Global markets continued to be sold down overnight as investors questioned the financial stability in the euro zone despite approval of a rescue package for Ireland. US markets recovered from early sell-off (again), but still ended in the red. The key US indices month-to-date return concluded in negative territory, breaking a 3-month winning streak. European stocks ended lower again overnight, while Germany again outperforms for the month. Asian stock markets ended lower, with simmering geopolitical tensions between the two Koreas holding back investors. Investors were also cautious ahead of Chinese PMI data out today. Commodities prices ended the session lower but were mainly positive for the month.
The SPI Futures is below its key support level of 4600 and the ASX is set to open flat as the SPI Futures closed flat (or -2 pts) at 4,591 (down -1.7% for month). The key levels for our index today are 4650 and 4550. M&A activity continues to drive specific stocks. The ASX is set to open flat today, with negative leads from overseas markets. Investors will need to monitor the 3Q GDP data out today, as economists are forecasting there was a contraction in 3Q10, with net exports providing a bigger drag than expected. Also of interest will be China re further prospective monetary tightening measures and the release of its Chinese PMI data today. Expect traders to be cautious especially ahead of these data releases.
US Markets
US markets recovered from early sell-off (again), but still ended in the red. The key U.S. indices month-to-date return concluded in negative territory, breaking a 3-month winning streak. The Euro zone fears of sovereign debt contagion continued to weigh on markets globally. In the U.S. better-than-expected data on U.S. manufacturing and consumer confidence helped the markets to recover. The Chicago Purchasing Managers Index (PMI), came in at 62.5 in November (vs expectations of a 60.0), while the Conference Board’s November consumer confidence came in at 54.1 (vs the forecast of 52.5). The technology sector led the declines, as the European Commission opened an antitrust investigation into allegations that Google has abused a dominant position in online search. The Healthcare sector was down 0.9% while the Financial and Consumer-discretionary sectors fell 0.5%. The Dow closed down -0.4% (or -46 points) at 11,006 (down -1.1% for month), while in the broader market the S&P 500 index down -0.6% (or -7 points) at 1,181 (down -0.4% for month) and the tech-heavy Nasdaq ended down -1.1% (or -27 points) at 2,498 (down -0.6% for month).
European Markets
European stocks ended lower again overnight. Germany outperforms again for the month. The markets contined to see selling pressure, as the Ireland bailout package failed to ease concerns over debt contagion problems flowing to other European nations. In London stocks continued to decline, as the cost of insuring the debt of the PIIGS economies (including Portugal, Ireland, Italy, Greece and Spain), has soared to record high levels, desipte the EUR85 billion aid package for Ireland. On a positive an interesting survey from Bloomberg reported that even though European countries slide deeper into debt, the regions companies are paying off creditors and boosting profits at the fastest pace in seven years. Liabilities as a percentage of earnings in the benchmark Stoxx Europe 600 Index dropped 22 percent last quarter, the most since 2003. Bloomberg analysts also forecast annual profit growth in Europe will average 46 percent in 2010 and 2011, more than at any time in the previous seven years. If this happens then European stock valuations will be back at levels not seen since September 2008. The IMF also provided some interesting data forecasting Europe’s economy to expand by 1.7 percent next year and earnings for Stoxx 600 companies to climb 14 percent in 2011. So in short if the EU can get its soveriegn debt under control the EU companies could be in for a solid year in 2011. In London the FTSE 100 index closed down -0.4% (or -23 points) at 5,528 (down -2.7% for month), the German DAX down marginally -0.1% (or -9 points) at 6,688 (up 1.5% for month), while in France the CAC was down -0.7% (or -25 points) at 3,630 (down -5.4% for month).
Asian Markets
Asian stock markets ended lower. Simmering geopolitical tensions between the two Koreas held back investors. Investors were aslo cautious ahead of Chinese PMI data out today, and as concerns about further tightening measures in China continued to weigh on shares on both China and in Hong Kong. The Chinese market slid to a 7-week low, after 3-sessions of selling. Interest-rate sensitive plays, such as banks and property developers, extended recent losses. Tokyo stocks saw some profit-taking on the back of disappointing Japanese jobless figures and as caution ruled over fears of contagion of European sovereign debt in the PIIGS economies, meant that they yen rose against the euro, weighing o exporters. In China the SSE Composite closed down -1.6% (or -46 points) at 2,820 (down -5.2% for month), while in Hong Kong the Hang Seng Index was down -0.7% (or -158 points) at 23,008 (down -2.7% for month) and in Japan the Nikkei 225 Index was down -1.9% (or -189 points) at 9,937 (up 7.9% for month).
Commodities
The U.S. Dollar Index, which tracks the currency against a basket of six others, rose 0.6% as the euro dropped below $1.30 to a 2-month low intra-day. Crude-oil prices slipped below $85 a barrel while gold futures were also lower. The Dollar Index up 0.6% at 81.34 on lower Euro, while the Australian Dollar last traded at 95.86. Commodities were generally higher for the month.
Benchmark crude NYMEX for December delivery was down -2.4% (or $US-2.04) to settle at $US83.69 (up 3.0% for month). Copper prices backed-off 2-year highs, Copper for December delivery was up 1.4% (or 5.2 cents) at $US3.8100 (up 2.0% for month). Gold prices off all-time highs again, with December gold was up 1.3% at $US1,383.60 (up 2.1% for month).
Key International News Drivers Today
US - Markets recover from sharp initial sell-off. Markets break 3-month winning streak.
EU – Investors continue to worry over EU debt contagion in the euro zone.
CHINA - PMI data out today. China prospect of implementing further tightening measures.
JAPAN – Market holding above 10,000 but backs off 5-month highs.
Markets Overview
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Market
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Movement
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The Dow Jones Industrial Average
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Down -0.4% (or -46 pts) at 11,006 (up down -0.8% for month)
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The S&P 500
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Down -0.6% (or -7 pts) at 1,181 (up down -0.7% for month)
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The Nasdaq
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Down -1.1% (or -27 pts) at 2,498 (up down -1.4% for month)
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The FTSE 100
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Down -0.4% (or -23 pts) at 5,528 (up down -2.5% for month)
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The German DAX
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Down Marginally -0.1% (or -9 pts) at 6,688 (up down -2.3% for month)
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The Fench CAC
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Down -0.7% (or -25 pts) at 3,630 (up down 9587.8% for month)
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The Dollar Index
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Up 0.63% at 81.34
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The Australian Dollar
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Last traded at 95.86
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The Commodities Index
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Down -0.5% at 301.4
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Crude Oil Futures
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Down -2.4% at $83.69 (up down -0.2% for month)
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Gold Futures
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Up 1.3% at $1,383.60 (up down 1.5% for month)
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Copper Futures
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Up 1.4% at $3.8100 (up down 1.8% for month)
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SPI Futures
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Down Marginally 0.0% (or -2 pts) at 4,591 (up down 0.3% for month)
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Market
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Movement
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SSE Composite (China)
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Down -1.6% at 2,820 (up down -1.8% for month)
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Hang Seng Index (Hong Kong)
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Down -0.7% at 23,008 (up down 0.6% for month)
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Nikkei 225 Index (Japan)
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Down -1.9% at 9,937 (up down -1.0% for month)
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ASX News Today
The SPI Futures is below its key support level of 4600 and the ASX is set to open flat as the SPI Futures closed flat (or -2 pts) at 4,591 (down -1.7% for month). The key levels for our index today are 4650 and 4550. M&A activity continues to drive specific stocks. The ASX is set to open flat today, with negative leads from overseas markets. Investors will need to monitor the 3Q GDP data out today, as economists are forecasting there was a contraction in 3Q10, with net exports providing a bigger drag than expected. Also of interest will be China re further prospective monetary tightening measures and the release of its Chinese PMI data today. Expect traders to be cautious especially ahead of these data releases.
BOQ- ASIC plans to begin legal action against several domestic banks (BOQ, CBA, MQG) in seeking compensation for investors following the collapse of Storm Financial Ltd.
CBA- CommBank say they will fight the legal action resulting from the Storm Financial collapse.
FRS- FerrAus the iron ore explorer advised shareholders not to accept an unsolicited $230 million takeover bid from Hong Kong listed Wah Nam International Holdings Ltd.
GDO- Gold One International has confirmed production guidance of 120,000 ounces of gold and earnings of $60 million in FY11.
IHF- NorthWest Value Partners has increased its takeover offer for ING Real Estate Healthcare Fund and has won the right to undertake exclusive due diligence on the fund.
LEI- Leighton has agreed a governance framework with ACS, the Spanish group bidding to take over Leighton’s German parent, Hochtief.
MCC- Macarthur Coal will defer the announcement of its fourth mine project until early 2011, after it finalises commercial terms.
MQG- Macquarie Group will acquire a 17.5 percent interest in capital and asset management firm Bluestone Group through the subscription of newly issued ordinary shares.
MTS- Metcash the independent wholesaler, said its guidance for the 2H11 of its fiscal year is at risk if falling prices and rising business costs continue.
NAB- National Bank has finally resolved the computing problems which effected millions of customers sice last week.
NUF- Nufarm has arranged a new $900 million loan that will refinance the ag company’s existing debts due to expire on 15 December 2010.
SFR- Sandfire Resources has increased its estimated resources fivefold for its DeGrussa copper-gold project in WA.
TLS- Telstra to split as the parliament has finished the year by giving approval for legislation to structurally separate Telstra into wholesale and retail divisions.
WPL- Woodside has confirmed costs for its Pluto LNG project have blown out by $900 million (total cost is now up 7% to $13.5 billion) and it will take another 6-months to begin production while it rebuilds equipment that falls short of design specifications.
Economic Reports :
Australian PMI for November
Commodity Price Index for November
GDP for Q3
International Trade in Goods & Services Balance for October
Retail Sales Report for October
Companies:
Centennial Coal Ltd (CEY) Full year 2010 AGM
Consolidated Media (CMJ) Full year 2010 AGM
Crown Ltd (CWN) Full year 2010 AGM
Metcash Ltd (MTS) Interim 2011 Results
Goodman Group (GMG) Full year 2010 AGM
SEEK Ltd (SEK) Full year 2010 AGM
White Energy Company (WEC) Full year 2010 AGM
Ex-Dividends
GrainCorp (GNC)
Market Summary
ASX – to open lower
US & UK/Europe – Lower
US ADRs – Broadly Lower
BHP down 1.4% &
RIO down ;
AWC down 1.8%
ANZ down 0.7% &
NAB down 0.9%
NEM up 1.3%,
JHX up 2.9%,
NWS down 1.9%
Commodities Stock Index flat
Gold Stocks Index up 0.4%
Oil Stocks Index down 0.7%
By Michael Hevern
Head of Research
