Overseas Market Report – Stocks Rise as Oil Stabilizes
Stocks were higher as oil prices stabilized.
After falling again on Monday oil futures were up somewhat yesterday, boosting the Energy sector.
The U.S. economy grew at a 2% clip in the third-quarter, according to the latest revision to GDP data. That is down slightly from the previous estimate of 2.1% growth as inventory growth was moved down and the trade deficit was revised up.
Existing home sales were off 10.5% in November from the previous month to a seasonally adjusted annual rate of 4.76 million. Sales were off 3.8% year-over-year. The National Associate of Realtors thinks the number is down so sharply due to new regulations which are lengthening closing times and tighter inventories.
At the close the Dow, S&P 500 and NASDAQ rose 1%, 0.9% and 0.7% respectively.
For Australian ADRs listed on the NYSE, BHP Billiton rose 26 cents (1.07%) to $24.54, ResMed gained 63 cents (1.19%) to $53.54, Telstra Corporation rose 14 cents (0.72%) to $19.62, Spark New Zealand gained 45 cents (4.27%) to $10.97 and Westpac was 1 cent higher (0.04%) at $23.17.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.23% and the 5-year yield was 1.70%.
Shares of Chipotle (CMG) were down after an announcement Monday that the CDC is investigating another, more-recent outbreak of E. Coli among individuals who had eaten at Chipotle (separate from the reported E. Coli cases across eight states between late October and early November). Morningstar analyst R.J. Hottovy thinks the news will put the company's previous fourth-quarter outlook at risk and will likely require additional food safety marketing and other promotional efforts. Still, he still sees narrow-moat Chipotle's brand as strong enough to withstand these investigations, aided by greater promotion of new food-safety protocols.
European markets ended mostly higher after a choppy trading day. The FTSE 100 was up 0.8%, the Paris CAC was 0.1% higher while Germany's DAX was down 0.1%.
Asian markets were mixed. The Shanghai Composite and Hang Seng were each up around 0.2% while the Nikkei 225 was down 0.2%. India's Sensex fell 0.6%.
Australian Market Report – Local Markets Are Expected To Open Higher
Ahead of the local open SPI futures were 19 points higher at 5,090.
Tuesday 22 December – close. The Australian market had a strong start to the day, following a positive lead set by the US market overnight. However, early morning highs did not last with the benchmark index retreating back to the flat line during afternoon trade, and finishing marginally higher at close. There were mixed results from the sectors; health care gained most significantly while materials were the worst performer for this session. The Australian dollar appreciated against most major currencies.
The All Ordinaries rose 9.90 points to 5,167.70 while the S&P/ASX 200 added 7.70 points (0.15%) to 5,116.70.
Australian shares edged up to a fifth straight positive finish in a row Tuesday, buoyed by gains in energy stocks in otherwise mixed trading.
Analysts said volume was thin this week in the lead-up to the year-end holidays.
"The index hugged close to the 5100 level again and looks to continue around these levels for the rest of the week," said Angus Nicholson, a market analyst at IG in Melbourne.
Mr. Nicholson said the surprise of the day was the gain by energy stocks, despite the continued slump in crude-oil prices to fresh multiyear lows.
For the day, 1.69 billion shares were traded worth 3.93 billion Australian dollars (US$2.83 billion).
Among energy shares, Woodside Petroleum gained 0.6%, Oil Search added 0.8% and Santos climbed 3.1%. Still, Origin Energy lost 1.8% after moving to reduce its exposure to low oil prices by buying put options–contracts giving the owner the right to sell at a specified price within a specified time–on oil for the 2017 financial year at a cost of A$82 million.
In This Issue
Asciano (AIO)
Asciano announced that the Australian Competition and Consumer Commission (ACCC) has commenced market consultation on proposed revised undertakings offered by a consortium assembled by Brookfield Asset Management Inc. that includes Brookfield Infrastructure Partners LP (Brookfield) in relation to the proposed acquisition of the Company. The revised undertakings have been proposed to address the preliminary competition concerns identified by the ACCC in the Statement of Issues released on 15 October 2015. While the ACCC has decided to publicly consult on whether the undertakings will be satisfactory to address the ACCC's preliminary competition concerns, this should not be interpreted to mean that these or any other form of undertakings will ultimately be accepted. AIO lifted 8 cents to $8.80.
Origin Energy (ORG)
Origin Energy announced that it has taken steps to reduce the Company's exposure to low oil prices by purchasing put options on oil (Oil Puts) for the FY2017 and forward selling LNG cargoes at a fixed price. Both transactions are designed to mitigate a substantial proportion of its share of exposure to oil prices on volumes Australia Pacific LNG sells under existing contracts and to spot LNG prices on volumes above contracted commitments. The Oil Puts provide the Company with the right to sell 15m barrels of Japan Customs-cleared Crude at a strike price of A$55/bbl for 75% of the volume and US$40/bbl for 25% of the volume. The cost of the Oil Puts is $82m after tax and will be expensed in Underlying Profit in the FY2017. ORG lost 8 cents to $4.38.
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