Market report: Monday, February 1
UPDATED: The Australian share market has opened 1 per cent higher.
At 10.10am (AEDT) on Monday, the benchmark S&P/ASX200 index was up 52.1 points, or 1.04 per cent, at 5,057.6, while the broader All Ordinaries index was up 52.0 points, or 1.0 per cent, at 5,107.6.
On the ASX 24, the share price futures index was up 40 points at 5,005, with 13,198 contracts traded.At 8.02am (AEDT) on Monday, the share price futures index was up 37 points at 5,002.
In local economic news on Monday, the Reserve Bank of Australia is due to release index of commodity prices for January.
Also due out are the Australian Industry Group’s performance of manufacturing (PMI) index, the RP Data Core Logic Home Value Index and the TD Securities-Melbourne Institute inflation gauge, all for January.
In equities news, the Australian Competition and Consumer Commission takes Woolworths to court alleging the supermarket demanded more than $60 million from its suppliers.
The Australian share market looks set to open higher following gains on world markets after the Bank of Japan unexpectedly cut its interest rate to below zero.
At 8.02am (AEDT) on Monday, the share price futures index was up 37 points at 5,002.
NEW YORK – Wall Street markets have surged more than 2 per cent after the Bank of Japan unexpectedly cut its interest rate to below zero and Microsoft led a major rally in technology shares, repairing some of the damage to the S&P 500’s worst January since 2009.
“Sentiment certainly had swung to a wildly negative scenario. In the short term I’m not sure the sentiment backdrop we’ve seen was warranted,” said Michael Church, president of Addison Capital Management in Philadelphia.
“What happens if there is not a recession? What happens if China stabilises and the Fed doesn’t raise rates aggressively?”
The BoJ cut a benchmark rate to -0.1 to stimulate its economy, while US fourth-quarter GDP data bolstered arguments that the Federal Reserve might go slower than expected on future rate rises.
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LONDON – Britain’s benchmark equity index rose, cheered by the Bank of Japan’s decision to adopt a negative interest rate to boost its economy.
“The Bank of Japan has managed to temporarily ease some of the macroeconomic tensions that have plagued the start to 2016,” said Spreadex analyst Connor Campbell.
Traders said that the BoJ’s move would put pressure on the US Federal Reserve to adopt a cautious stance over any future interest rate rises.
It could also prompt the ECB to undertake similar measures in March and reinforce the likelihood that the Bank of England would keep interest rates at a record low.
HONG KONG – World shares jumped and the yen slumped after the Bank of Japan stunned markets by taking one of its main interest rates into negative territory, its boldest step yet to re-inflate the economy.
“It has become clear that stock markets cannot stand on their own feet,” said KBC senior economist Koen De Leus, in Brussels. “As long as the economy is shaky and the world is burdened with high debt, central banks and their money printing machines are a necessary evil to keep up the markets.
The BoJ’s move gave a lift to bourses across the region, even though economists at HSBC and elsewhere doubted it would give a boost to Japan’s real economy or inflation.
“We do not think negative rates are a game changer,” said Commerzbank strategist Esther Reichelt, in Frankfurt.
“Pressure on the BoJ will mount to do even more in coming months to attain their inflation target.”
WASHINGTON – US economic growth braked sharply in the fourth quarter as businesses stepped up efforts to reduce an inventory glut and a strong dollar and tepid global demand weighed on exports.
BRUSSELS – Inflation appears to be picking up across the 19-country eurozone despite super-low oil prices.
ANKARA – Iran has cancelled an oil conference in London in February, when Tehran was expected to reveal its new oil and gas contracts to investors, apparently over a delay in getting visas.
ENERGY
Oil has continued its upwards move on prospects that a deal between major exporters to cut production could help reduce one of the worst oil gluts in history.
It hit $US35 a barrel and marked a gain of about 25 per cent from 12-year lows seen earlier in January.
Brent futures, for April delivery, are up $US1.19 at $35.99 a barrel, while WTI March futures are up 40 US cents at $US33.62.
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PRECIOUS METALS
Gold has edged higher following data showing US economic growth braked sharply in the fourth quarter and the price of the precious metal was on track for its biggest monthly rise in a year after global economic headwinds hit riskier assets.
“Maybe things won’t be this bad next month in the wider markets, so it is possible that if ETF flows are subsiding, prices will be lower too,” Macquarie analyst Matthew Turner said.
“But one positive lesson we can learn from this month is that gold does still have a safe-haven role and that could stand it in good stead through a testing year to come.”
BASE METALS
Copper has risen as traders and funds expecting tighter supplies reversed their bets on lower prices, although uncertainty about Chinese demand is expected to cap gains ahead of the Lunar New Year holiday.
“The rise is more related to short-covering. Metals are possibly mimicking the oil market and there has been this supportive news from Indonesia,” said Julius Baer’s head of commodity research, Norbert Ruecker.
“We don’t see this as a turning point, there is a lot of uncertainty about global growth and China demand.” China’s week-long Lunar New Year holiday starts on February 8.
News that Freeport McMoRan has lost its right to export copper concentrate valued at more than $US1 billion from one of the world’s biggest mines in Indonesia has fuelled the idea of lower supplies.
ASX stocks to watch Monday, February 1
BHP – BHP BILLITON
FMG – FORTESCUE METALS GROUP
RIO – RIO TINTO
Australian-listed mining stocks could gain after the price of iron ore lifted to $US41.50.
ORG – ORIGIN ENERGY
OSH – OILSEARCH
STO – SANTOS
WPL – WOODSIDE PETROLEUM
Energy stocks could lift on Monday after another rise in oil prices, with WTI March delivery futures up 40 US cents to $33.62 and Brent April delivery futures up $US1.19 at $US35.99.
WOW – WOOLWORTHS
The ACCC takes Woolworths to court alleging the supermarket demanded more than $60 million from its suppliers.
AAP
