors access to “cheap” protection, so investors may consider taking this opportunity to protect their portfolios.
US Markets
US stocks gained overnight, extending their rally into a third week. Financials led U.S. stocks higher as the new global banking requirements will be implemented gradually enough to ensure banks worldwide, will not need to rush to raise capital. The key news were the results of Basel III meeting, where global financial regulators agreed to new rules for how much money banks must hold in reserves, and China’s release of inflation data for August out Saturday, showed consumer prices accelerated at the fastest pace in nearly 2-years. Acquisitions are an indicator that companies are confident the economy is going to expand soon, and HP has been in the thich of it. Overnight Hewlett-Packard agreed to purchase security software provider ArcSight and Dollar Thrifty Automotive Group said it accepted Hertz Global Holdings acquisition offer. As a result of Basel III, banks will gradually have to increase their reserves to protect against potential losses. China’s reported industrial production accelerated again in August confirms that the country’s growth is not slowing as quickly as first thought. The Dow closed up 0.8% (or 81 points) at 10,544, while in the broader market the S&P 500 index up 1.1% (or 12 points) at 1,122 and the tech-heavy Nasdaq ended up 1.9% (or 43 points) at 2,286.
European Markets
European equity markets closed higher overnight. Investor sentiment was buoyed by the Basel III agreement to implement new rules to strengthen the global banking sector against any new financial crisis and strong Chinese economic data. Strong expansion in China is vital to a continuing global recovery as it will offset sluggish growth in the US and Europe where economic expansion is not as strong. In London the FTSE 100 index closed up 1.2% (or 64 points) at 5,566, the German DAX up 0.8% (or 47 points) at 6,262, while in France the CAC was up 1.1% (or 41 points) at 3,767.
Asian Markets
Asian markets closed up on the back of the weekend report thatshowed China reported industrial production accelerated again, for 10th consecutive month. Japanese share rose, led by gains in the major lenders as new bank capital rules were not as stringent as first thought. China’s release of strong data on the weekend shows the world’s second biggest economy remins robust. Property developers and bank stocks rebounded as concerns over the need for further tightening measures for the property sector eased. In China the SSE Composite closed up 0.9% (or 25 points) at 2,688, while in Hong Kong the Hang Seng Index was up 1.9% (or 401 points) at 21,658 and in Japan the Nikkei 225 Index was up 0.9% (or 8260 points) at 9,322.
Commodities
The Dollar Index down -1.0% at 81.87 on higher Euro, while the Australian Dollar last traded higher at 93.51. Commodities were generally higher.
Oil prices rose above $US74 this week, after the forecast for global oil demand for 2010 was raised and following the closure of a key pipeline carrying crude to the U.S. The benchmark crude NYMEX for September delivery was up 1.0% (or $US0.74) to settle at $US77.15. Copper prices higher, Copper for September delivery was up 2.2% (or 7.5 cents) at $US3.4815. Gold prices are around 2-month highs, are around key $US1,250 level, with December gold up marginally 0.1% at $US1,246.00.
Key News International Drivers Today
US – Wholesale inventories building. Companies continue to report earnings this week.
EU – Banks may need to raise EUR105 billion of extra capital under planned Basel rules.
CHINA – Chinese inflation reading has risen 10 consecutive months. Government stands firm on access to credit.
JAPAN – Japan exporters hurt as yen rose to a fresh 15-year high .
Markets Overview
Rally Continues on Chinese Growth Report
SPI: Above key Level 4600 – SPI up 0.3% at 4,646 (up 0.3% for week)…
ASX News Today
The SPI Futures is just above the key resistance level of 4600 the ASX is set to open higher as the SPI Futures closed 0.3% (or 12 pts) at 4,577 (down -0.2% for week). The key levels for our index today are 4700 and 4500. M&A activity continues to drive specific stocks. The ASX is set to trade higher today. M&A activity is hotting up, particularly in the gold mining sector, however gold prices have back off record highs and will likely weigh on gold stocks in the short term. Oil prices are above the key $US75 level. Options volatilty is subdued at the moment, which gives investors access to “cheap” protection, so investors may consider taking this opportunity to protect their portfolios.
AEC- Ammtec the minerals tester, has agreed to a revised takeover offer from Campbell Brothers.
AVO- Avoca Resources the Perth-Based explorer will merge with Turkish gold producer Anatolia Minerals Development to create an intermediate global gold producer called Alacer Gold Corporation.
ARU- Arafura Resources, stands to become the world’s major supplier rare earth products, after a scientific breakthrough could enable it to break a stranglehold on technology to treat rare earths.
BIG4- The Big four banks, already satisfy the new regulations handed down by the world central bankers that require lenders to set aside more capital to better withstand financial shocks
LEI- Leighton Holdings nominated a CEO successor for Wal King, but says it will continue with the strategy of growth through geographic and market diversity.
LEI- John Holland Group, a whole subsidiary of Leighton Holdings, has won a $276 million deal for a new port in WA. The port is associated with miner Rio Tinto Ltd’s Cape Lambert Port B project.
MTE- Metrocoal says Chinese authorities have approved the $30 million joint venture with Chinese state-owned enterprise the China Coal Import & Export Company (CCIE), so the project is on track.
RNG- Range River Gold has upgraded the open-pit resource potential of two deposits at its Mt Morgans project in Western Australia.
SKI- Spark Infrastructure, the electricity infrastructure fund says it has secured a new $250 million bank loan.
WOW- A Morgan Stanley report says Woolies enjoy the fatest profit margin of any supermarket chain in the world, and suggests Woolies needs to increase its home brands to improve margins.
Economic Reports :
NAB – to release August Business Survey
Companies:
SGT – Optus MD will speak on Cloud Computing today
VBA – Virgin CEO John Borghetti will speak to Business today
Dividends
Computershare (CPU) – Full year 2010 Dividend payment
Tassal Group (TGR) – Full year 2010 Ex-dividend date
SEEK Ltd (SEK) – Full year 2010 Ex-dividend date
Market Summary
ASX – to open Higher
US & UK/Europe – Higher
US ADRs – Generally Higher!!!…
BHP up 3.2% &
RIO up 2.9%;
AWC up 3.1%
ANZ up 3.0% &
NAB up 3.5%
NEM down 0.4%,
JHX up 3.8%,
NWS up 2.3%
Commodities Stock Index up 0.9%
Gold Stocks Index up 0.3%
Oil Stocks Index up 0.7%
By Michael Hevern
Head of Research
