Market Update & Important Indicators
U.S. stocks posted small losses as a mixed report on June labor markets failed to pull attention away from Greece's weekend referendum on its creditors' demands. The Labor Department said 223,000 jobs were added to the U.S. economy in June, while the unemployment rate fell to 5.3% from 5.5%. The number of new jobs created came in just below expectations for 233,000, while wages remained flat and job creation in the spring was weaker than initially estimated, the Labor Department said. The Dow Jones index dropped 28 points, or 0.2%, to 17,730, while the S&P 500 closed flat at 2,077.
Most European stocks ended lower on Thursday, with investors watching the situation in Greece, where the country is set to hold a referendum on Sunday on creditors' previous demands. This poll is splitting Greek voters and spreading dissent inside the government. The German DAX and the French CAC indices were down 0.7% and 1.0% respectively, although the FTSE bucked the European trend by climbing 0.3%.
Chinese shares plunged Thursday, even as Beijing grasps for solutions to stem the selling, including relaxing rules on the use of borrowed funds to invest in stocks (a surprising turnaround given concerns that margin lending fueled a too-hot rally over the past year). Stocks rose elsewhere in Asia, with the Nikkei and Hang Seng indices climbing 1.0% and 0.1% respectively.
Base metals were mixed overnight with small gains in copper, lead and nickel offset by declines in aluminium, tin and zinc. Iron ore prices dropped 6.0% to $55.63/t, Brent crude was flat at $62.07/bbl, and gold dipped 0.2% to $1,166/oz.
Thought for the day
Austal showing its credentials – Capabilities in the U.S. and Australia
With the announcements yesterday that Littoral Combat Ship USS Jackson (LCS 6) has successfully completed U.S. Navy acceptance trials and that the seventh Cape Class Patrol Boat Cape Wessel has been delivered to the Australian Border Force, Austal (ASB) is making clear it aims to be involved in the construction of future frigates and patrol boats in Australia. The announcements come at a time when the focus on the local shipbuilding industry is intensifying post the recently released RAND report on the Australian shipbuilding industry and pending the release of the Government’s Defence White Paper later this year.
The RAND Corporation, a leading global defence think-tank, delivered the following key points in its April report:
• Australia can sustain a naval ship-building industry by embarking on a longer-term continuous ship-building strategy (that avoids costly production gaps)
• The industry needs reform and productivity gains to be competitive internationally
ASB has made its case is clear. With consolidation in the industry and a friendlier exchange rate, CEO Andrew Bellamy believes that Australia can not only build ships cost-effectively for the local market, but that the local shipbuilding industry can tap into export markets as well, with the latter helping fill the so-called “Valley of Death” (a looming hole in the naval shipbuilding programme). The fact that ASB is currently delivering a significant portion of the U.S. Navy’s future ship requirements (LCS’s and JHSV’s) from its base in Alabama, and has won two offshore vessel contracts (worth >US$50m) in June suggests this is a valid claim.
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