Overseas Market Report – Stocks Rally; Rising Oil Prices, Fed Eyed
Stocks were higher on Tuesday as oil prices recovered and the market prepared for the Fed rate hike expected on Wednesday.
Crude oil future prices rose again yesterday after stabilizing on Monday. The rebound comes after a punishing week for commodities.
The consumer price index was unchanged in November from the previous month as lower energy and food prices dragged down the price level. Excluding those two volatile categories, prices were up 0.2%. On a year-over-year basis, total inflation was up 0.5% while core inflation was up 2%.
The Empire State Manufacturing Index, which measures the strength of the New York area industrial sector, improved to -4.6 in December from -10.7 in November. Still, any reading below zero indicates a contraction.
At the close the Dow and NASDAQ were each up 0.9% while the S&P 500 was 1.1% higher.
Shares of 3M (MMM) were down after the firm cut its 2015 earnings guidance. Management now expects the firm to earn $7.55 a share, down from the previous range of $7.60 to $7.65 it had provided in October. The company blamed slow growth in the global economy for the cut.
For Australian ADRs listed on the NYSE, BHP Billiton gained 14 cents (0.59%) to $23.81, ResMed slightly rose 5 cents (0.09%) to $55.71, Telstra Corporation gained 21 cents (1.13%) to $18.83, Spark New Zealand lost 21 cents (-1.99%) to $10.32 and Westpac rose 20 cents (0.90%) to $22.30.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.27% and the 5-year yield was 1.70%.
European markets were sharply higher. The FTSE 100, Paris CAC and Germany's DAX were up 2.5%, 3.2% and 3.1% respectively.
Asian shares were mixed. The Shanghai Composite gained 0.3%, the Hang Seng was down 0.2% while the Nikkei 225 shed 1.7%. India's Sensex rose 0.7%.
Australian Market Report – Local Markets Are Expected To Open Higher
Ahead of the local open SPI futures were 55 points higher at 4,959.
Tuesday 15 December – close. Local stocks opened higher this morning despite weak leads from European markets overnight. However, the local sharemarket failed to hold onto early gains and closed at a new record low for the year, dragged down by big losses in the big four banks and mining stocks. There were mixed results from the sectors; telecommunication services were the best performer for this session while materials lagged behind the rest. The Australian dollar depreciated against most major currencies.
A sixth straight decline for Australian shares Tuesday left the market at its lowest level in more than two years as resources stocks and banks continue to falter.
Despite a strong start to the day as oil prices stabilized and iron-ore strengthened, the S&P/ASX 200 finished down 19 points, or 0.4%, at 4909.6, its lowest finish since July 2013.
It is only the second time this year the index has notched up such a long losing streak, falling 4.8% over the last six sessions. The ASX 200 is now down 9.3% in 2015, having risen in the previous three years.
"A combination of taut nerves and thin markets may mean an unseasonal increase in market volatility over the coming weeks," CMC Markets chief market strategist Michael McCarthy said, adding that there was a backdrop of increasing caution ahead of the U.S. Federal Reserve's meeting and the possibility of a long-awaited rise in U.S. interest rates.
There was little immediate reaction from the equities market to either the minutes of the Reserve Bank of Australia's last policy meeting, or to the government's mid-year economic and fiscal outlook, which offered little surprising news even though it painted a worsening picture for the deficit.
"Oil remains key here and it is now fully understood by all in the market that falls in oil are not good," said Chris Weston, chief market strategist at IG in Melbourne.
In This Issue
Greencross (GXL)
Greencross noted the article in the Australian Financial Review Online indicating that an investment bank is seeking to acquire 14.99% of the Company's issued shares. The Company's directors recommend shareholders take no action in response to the approach. It has appointed Macquarie Capital (Australia) and Allier Capital as financial advisers. GXL soared $1.35 to $5.98.
Oil Search (OSH)
Oil Search announced that it has signed two Power Purchase Agreements (PPAs), the Biomass Independent Power Producer (IPP) PPA and Highlands IPP PPA, with Government-owned PNG Power (PPL), as part of a long-term strategy to develop solutions for PNG's power sector. These agreements follow the upgrade and provision of diesel to PPL's power plant in Tari in April 2015, allowing the commencement of continuous 24-hour power generation in the town and the signing of a statement of intent with PPL on the next phases of the Ramu Power Project (RPP) in September 2015. The RPP aims to provide up to 100 MW of additional electricity generating capacity in a phased rollout, enabling the connection of up to one million people to a larger and improved electricity grid by 2030. OSH added 8 cents to $5.94.
Qantas Airways (QAN)
Qantas Airways announced that it expects to report an Underlying PBT in the range of $875m to $925m for the first 6 months of FY2016. The expected $875m to $925m range represents a significant improvement in underlying earnings for the Group and compares to an Underlying PBT of $367m in the first half of FY2015. The Company's strong first half performance is attributable to the continued delivery of the $2bn Group's Transformation program, revenue growth and the benefit from lower fuel prices which has been secured through the Group's disciplined hedging program. The expected first half result includes the estimated $17m non-cash negative impact of bond rate movements on employee provisions and the $25m one-off impact on Jetstar Group earnings from volcanic activity in Bali during the period. QAN fell 9 cents to $3.69.
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)
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