Market report: Monday, January 11
UPDATED: The Australian share market is about 1.5 per cent lower in early trade on continued worries about the Chinese economy and whether its government will again intervene to prop up markets.
The benchmark S&P/ASX200 index briefly dropped below the lows of September and December before recovering to 4,917.9 at 10.30am (AEDT) on Monday.
That’s still down 72.9 points, or 1.46 per cent.
IG market analyst Angus Nicholson said that whether the market finished above the 4,910 level cited by analysts as a possible floor for stocks could be crucial for investor sentiment.
“Everyone’s going to want to see a close above that but on top of that is whether we start to see some consistent intervention by the chinese government in the FX and equity markets,” Nicholson said.
“If we do start seeing that today and tomorrow, that might start changing investor perception and perhaps bring a bit more buying to the market.”
The continued selloff in Australia comes after Wall street ended a volatile week with its worst five-day start to a year ever.
“It’s looking like a pretty messy open as things are slowly unwinding,” Nicholson said, adding that IG Markets expected a drop of about 1.4 per cent for the day.
The big four banks were all in negative territory, with Commonwealth Bank down 86 cents, or 1.08 per cent, at $78.56, and National Australia Bank down 32 cents, or 1.15 per cent, at $27.40.
ANZ dropped 22 cents, or 0.86 per cent, to $25.32, and Westpac was down a relatively modest 17.5 cents, or 0.56 per cent, to $30.82.
BHP Billiton and Rio Tinto were hit again, with both mining giants declining more than 3.5 per cent as the price of iron ore continued to fall.
BHP was down 60 cents, or 3.67 per cent, at $15.75, while Rio was down $1.65, or 3.94 per cent, at $40.25.
The energy sector’s woes continued, with Santos down 9.0 cents, or 2.66 per cent, to $3.29, and Oil Search, Orora and Woodside Petroleum showing similar declines.
Shares in iSelect slumped 33 cents, or 30 per cent, to 77 cents after the comparison website sharply cut its full year EBIT guidance to $15-$18 million, from $26 million.
“That’s quite shocking, the fact they’re reporting such errors in their management,” Nicholson said.
“It looks like quite a lot of mismanagement going on there and investors are pounding it at the open.”
At 6.45am (AEDT) on Monday, the share price index was down 80 points at 4,850.
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Locally, in economic news on Monday, the ANZ job advertisements series for December is due out.
No major equities news is expected.
In Australia, the market on Friday ended a volatile week lower.
The benchmark S&P/ASX200 index was was down 19.5 points, or 0.39 per cent, at 4,990.8 points.
The broader All Ordinaries index fell 19.4 points, or 0.38 per cent, at 5,049.9 points.
The Australian dollar has fallen to a new three-month low after US employment growth figures came in much stronger than expected.
At 8.18am (AEDT) on Monday, the local unit was trading at 69.66 US cents, down from 70.51 cents on Friday.
And the Australian share market looks set to open sharply lower after Wall street ended a volatile week with its worst five-day start to a year ever.
The share price index was down 80 points at 4,850.
The Australian bond market is firmer after global stock markets ended their worst five-day start to a year.
St George chief economist Hans Kunnen said a very strong US jobs report failed to boost market confidence and strong demand for safe-haven assets continued.
“Unsettling markets have been concerns over the pace of global economic growth and, in particular, that of China,” he said.
The US economy created 292,000 jobs in December, easily beating forecasts of a rise of 200,000, and the unemployment rate held steady at a seven-and-a-half-year low of five per cent.
At 8.30am AEDT on Monday, the March 2016 10-year bond futures contract was trading at 97.260 (implying a yield of 2.740 per cent), up from 97.215 (2.785 per cent) on Friday.
The March 2016 three-year bond futures contract was at 98.030 (1.970 per cent), up from 97.990 (2.010 per cent).
Of interest to local markets on Monday will be the release of the ANZ job advertisements figures for December.
NEW YORK – US stocks have closed lower, ending a volatile week with their worst five-day start to a year ever, as sliding oil prices and lingering worries about the global economy offset upbeat US job growth.
Both the Dow and S&P 500 had their worst five-day starts in history, with the Dow falling 6.2 per cent for the week and S&P 500 sliding 6 per cent. The Nasdaq was down 7.3 per cent this week.
“The start of the year is very poor, so that’s got investors on the defensive,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
“In the face of weakening global growth … it’s difficult to find reasons to commit money at this point even if one is bullish,” he said, adding that he expects stocks to rebound from these oversold conditions next week.
LONDON – Top UK shares have taken their biggest tumble in the first week of a year since 2000 as China’s decision to let the yuan weaken rattled global markets.
The UK’s FTSE 100 had opened higher on Friday after Chinese stocks regained some poise following a plunge the previous day.
However, traders said the unpredictability of the previous week prompted investors to sell out of their positions before the weekend for fear of being caught in volatility on Monday.
“We saw a bit of buying early doors, but that seems to have petered out, as no one wants to go into the weekend holding long positions, given how volatile crude oil and other commodities are at the moment,” said Manoj Ladwa, head of trading at TJM partners.
HONG KONG – Gains by Chinese stocks, a steadier yuan and a recovery in oil prices have helped calm frazzled investors just in time for the first US payrolls report of the year.
China on Friday nudged the yuan higher for the first time in nine days, easing fears that it had lost control of the currency.
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“We’ve had a stabilisation in China overnight, but the question remains as to whether China’s economy is headed for a hard or soft landing,” said Richard McGuire, senior fixed income strategist at Rabobank.
NEW YORK – Oil has fallen for a fifth straight day, losing 10 per cent on the week, and Goldman Sachs says more losses are needed to force producers to cut supplies adequately to balance the glut and bleak demand outlook in the market.
BEIJING – China’s consumer inflation edged up in December, while companies’ factory-gate prices continued to fall, adding to concerns about growing deflation risks in the world’s second-largest economy.
WASHINGTON – US consumers boosted their borrowing in November, as higher credit card spending partially offset slower growth in auto and student loans.
ENERGY
Brent and US crude futures prices have extended their slide, pressured by unrelenting oversupply and a bleak demand outlook.
Crude futures seesawed through the day, settling lower after Wall Street stock prices gave up earlier strength. The two benchmarks hit 12-year lows earlier in the week.
Goldman Sachs said in a note on Friday the market needs to see sustained low prices through the first quarter and that producers were not ready to slash output at current prices.
PRECIOUS METALS
Gold has fallen further from an earlier nine-week high as stronger-than-expected US payrolls data boosted the US dollar and stock markets, shoring up a recovery in equities.
US job growth surged in December, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary.
“(These are) very strong numbers, good for the US dollar,” said Georgette Boele, analyst at ABN Amro.
“The US dollar is the most important negative driver for gold prices, so this will add pressure.”
BASE METALS
Copper has fallen on mounting worries about growth and demand over coming weeks in top consumer China, holding prices close to near-seven year lows.
Worries about economic growth in China have led to a turbulent start on equity and currency markets so far in 2016.
“There’s a lot of uncertainty about China. There’s also the weak data we saw this week and a perception that China’s economy is going to continue struggling,” said ICBC Standard Bank analyst Leon Westgate.
Westgate added that rebalancing of fund portfolios based on commodity indices over the next few days could add to volatility.
“It’s difficult to predict because you have to look at the rebalancing with regard to inflows and outflows out of index products and relative price changes.”
ASX stocks to watch Monday, January 11
BHP – BHP BILLITON
FMG – FORTESCUE METALS GROUP
RIO – RIO TINTO
Mining stocks listed on the Australian share market could be hit again on Monday, with iron ore prices continuing to fall.
OSH – OILSEARCH
STO – SANTOS
WPL – WOODSIDE PETROLEUM
Falling oil prices could prompt ASX-listed energy stocks to fall on Monday.
AAP
