Morning Market Wrap
Bernanke says US Will Avoid Double Dip Recession; Mixed Leads for ASX Today
Bargain hunters stepped in late in the US session pushing the Dow Jones higher, ending a two-day slump which had sent the market tumbling 4.3%. Financials still lagged the market, while gold traded at new highs.
The SPI Futures is below the key level of 4500 the ASX is set to open higher as the SPI closed up 55 points (or 1.3%) at 4,384. Key levels today are 4350 and 4450. Expect our market to continue its recovery, as U.S. and U.K. give mixed signals.
Overseas Overview
The late rally in the US saw the Financials and Energy sectors lead the way, up 2.1% and up 1.7% respectively, however the hi-tech Nasdaq failed to join in the party as the chipmakers were downgraded. The market sentiment was buoyed by the Federal Reserve chairman Ben Bernanke saying he did not expect the economy to go back into recession. The Dow closed 123 points higher, by 1.26 per cent, at 9,940, while the S&P 500 index was up 11, or 1.1 per cent, at 1,062 and the Nasdaq fell 3 points, by 0.15 percent, at 2,170.
European stocks continued to be weighed down by sovereign debt concerns. The Fitch ratings agency said that the U.K. is on credit watch, saying that further spending cuts (or tax hikes) will be needed for the U.K. debt to be brought down to 3% of GDP. Debt is currently running at 11% of GDP in the U.K. BP also hurt the market as the ongoing oil spill continues in the Gulf of Mexico. In London, the FTSE 100 ended 41 points lower, by 0.8 per cent, at 5,028, and in Europe the German DAX 30 ended down 36 points, or 0.6 per cent, at 5,868 points, while the CAC 40 ended down 33 points, or 0.98 per cent, at 3,380 points.
Oil prices rose with NYMEX crude for July delivery rising 55 cents to $US71.99 a barrel. Gold rose to another record high above $US1,250 as investors continue to seek a safe haven. The price of gold for August delivery jumped as high as $US1,254.50 an ounce in early trading before pulling back slightly. Gold ended the day up $4.80 at $US1,245.60 an ounce. Contracts for July silver rose 31.5 cents to settle $US18.477 an ounce. Copper traded narrowly rising 1.35 cents to settle at $US2.779 a pound.
Key Overseas Drivers
Fed Chairman, Ben Bernanke says he does not expect the economy to go back into recession
U.S. rise led by Miners, Financials and Energy stocks as bargain hunters step in.
U.K. facing ratings downgrades on debt concerns. Gold trades at new record highs above $US1,250.
Markets Overview
Markets Mixed in the U.K. Financials and Energy Weighed in the U.S. Financials and Miners and Energy rise.
SP500: up 1.1% at 1,062 – Just Below “Flash Crash” Lows
DOW up 1.3% at 9,940 – Below 10,000
NASDAQ: down 0.2% at 2,170
Dollar Index: higher at 88.11 on Lower Euro
A$ lower at 82.73 (above 10-month Lows)
FTSE: down 0.8% at 5,028 – Fitch Ratings says more severe spending cuts are necessary
DAX down -0.6% – Still in Uptrend
CHINA: flat at 2,514 – 13-month Lows as Suport becomes Resistance
HSI up 0.6% at 19,487
Oil: up 1.4% ($71.99)
BP Makes Progress on Oil spill in Gulf of Mexico
Gold: down 0.3% at ($1,236)
Commodities Mixed
SPI: Below 4500 ASX
SPI up 1.3% at 4384
ASX Key Drivers
The SPI Futures is below the key level of 4500 the ASX is set to open higer as the SPI closed up 55 points (or 1.3%) at 4,384. Key levels today are 4350 and 4450. Expect our market to continue its recovery as U.S. and U.K. give mixed signals.
AUD – recovers to 82.73, above 10 months lows.
ASX – The government says approval for a competing stock exchange will not be given until the transfer of supervisory power from the Australian Securities Exchange to the coporate regulator in August.
BHP – CEO Marius Kloppers meets secretly with Kevin Rudd re RSPT tax.
ELD – unable to finalise bank finance from the Rural Bank for potential investors in the Elders Forestry 2010 MIS (managed investment scheme) project
GBG – Gindalbie it will be spending $1 billion for the construction and development work at its Karara iron ore project within months.
GOLD – hits record highs above $US1,250.
HSP – US-based Tenet Healthcare Corp has withdrawn its $1.84 billion bid for the private hospitals operator and pathology. Leaving two bids outstanding.
NCM – Newcrest has completed the due diligence process for its proposed takeover of rival Lihir Gold.
VBA – JV partners wanted for international routes.
Economic Reports out today:
ABS – to release April housing finance data
CSI – Westpac’s June Consumer Sentiment Survey
QLD – Budget luncheon
RBA – Glenn Stevens to address Western Sydney Business Connection
Market volatility will continue near term, some bargain hunting is underway.
We the suggest trading strategy is to tighten stops. Be prepared to open/hold short positions, look fo value stocks.
MARKET SUMMAY
ASX – to continue recovery
US & UK/Europe – mixed leads
US ADRs – Broadly Higher!!!…
BHP up 5.4% & RIO up 3.7%; AWC up 5.1%
ANZ up 5.7% & NAB up 3.8%
NEM up 2.3%, JHX up 0.2%, NWS up 1.6%
Commodities Stock Index up 1.5%
Gold Stocks Index up 2.3%
Oil Stocks Index up 0.7%
By Michael Hevern
Head of Research
