Market report: Tuesday, November 8
UPDATED: Australian shares have opened more than 1 per cent higher after US jobs data at the end of last week gave further support to the idea of a Federal Reserve rate hike this month.
Strong performances by the financials and resources sectors that dominate the domestic market helped lift the benchmark S&P/ASX200 after US nonfarm payrolls increased 211,000 in November, suggesting the US economy is strong enough to withstand a first rate rise by the Fed in almost a decade.
“An unambiguously stronger picture of the US economy has emerged and that is supportive of share prices and profits around the globe,” CMC Markets chief market strategist Michael McCarthy said.
At 10.25am (AEDT), Commonwealth Bank was up $1.37, or 1.71 per cent, to $81.59, while ANZ and Westpac were both up 1.36 per cent.
ANZ added 37 cents to $27.48, Westpac added 44 cents to $32.74, and National Australia Bank rose 40 cents, or 1.35 per cent, to $30.01.
Bendigo and Adelaide Bank rose 24 cents, or 2.16 per cent, to $11.34, and Bank of Queensland was up 20 cents, or 1.49 per cent, to $13.64.
Insurers were similarly strong, with QBE, AMP, IAG and Suncorp all up between 1.5-2.0 per cent.
Rio Tinto was up 31 cents, or 0.7 per cent, to $44.69, and BHP Billiton was up 24 cents, or 1.34 per cent, to $18.17.
Another rise in the price of gold helped push Newcrest higher by 51 cents, or 4.39 per cent, to $12.14, and Alacer up 9.0 cents, or 3.37 per cent, to $2.76.
The rosy picture didn’t extend to the energy sector, however, with pressure on oil prices weighing on suppliers.
Origin was down 9.5 cents, or 1.75 per cent, to $5.32, Santos was down 11 cents, or 2.6 per cent, at $4.12, and Woodside Petroleum was down 9.0 cents, or 0.31 per cent, at $28.98.
The Australian dollar has slipped after a fall in oil prices hurt commodity currencies.
At 8.30am (AEDT) on Tuesday, the currency was trading at 72.66 US cents, down from 73.28 cents on Monday.
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And the Australian share market looks set to open lower, following Wall Street’s lead into the red as energy and raw material stocks took a hit with oil prices falling to their lowest in nearly seven years.
The December share price index futures contract was down 14 points at 5,135.
Locally, in economic news on Tuesday, the National Australia Bank’s monthly business survey for November and the ANZ-Roy Morgan weekly consumer confidence survey are both due out.
The AFR Workforce & Productivity Summit is on in Melbourne.
In equities news, tech startup Atlassian is expected to list on the Nasdaq in New York.
NEW YORK – Wall Street has fallen as energy and raw material stocks take a hit, with oil prices falling to their lowest in nearly seven years.
Brent crude and US crude extended their decline and fell as much as five per cent, after OPEC’s meeting last week failed to address a growing supply glut.
Falling oil prices helped airline stocks, with JetBlue Airways up 4.1 per cent and Republic Airways up 2.9 per cent. The S&P 1500 airlines index hit its highest level since January.
Inaccurate forecasts of growth, employment and inflation by the Fed have pulled the central bank in conflicting directions and driven the decision to keep rates low for so long, St Louis Federal Reserve President James Bullard said.
Traders see a 79 per cent chance that the central bank will increase rates for the first time in nearly a decade, according to the CME Group’s FedWatch.
LONDON – Britain’s top share index has surrendered its earlier gains to end lower, with commodity shares coming under severe pressure after prices of crude oil and metals slipped.
The UK Oil and Gas and the mining indexes fell after crude oil prices hit their lowest in nearly seven years following an OPEC meeting that ended in disagreement over production cuts and as metals prices fell on a stronger US dollar.
Shares in Royal Dutch Shell, BG Group, BP, BHP Billiton and Antofagasta saw falls of between 2.8 per cent and 4.7 per cent.
“OPEC seems to be fragmenting now, with an air of ‘every member for itself’ prevailing,” said Mike van Dulken, head of research at Accendo Markets.
“Without the protection of big producers like Saudi Arabia, smaller exporters will have little choice but to ramp up production, even if to do so would be counter-productive for the oil price.
HONG KONG – Asian shares edged lower as investors kept a weather eye on Chinese economic data due this week that’s expected to show the world’s second-largest economy is still sluggish
Asian investors were worrying about Chinese trade data due on Tuesday, inflation the following day and industrial output and retail sales figures due on Saturday
Market moves may be muted as investors digest the European Central Bank’s moves to stimulate growth and inflation, which disappointed many, and look ahead to next week’s US Federal Reserve policy meeting, at which rates are expected to rise for the first time since 2006.
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ENERGY
Oil prices have skidded to their lowest level in nearly seven years, hurting the shares of major oil companies on Wall Street as a global glut showed no signs of abating, while European stocks benefited from a weaker euro.
Brent crude prices fell to $US41.20 on Monday, their lowest since February 2009, after a meeting of members of the Organisation of the Petroleum Exporting Countries on Friday ended in disagreement over production cuts and without a reference to its output ceiling.
“As a result of the collapse in oil and gas prices today, the market is worried that you’re going to see less capital spending, you’re losing a lot of a good-wage jobs in the oil patch, and people are worrying that we’re going to see a snowball of defaults among high-yield energy issuers,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St Louis.
PRECIOUS METALS
Gold has fallen more than one per cent from the prior session’s three-week high, after the US dollar gained from Friday’s upbeat US jobs data that reinforced expectations the Federal Reserve will raise interest rates next week.
A tumble in crude oil futures to a near seven-year low also pressured gold prices, traders said.
“Most people have been looking at the potential for a rate hike in the US and pretty much that alone, ignoring all other news,” Simon Weeks, head of precious metals at the Bank of Nova Scotia.
“There must have been people who were caught short on Friday.”
“We expect that technical upside pressure will be subdued into year-end while macro conditions remain skewed to the downside,” Citi Research said in a note.
BASE METALS
Copper prices have fallen alongside oil as a strong US dollar reinforces worries about weak demand growth in top consumer China and expectations of surplus metal.
“The market is focused on the demand side. We will have better clues of what is going on with Chinese data later this week,” SP Angel analyst Sergey Raevskiy said.
“Producers need to cut more to try to balance the market, but that isn’t happening.”
China’s trade data is due on Tuesday and investment and industrial production numbers for November are due on Saturday.
NEW YORK – Oil prices have skidded to their lowest level in nearly seven years, hurting the shares of major oil companies on Wall Street as a global glut showed no signs of abating, while European stocks benefited from a weaker euro.
FAIRFIELD, Connecticut – GE has scrapped a $US3.3 billion ($A4.5 billion) plan to sell its home appliance business to the Swedish company Electrolux, a deal opposed by US regulators over concerns about competition.
ZURICH – Debt-laden mining giant Glencore says it has begun talks with miners at its Collinsville coal mine in Australia where it plans to cut back production affecting 180 jobs.
ASX stocks to watch
BHP – BHP BILLITON
RIO – RIO TINTO
FMG – FORTESCUE METALS GROUP: Miners could see a hit to their share value on Tuesday with the price of iron ore falling below $US40, with it dropping 97 US cents to $US39.06.
AAP
