Overseas Market Report – Stocks Fall as Energy Sector Weighs Again
Stocks were lower again yesterday as low oil prices continued to put pressure on the energy sector.
The price of Brent Crude fell below $40 for the first time since February 2009. Oil prices rebounded somewhat in mid-morning trading yesterday.
Job openings fell somewhat in October to 5.4 million, off 2.7% from the previous month. Still, the data is near the record high of 5.7 million openings seen in July.
At close the Dow, S&P 500 and Nasdaq were down 0.9%, 0.7% and 0.1% respectively.
Shares of Norfolk Southern (NSC) were down over 3% yesterday morning after rejecting a revised buyout offer from Canadian Pacific (CP). The offer was similar in value to CP's previous overture, but this time the firm was planning on creating a holding company that could operate each railroad separately until the deal received regulatory approval.
Toll Brothers (TOL) reported results that fell short of analyst expectations. The high-end homebuilder said it earned 80 cents a share vs the expected 83 cents a share. Signed contracts were up 29% year-over-year while average prices rose 15% to $872,000.
For Australian ADRs listed on the NYSE, BHP Billiton fell $1.07 (-4.19%) to $24.44, ResMed lost 11 cents (-0.19%) to $56.42, Telstra Corporation slipped 1 cent (-0.05%) to $19.19, Spark New Zealand fell 17 cents (-1.63%) to $10.29 and Westpac declined $0.36 (-1.54%) to $23.06.
At 8:30 AM (AEDT), the 10-year Treasury note yield was 2.22% and the 5-year yield was 1.67%.
European markets were lower yesterday. The FTSE 100, Paris CAC and Germany's DAX were down 1.4%, 1.6% and 2% respectively. The Sensex fell 0.9%.
Asian markets were also down. The Shanghai Composite slipped 1.9%, the Hang Seng lost 1.3% and the Nikkei 225 was off 1%.
Australian Market Report – Local Markets Are Expected To Open Lower
Ahead of the local open SPI futures were 23 points lower at 5,086.
The local market opened lower yesterday on the back of losses in the US market overnight. The negativity continued throughout the day as a hefty sell-off amongst resource stocks and the big banks weighed heavily on the market. There were mixed results from the sectors; industrials, health care and telecommunications gained while energy and materials fell significantly. The Australian dollar fell against most major currencies.
The All Ordinaries fell 47.90 points to 5,158.00 while the S&P/ASX 200 lost 47.10 points to 5,108.60.
The basket of energy shares was hardest hit, falling 6.4% after crude-oil prices slumped to their lowest levels in almost seven years in overnight trading. The weakness in oil, together with ongoing concerns about demand, carried over to other commodities, including iron ore, which declined to a 10-year low, and knocked 3.4% from the materials subindex. Banks weren't immune, with the four major lenders all losing ground.
Among energy shares, Santos lost 13%, Origin Energy declined 2.7% and Beach Energy shed 5.4%. Woodside Petroleum dropped 4% after it said it had abandoned a takeover offer for Oil Search, while its target sank 16%.
BHP Billiton's shares sank to a fresh decade low, losing 5.2%, while Rio Tinto was 4.3% lower and iron-ore producer Fortescue Metals Group weakened 3%. South32, which was spun off by BHP earlier this year, fell 8% to a new low.
"It is quite spectacular, really," said Tim Schroeders, a fund manager at Pengana Capital. "Now, we are getting to a point where people have been so wrong for so long, they are having to address the situation and sell."
Mr. Schroeders said that while the falls come after another collapse in oil prices, the selling is also rooted in expectations the U.S. Federal Reserve will soon raise interest rates, which could further weaken commodities demand.
In This Issue
CIMIC Group (CIM)
CIMIC Group announced that Thiess has been awarded a 4 year contract extension by Energy Resources LLC at the Ukhaa Khudag (UHG) coal mine, delivering up to $1bn of revenue during next 7 years. Located in Southern Mongolia, the contract extension complements the current 8 year agreement signed in 2008 and results in Thiess continuing mine operations and maintenance delivery until 2022. Thiess is responsible for mining services at the UHG coal mine, including fleet operation and maintenance for overburden stripping, coal mining and blast drilling under an alliance structure, with involvement also in planning and health, safety and environmental management. CIM lost 16 cents to $24.31.
Transurban Group (TCL)
Transurban advised that Victorian Government will progress the Western Distributor proposal through to exclusive negotiations between the parties. The Company will work with the Victorian Government to finalise the scope of the project, including the design of the Western Distributor tunnels and the exact locations of connections to the Port of Melbourne and CBD. The project scope and construction costs for the project will be confirmed following completion of a statutory planning process, which will commence in 2016. The Western Distributor project is currently expected to cost around $5.5bn, with exact construction costs to be determined through a competitive tender process and confirmation of the final project scope. The Company anticipates financial close for the project in 2017. TCL added 24 cents to $10.21.
Recent Contacts & Presentations
Tox Free Solutions (TOX), AWE Limited (AWE), Ausdrill (ASL), GR Engineering (GNG), Medusa (MML), Resolute (RSG), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), FAR Limited (FAR), Central Petroleum (CTP), Senex Energy (SXY)