Market Wrap for Tuesday 1st December 2009

Shares have ended 0.4 per cent higher today, shrugging off a third consecutive rate rise by the Reserve Bank. At the close, the benchmark S&P/ASX200 index was up 17.7 points, or 0.4 per cent, at 4719, while the broader All Ordinaries rose 17.6 points, also 0.4 per cent, to 4733.1. Among the sectors, industrial stocks rose 1 per cent, materials gained 0.2 per cent, financials 0.4 per cent, while property trusts fell 0.3 per cent.

Australia’s central bank raised its benchmark interest rate by a quarter percentage point for an unprecedented third straight month as evidence mounts that the nation’s economy is strengthening. Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.75 percent from 3.5 percent. Stevens said today the bank’s three rate increases will “work to increase the sustainability of growth in economic activity and keep inflation consistent” with his target range of 2 percent to 3 percent “over the years ahead.”

The increase is the first time the central bank has raised borrowing costs at three straight meetings, boosting the rate from a half-century low of 3 percent. By contrast, officials in the U.S., U.K. and Europe have kept their benchmark lending rates at historic lows this year.

Development of Australia’s largest resource project has formally started today with a ground-breaking ceremony at Barrow Island for the $43 billion Gorgon gas project. Senior executives from Chevron, Shell and ExxonMobil, together with Premier Colin Barnett, federal Resources Minister Martin Ferguson, were on hand to officially kick-start the massive project. The operation is tipped to create more than 10,000 direct and indirect jobs and more than $33 billion is expected to be spent on local goods and services.

U.S. stocks rose on Monday, helping the Dow post its fifth straight monthly gain, on hopes that possible fallout from Dubai’s debt woes will be contained. Shortly before the market closed, Dubai’s largest company said its planned restructuring of some units involved $26 billion in debt, easing some concerns about the size of Dubai’s financial problems.

Retail shares limited the advance as investors worried that the holiday shopping season might have gotten off to a tepid start. Black Friday data suggested weak sales during retailers’ most imporant sales period and underscored concerns about the economy. Black Friday, or the Friday after the U.S. Thanksgiving Day holiday, is seen as the start of the U.S. holiday shopping period and buyers typically flood the stores that day searching for bargains.

The Dow Jones industrial average rose 34.92 points, or 0.34 percent, to end at 10,344.84. The Standard & Poor’s 500 Index was up 4.14 points, or 0.38 percent, at 1,095.63. The Nasdaq Composite Index was up 6.16 points, or 0.29 percent, at 2,144.60.

Source: Reuters, Fairfax, Bloomberg

Market Wrap for Wednesday 25th November 2009

Shares have ended higher after picking up solid gains in late afternoon trading as investors snapped up banks and miners. At the close, the benchmark S&P/ASX 200 index was up 37.2 points, or 0.8 per cent, at 4722.2, while the broader All Ordinaries was 32.8 points higher, or 0.7 per cent, at 4741. Among the sectors, financials increased 0.9 per cent, while materials added 1.1 per cent, and energy rose 0.3 per cent. Gold miners sagged 0.4 per cent.

Gold rose to a record high above $US1175 today, the second time this week it has notched up a new high on solid investment sentiment and expectations of more gold buying by the public sector. A recent purchase of 200 tonnes of gold by India’s central bank sparked a rally that lifted the precious metal to successive record highs with it gaining about 12 per cent this month alone. The purchase was part of a planned sale of 403.3 tonnes by the International Monetary Fund. Russia, Sri Lanka and Mauritius have also since announced gold acquisitions.

Australia’s economy has entered a “new upswing” that will last for several years, helping the nation’s households fund mortgage costs, said Ric Battellino, deputy governor of the central bank. The currency rose as investors increased bets the Reserve Bank will raise interest rates next week for a record third month after Battellino told a conference in Melbourne today that it’s “reasonable to assume we will see this growth extended for a few more years yet.” A report published earlier today showed the number of jobs available for skilled workers rose 2.4 percent in November from October, adding to signs that the economy is strengthening.

U.S. stocks fell on Tuesday on lackluster economic data in a session marked by low volume and choppy trading, but losses eased after the Federal Reserve raised its expectations for growth in 2010. Stocks fell early in the session as revised government data on gross domestic product showed the U.S. economy grew at a slower-than-expected pace in the third quarter.

However, the downbeat mood was tempered after the Fed revised upward its growth expectation for 2010, while minutes of the FOMC’s most recent meeting showed officials are increasingly confident about a durable recovery for the U.S. economy. The U.S. stock market will be closed on Thursday in observance of Thanksgiving Day. On Friday, it will be open for only half a day due to the holiday.

The Dow Jones industrial average dropped 17.24 points, or 0.16 percent, to end at 10,433.71. The Standard & Poor’s 500 Index inched down just 0.59 of a point, or 0.05 percent, to 1,105.65. The Nasdaq Composite Index fell 6.83 points, or 0.31 percent, to 2,169.18.

Source: Reuters, Fairfax, Bloomberg

Market Wrap for Tuesday 24th November 2009

Australian stocks gave up solid early days to end lower, led by a sharp turnaround for mining stocks. The benchmark S&P/ASX200 index reversed yesterday’s gains, losing 32 points, or 0.7 per cent, to close at 4685, while the broader All Ordinaries fell 31 points, or 0.7 per cent, to 4708.2. Among key sectors, materials stocks were down 0.9 per cent, financials were off 0.7 per cent and energy stocks were trading 0.4 per cent lower.

Woodside Petroleum Ltd. said it has kicked off Australia’s biggest drilling campaign to find fuel for its Pluto gas project off the country’s northwestern coast and is also negotiating supplies from other companies. Australia’s second-largest oil and gas producer plans to drill at least 20 wells through to 2011 to find gas for the venture, that is set to cost more than $10 billion. The program represents the biggest deep-water, continuous drilling campaign in Woodside and most likely Australian history, Peter Moore, senior vice president for exploration, said at an investors briefing today in Perth.

U.S. stocks snapped a three-day losing streak on Monday as stronger-than-expected home sales data fueled optimism while a weaker dollar boosted commodity-linked stocks. Sales of previously owned U.S. homes rose to their highest level in more than 2-1/2 years last month. That helped to ease concerns about the sector generated last week when another report showed housing starts fell sharply in October.

Monday’s data went some distance to reassure investors who have pared positions as they fret about the economy. Stocks rallied broadly, with all 10 S&P sectors showing strong gains. The Dow industrials reached a new 13-month high but volume was light, which some investors read as a lack of conviction.

The Dow Jones industrial average gained 132.79 points, or 1.29 percent, to end at 10,450.95. The Standard & Poor’s 500 Index rose 14.86 points, or 1.36 percent, to 1,106.24. The Nasdaq Composite Index added 29.97 points, or 1.40 percent, to close at 2,176.01.

The slide in the dollar helped lift commodity stocks as gold hit a record $1,170.55 an ounce and copper rose to levels not seen for 14 months, helped also by expectations of recovery.

Source: Reuters, Fairfax, Bloomberg

Market Wrap for Monday 23rd November 2009

The Australian sharemarket has closed 0.7 per cent higher, as gains in the mining and retail sectors offset weakness in some bank and energy stocks. At the close, the benchmark S&P/ASX200 index was up 31.2 points, or 0.7 per cent, at 4717, while the broader All Ordinaries gained 32.5 points, or 0.7 per cent, to 4739.2. Among the sectors, materials stocks rose 1.7 per cent, industrials gained 1.2 per cent, while financials slipped 0.1 per cent.

Stocks could sputter this week as volumes dry up in holiday-shortened trading and with a slew of economic reports likely to illustrate the recovery is still fragile. Investors will also get a glimpse of how holiday shopping could shape up with “Black Friday,” which traditionally marks the start of the season as retailers slash prices. It will be difficult for the economic recovery to make much headway without a pick-up in consumer spending as it accounts for two-thirds of the economy.

A raft of data is squeezed into the first half of the week, shortened by Thursday’s Thanksgiving holiday. The delicate nature of the recovery has analysts split on whether the economy will advance from here or still faces another leg down. Data has largely shown an economy that is recovering slowly but is still weak, particularly in areas like employment. Reports include home sales, consumer confidence, durable goods and the second reading of gross domestic product.

Platinum gained more than 1 percent on Monday, rising to its strongest level since September 2008 after gold rallied to a lifetime high on firm oil prices and worries about the economic outlook. Spot platinum jumped to $1,464.50 an ounce, up from $1,441 in New York on Friday. Platinum is used in autocatalysts to clean exhaust fumes and in jewellery.

Oil prices rose above $US78 a barrel on Monday as heightened tension between Iran and Western nations raised speculation over a potential supply risk, encouraging investors to push prices higher. Prices were also supported by a weaker US dollar, following dovish comments from US central bankers and a surge in gold to a new record after concerns over accelerating inflation and weak economic growth prompted investors to cut risk. Higher resource stocks helped boost Asian stocks.

US crude for January delivery rose 71 cents to $US78.18 a barrel in Asian trade. The December contract, which expired on Friday, settled down 74 cents at $US76.72 a barrel, weighed down by a stronger dollar and concerns about the energy demand outlook.

Source: Reuters, Fairfax

Market Wrap for Friday 20th November 2009

Australian shares have posted modest losses for the week as banks and mining stocks slid on Friday. At the close, the benchmark S&P/ASX200 index was 63.4 points lower, or 1.3 per cent, at 4685.8, while the broader All Ordinaries was off 61.1 points, or 1.3 per cent, to 4706.7. The pull-back erased gains earlier in the week to leave the ASX200 down about 0.4 per cent – its third weekly decline in the past four weeks. Today, all sectors ended in the red, with materials stocks down 1.4 per cent, financial shares were off 1.5 per cent and industrials dropped 1.7 per cent.

Australia’s central bank should continue to lead the world in raising interest rates as its economic growth outpaces most other countries, the Organization for Economic Cooperation and Development said. The economy will expand 0.8 percent this year, accelerating to 2.4 percent growth in 2010 and 3.5 percent in 2011, the OECD forecast in its semiannual economic outlook released yesterday in Paris. The organization in June predicted Australia’s economy would shrink 0.4 percent in 2009 and expand 1.2 percent in 2010. Higher household confidence and iron ore exports to China will prompt central bank Governor Glenn Stevens to raise borrowing costs in December by a quarter percentage point for a record third month to 3.75 percent, analysts surveyed by Bloomberg predict.

Technology stocks drove a broad-based U.S. sell-off on Thursday as a brokerage took a dim view of demand prospects for the semiconductor sector, while economic data underscored the fragility of the recovery. Bank of America-Merrill Lynch cut its 2010 growth outlook for the semiconductor industry on concerns about a rising inventory glut. It downgraded 10 stocks, including Intel Corp, Texas Instruments Inc and Marvell Technology Corp. There was also more disconcerting news in housing. A record one in seven U.S. mortgages were in foreclosure or at least one payment was past due in the third quarter, according to fresh data signaling that the housing market’s recovery will be tepid at best.

The U.S. dollar’s gain was another headwind for stocks as it pressured prices of natural resources like crude oil and gold, pushing down shares of companies such as Alcoa and U.S. Steel Corp. The S&P materials index shed 1.5 percent as the U.S. dollar index rose 0.2 percent.

The Dow Jones industrial average shed 93.87 points, or 0.90 percent, to end at 10,332.44. The Standard & Poor’s 500 Index slid 14.90 points, or 1.34 percent, to 1,094.90. The Nasdaq Composite Index dropped 36.32 points, or 1.66 percent, to 2,156.82.

Source: Reuters, Fairfax, Bloomberg

Market Wrap for Thursday 19th November 2009

Australian shares hold on to modest gains as regional markets retreat. Banks and gold miners advance. In the final minutes of trading, the S&P/ASX 200 was up 9.6 points, or 0.2 per cent, to 4748.6 and the broader All Ordinaries index gained 6.9 points, or 0.1 per cent, at 4766.5. Major indexes across the region were lower, with Japan’s Nikkei 225 down about 1.5 per cent. On a sector-by-sector basis, materials advanced 0.4 per cent while gold stocks added 0.9 per cent and financials rose 0.7 per cent.

BHP Billiton chief executive Marius Kloppers says his company is cautious about the global economy and that restocking in developed nations has been lethargic. “We remain cautious on the global economy in the short to medium term,” Mr Kloppers said yesterday at a meeting at the Lowy Institute.

Mr Kloppers says there has been strong demand recovery in the resources sector, mainly driven by restocking in China, but this could be drawing to an end. “As GPD (gross domestic product) growth picked up, the Chinese economy had to increase its working capital in order to support this increasing economic activity,” Mr Kloppers said.

“The increase in working capital has a once-off impact on demand and we are now witnessing the end of that working capital build in China.” He said BHP Billiton had expected a similar restocking exercise would be required in Organisation for Economic Co-operation and Development countries, but this has been slow to start.

Oil traded near $80 a barrel in New York after rising yesterday as a government report showed U.S. crude and fuel supplies dropped along with refinery production and imports. Oil gained 0.6 percent yesterday and touched $80.33 after the Energy Department said crude inventories declined 887,000 barrels to 336.8 million last week. Stockpiles were forecast to increase by 300,000 barrels, according to a Bloomberg News survey of analysts. Fuel supplies fell as refiners operated at the slowest pace in more than a year.

U.S. stocks broke three days of gains on Wednesday following worrisome outlooks from two major software makers and a surprising drop in home construction last month. But stocks sharply cut the session’s losses just before the closing bell as many investors pointed to a strong uptrend in equities that have pushed major indexes to 13-month highs in recent days. The S&P 500 has ended down only three times in the last two weeks.

The government said housing starts declined to their lowest level in six months, weighed down by a sharp fall in construction activity for both single-family and multi-family dwellings, a sign the housing market is still under pressure. While the decline in new construction raised concerns about the recovery, it could bode well for removing remaining inventory from the market, something analysts say must happen for the housing sector to recover.

The Dow Jones industrial average dropped 11.11 points, or 0.11 percent, to 10,426.31. The Standard & Poor’s 500 Index dipped just 0.52 of a point, or 0.05 percent, to finish at 1,109.80. The Nasdaq Composite Index lost 10.64 points, or 0.48 percent, to end at 2,193.14.

Source: Reuters, Fairfax, Bloomberg, AAP

Market Wrap for Tuesday 17th November 2009

The Australian stock market ended 0.5 per cent lower, after profit-taking in the financial sector eroded earlier gains. At the close, the benchmark S&P/ASX200 index was up 25.8 points, or 0.5 per cent, at 4729.42, while the broader All Ordinaries rose 23.6 points, or 0.5 per cent, to 4750.2. Among the sectors, financial stocks fell 1.5 per cent, industrials were down 1.1 per cent, while materials stocks rose 0.6 per cent.

The Australian dollar weakened from near the strongest level in 15 months after minutes from the central bank’s most recent meeting cast doubt on a third- straight increase in key lending rates. Australia’s central bank says the pace of interest-rate increases is an “open question” as it balances the risk of keeping borrowing costs too low against an economy that may cool as government stimulus abates. “In considering the pace of that adjustment, members were conscious of balancing risks,” officials said in minutes released today of their Nov. 3 meeting, at which they became the first central bank to raise borrowing costs twice this year.

The need for greater global currency stability means the world can no longer rely, as it has done since the end of the gold standard, on a currency issued by a single country, the head of the IMF said on Tuesday. Dominique Strauss-Kahn, managing director of the International Monetary Fund, restated his view that a new global currency might evolve out of the Special Drawing Right, the Fund’s in-house unit of account. That probably has to be a basket,” Strauss-Kahn said of the eventual replacement for the U.S. dollar. “In a globalised world there is no domestic solution,” he told a forum.

U.S. stocks rose broadly on Monday, sending indexes to fresh 13-month closing highs, after Federal Reserve Chairman Ben Bernanke reinforced expectations that interest rates would stay low to spur growth. Bernanke repeated that the Fed was likely to keep interest rates exceptionally low for “an extended period,” a pledge that weighed on the U.S. dollar and drove investors to snap up shares of natural resource companies as prices of global commodities – from gold to wheat – shot higher. In a speech before the Economic Club of New York, Bernanke said the recovery would not be as robust as previously hoped, and rising unemployment and tight bank lending were significant headwinds.

In the last hour of trading stocks briefly pared gains as Meredith Whitney, a prominent analyst, said in a CNBC television interview the stock market run-up was not supported by fundamentals. The Dow Jones industrial average gained 136.49 points, or 1.33 percent, to 10,406.96. The Standard & Poor’s 500 Index shot up 15.82 points, or 1.45 percent, to 1,109.30 – its first close above the psychologically important 1,100 level for the first time since October 2008. The Nasdaq Composite Index jumped 29.97 points, or 1.38 percent, to 2,197.85.

Source: Reuters, Fairfax, Bloomberg

Market Wrap for Monday 16th November 2009

Australian shares held on to gains, with strong advances for mining and energy stocks. The benchmark S&P/ASX200 index closed 48.8 points, or 1 per cent, higher at 4755.2 points, while the broader All Ordinaries index was up 51.2 points, or 1.1 per cent, to 4773.8 points. Materials stocks gained 3.1 per cent while energy stocks were 2.1 per cent higher. Financial stocks were off 0.5 per cent.

Gold prices hit a fresh record high, exceeding their highs marked last week, as investors continued to seek bullion’s appeal as a hedge against the dollar’s weakness and inflation risks. Spot gold stood at $US1123.40 after rising as high as $US1126.30 per ounce, a record, compared with the notional New York close of $US1118.50.

The manager of two of the world’s largest commodities funds expects continued growth in the sector in 2010, with rising numbers of company mergers. Evy Hambro, a London-based portfolio manager who manages the BlackRock World Mining Fund and the Gold & General Fund, on Monday gave journalists in Australia an upbeat assessment of the sector following last year’s collapse in prices.

Mr Hambro said the rapid rise of China, which accounted for about 40 per cent of demand in almost every commodity, and above 50 per cent in some during the second quarter of 2009, was a key reason commodities prices would continue to rise.

The U.S. dollar drifted lower in Asia on Monday, heading into a week that is likely to see increased rhetoric on currencies from both China and visiting U.S. President Barack Obama. The United States and China sparred over exchange rates at a meeting of Asia Pacific leaders on Sunday, a move that quashed speculation China may allow some further yuan appreciation in coordination with Obama’s first trip to Beijing.

That could lead to some short-covering in the euro/yen pair later in the session, traders said. The euro had fallen in the previous session against the Japanese currency after shorts had been initiated on the hopes that a rising yuan will take some pressure off the euro. Market talk has been swirling that a rising yuan would lift other currencies across the region and take some of the upward pressure seen in the euro against the U.S. dollar.

Source: Reuters, Fairfax, AAP

Market Wrap for Tuesday 10th November 2009

The share market rose more than 1 per cent today, as investor spirits lifted further following another strong session on Wall Street. The benchmark S&P/ASX200 index was up 58.7 points, or 1.3 per cent, at 4733.6 points, while the broader All Ordinaries index rose 57.5 points, or 1.2 per cent, to 4744 points. Gains were across the board with most Asian markets up over 1 per cent following on from yesterday’s gains. Among the sectors, materials gained 1.9 per cent, financials rose 1 per cent and energy shares climbed 1.5 per cent.

Australian business confidence rose in October to near its highest level in almost six years, increasing the central bank’s scope to raise borrowing costs in December for a record third straight month. The sentiment index climbed 2 points to 16, after falling 4 points in September, according to a National Australia Bank Ltd. survey of more than 400 companies questioned between Oct. 25 and Oct. 30, and released in Sydney today.

A figure above zero shows optimists outnumber pessimists. Rising business and consumer confidence, as exports to China help the nation’s economy rebound from the global recession, were among reasons Reserve Bank Governor Glenn Stevens raised the benchmark interest rate by a quarter percentage point in October and this month to 3.5 percent.

Australian companies have raised a record amount of equity this year – almost three times the annual rate of the past few years and have looked to alternative sources of funds in response to the global financial crisis, a senior Reserve Bank of Australia official (RBA) says. RBA head of domestic markets department John Broadbent says the ratio of debt to equity in the corporate sector has been declining, with intermediated debt being replaced by a big increase in equity raisings.

‘‘Listed corporates have raised a record amount of equity this year, totalling some $60 billion, with issues broadly based across all sectors,’’ Mr Broadbent said today. ‘‘This compares with an annual average of around $20 billion in the three years prior to the financial crisis.’’ Mr Broadbent said most of these equity raisings had been used to pay down debt, with some companies explicitly saying the funds raised were to repay bank loans.

A broad U.S. stocks rally sent the Dow industrials to a 13-month high on Monday, after the Group of 20 pledged to keep aid flowing to the world economy, strengthening investors’ desire for risk. The agreement by G20 finance ministers and central bankers over the weekend to keep stimulus in place boosted global stocks on the expectation of prolonged low interest rates. The U.S. dollar briefly fell to a 15-month low, bolstering commodity prices and materials stocks.

The Dow Jones industrial average .DJI jumped 203.52 points, or 2.03 percent, to 10,226.94. The Standard & Poor’s 500 Index .SPX rose 23.78 points, or 2.22 percent, to 1,093.08. The Nasdaq Composite Index .IXIC gained 41.62 points, or 1.97 percent, to 2,154.06.

Lower interest rates worldwide make investing in risky assets like stocks more attractive, and reduce the cost of corporate financing used for investment.

Source: Reuters, Fairfax, AAP, Bloomberg

Market Wrap for Monday 9th November 2009

The Australian sharemarket rallied today, led by gains in financial stocks on a strong trading performance by Commonwealth Bank and a takeover offer for AXA Asia Pacific. At the close, the benchmark S&P/ASX200 index was up 80.9 points, or 1.8 per cent, at 4674.9, while the broader All Ordinaries gained 82.1 points, or 1.8 per cent, to 4686.5. Financial stocks gained 2.1 per cent, while energy stocks were up 1.3 per cent and the materials index was 1.6 per cent higher.

The spot price of gold in Sydney was $US1100.00 per fine ounce, up $US8.44 on Friday’s closing price of $US1091.56. Among key gold stocks, Lihir was up nine cents at $3.40 and Newcrest had gained $1.21 to $35.29. The most traded stock by volume was rural services provider Elders with 75.5 million shares worth $13.3 million changing hands.

As unemployment in the United States edges above 10 percent, anxious investors will look to earnings reports from major retailers for signs of life in the beaten-up consumer. Comments from Wal-Mart Stores Inc (WMT.N), the world’s largest retailer, as well as from a host of smaller stores, will be of vital importance to investors trying to judge the recovery’s pace.

What these companies, and especially Wal-Mart, say about the future will potentially overshadow profit figures. Top-line revenue performance will be key in judging to what extent business is creeping back. October retail chain sales showed half of retailers fell short of Wall Street’s expectations — another blow for hopes of a widespread recovery for the holiday season. The menu of economic indicators will be relatively light after the past week’s huge helpings of data.

Friday the 13th is the day to note, when the U.S. international trade deficit for September will be released, along with October’s import and export prices. The first reading for November on consumer sentiment will also be given that day by the Reuters/University of Michigan Surveys of Consumers.

Source: Reuters, Fairfax, AAP

Market Wrap for Thursday 5th November 2009

Miners and banks drag Australia’s main share index to its lowest close since early September. The benchmark S&P/ASX200 index ended down 32.1 points, or 0.7 per cent, at 4508, its lowest close since September 7. The the broader All Ordinaries lost 28.4 points, or 0.6 per cent, to 4519.2. Among the main sub-indexes, financial stocks were 0.5 per cent lower, materials had lost 1.4 per cent, while energy stocks rose 0.1 per cent.

Gold climbed to a record for the second straight day on speculation that central banks and investors will buy more metal to hedge against a falling dollar. India’s central bank said this week that it bought 200 metric tons of gold from the International Monetary Fund last month.

Yesterday, holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, rose by the most in nearly a month. The dollar slipped as much as 0.8 per cent today against a basket of currencies. Gold futures for December delivery rose $US2.40, or 0.2 per cent, to $US1087.30 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached the all- time high of $US1096.50.

Australian exports rose in September by the most in almost a year, underpinning an economic rebound that prompted central bank Governor Glenn Stevens to lead the world in raising interest rates. Exports jumped 5 percent from August, driven by increased shipments of coal and gold, the Bureau of Statistics said in Sydney today. The gain helped offset rising imports that widened the trade deficit to A$1.85 billion (A$1.68 billion), less than the A$2.15 billion estimate in a Bloomberg survey of analysts.

U.S. stocks rallied but lost steam on Wednesday after the Federal Reserve said it would keep rates near zero for “an extended period” even as it expressed confidence in the economic recovery. Stocks pushed higher in the hour following the FOMC statement, after the Fed kept its benchmark federal funds rate unchanged in a range of zero to 0.25 percent.

The S&P 500 rose as high as 1,061.00 and the Nasdaq touched 2,081.00. But the market was unable to hold those gains as it succumbed to selling pressure in the last half-hour of trading. The Fed’s closely watched policy statement was somewhat more upbeat than its statement in September. However, it was also more explicit about why it expects to keep rates low, citing “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.”

The Dow Jones industrial average gained 30.23 points, or 0.31 percent, to end at 9,802.14, after rising as much as 156.13 points, or 1.6 percent, in the hour after the FOMC statement to touch a session high at 9,928.04. The Standard & Poor’s 500 Index edged up 1.09 points, or 0.10 percent, to finish at 1,046.50. But the Nasdaq Composite Index slipped 1.80 points, or 0.09 percent, to close at 2,055.52.

Source: Bloomberg, Reuters, Fairfax

Market Wrap for Wednesday 4th November 2009

The sharemarket managed to salvage modest gains at the end of trade, after earlier dropping into the red as weaker retail sales weighed on sentiment. At the close, the benchmark S&P/ASX200 index was up 8.6 points, or 0.2 per cent, to 4540.1, while the broader All Ordinaries rose 7.6 points, or 0.2 per cent, to 4547.6. Among the sectors, financials rose 0.1 per cent, materials gained 0.8 per cent, while energy shares were down 0.1 per cent and consumer staples dropped 0.7 per cent after retail sales unexpectedly slumped in September.

Gold fell in Asia as a rally to the highest ever prompted some investors to sell the metal for profit. Futures in Shanghai jumped to a record. Bullion for immediate delivery reached an all-time high $1,087.80 an ounce yesterday after India’s central bank bought 200 metric tons from the International Monetary Fund for $6.7 billion, raising speculation that more governments will follow suit. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, rose by the most in nearly a month yesterday.

Australian retail sales unexpectedly dropped in September, driving down the nation’s currency as traders added to bets the central bank may pause after two successive interest-rate increases. Sales dropped 0.2 percent from August, when they gained a revised 0.7 percent, the Bureau of Statistics said in Sydney today. The median forecast of 22 economists surveyed by Bloomberg News was for a 0.5 percent gain.

Weaker household spending gives central bank Governor Glenn Stevens scope to keep the benchmark lending rate unchanged in December after raising it yesterday for a second straight month. Today’s report shows the boost earlier this year to retail sales and the economy from Prime Minister Kevin Rudd’s A$20 billion ($18 billion) in cash handouts to consumers is waning.

The S&P 500 and Nasdaq rose slightly on Tuesday as news of a major railroad acquisition helped sentiment, but the Dow edged lower on caution before a Federal Reserve statement on interest rates and the economy. The Dow Jones Transportation Average rose 5.3 percent as Warren Buffett’s Berkshire Hathaway agreed to buy Burlington Northern Santa Fe Corp in a deal that values the railroad company at $34 billion, Berkshire’s biggest deal ever. Burlington shares jumped 27.5 percent to $97. The Federal Open Market Committee began a two-day meeting on Tuesday. While investors expect the Fed to leave rates close to zero, they are nervous to hear what the officials say about the economic outlook.

The Dow Jones industrial average slipped 17.53 points, or 0.18 percent, to end at 9,771.91. But the Standard & Poor’s 500 Index added 2.53 points, or 0.24 percent, to finish at 1,045.41. The Nasdaq Composite Index advanced 8.12 points, or 0.40 percent, to close at 2,057.32.

Source: Bloomberg, Reuters, Fairfax

Market Wrap for Tuesday 3rd November 2009

Australian shares trimmed their losses after the RBA raised rates, although banks weighed on the market. The benchmark S&P/ASX200 index ended the day down 8.9 points, or 0.2 per cent, at 4531.5, while the broader All Ordinaries fell 6.3 points, or 0.1 per cent to 4540. Among the sub-indexes, materials were up 0.4 per cent, energy shares were 0.5 per cent lower, while financials lost 0.5 per cent.

Australia raised its benchmark interest rate by a quarter percentage point for the second time in four weeks, becoming the first nation to increase borrowing costs twice this year as the global economy recovers. Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.5 percent from 3.25 percent in Sydney today, as forecast by 18 of 22 economists surveyed by Bloomberg News. The rest expected a half-point increase. The currency fell after today’s decision.

Britain is set to announce on Tuesday a long-awaited deal with its bailed-out banks, including a record rights issue for Lloyds Banking Group and hefty disposals for Royal Bank of Scotland to appease the EU competition regulator and boost competition. Part-nationalised RBS and Lloyds, 43 percent state-owned, have for months been under the scrutiny of the European Commission, investigating the impact on competition of the billions of pounds received in state aid.

In an attempt to minimize further state aid which would require even bigger disposals to satisfy the Commission, the banks have also been negotiating with the UK government over its Asset Protection Scheme to insure their riskier loans. Both lenders are set to detail a final deal with the state on Tuesday in a complex package that will include disposals to satisfy the EU, sources close to the matter have told Reuters.

U.S. stocks rose on Monday after another round of solid economic reports, but pulled off session highs after a Fed official’s warning about banks’ loan losses. The three major indexes had previously risen about 1 percent earlier in the session as stronger-than-expected data on manufacturing and pending home sales spurred a broad-based advance and soothed worries over the recovery’s strength.

Industrial and materials stocks rose after the solid numbers on manufacturing activity, with the S&P Industrials index and the S&P Materials index both rising 1 percent.

The Dow Jones industrial average gained 76.71 points, or 0.79 percent, to end at 9,789.44. The Standard & Poor’s 500 Index climbed 6.69 points, or 0.65 percent, to 1,042.88. The Nasdaq Composite Index added 4.09 points, or 0.20 percent, to 2,049.20.

Source: Bloomberg, Reuters, Fairfax

Market Wrap for Monday 2nd November 2009

The Australian sharemarket lost more than 2 per cent today following significant losses over Wall Street’s last session and weaker commodity prices – and as retailer Myer listed on the stock exchange at a big discount. At the close, the benchmark S&P/ASX200 index was down 102.8 points, or 2.2 per cent, at 4540.4, while the broader All Ordinaries was down 100.6 points, or 2.2 per cent, at 4546.3. Losses were across the board, with all sectors deep in the red. Financial stocks fell 2.5 per cent, materials lost 2 per cent and the industrials index fell 3.2 per cent.

Myer opened at $3.88, lower than its issue price, amid an overall weak market. The department store’s open price was 5.4 per cent lower than its issue price of $4.10, when it began trading at midday. Myer shares closed at $3.75.

A gauge of Australian annual inflation slowed in October for a fourth month to a record low, easing pressure on central bank policy makers to increase the benchmark lending rate by a half a percentage point tomorrow. Consumer prices rose 1.2 percent from a year earlier, the smallest increase since the gauge was first calculated in 2003, after gaining 1.3 percent in September, according to an index compiled by TD Securities Ltd. and the Melbourne Institute released in Sydney today. Prices fell 0.3 percent from September.

The gauge suggests inflation has held below the central bank’s target range of between 2 percent and 3 percent for the past six months, giving Governor Stevens scope to slow the pace of interest-rate increases. Policy makers will raise the overnight cash rate target by a quarter percentage point to 3.5 percent tomorrow, according to analysts surveyed by Bloomberg.

The Australian government Monday said it expects unemployment to be lower and economic growth stronger in the current fiscal year as the resource-rich nation sidesteps the worst of the global downturn. But the positive effects of the improved economic outlook will take some time to flow through to the budget bottom line, with the government leaving virtually unchanged its budget deficit forecast for the year that started July 1.

The government now expects to record an underlying budget deficit of A$57.7 billion in fiscal 2009-10, slightly wider than the deficit of A$57.6 billion it forecast six months ago in its annual budget. That surprised many economists who had expected an improvement in the government’s balance sheet in the current year.

And, although it narrowed its forecast deficits for each of the following fiscal years through to June 2013, the government doesn’t expect to return the budget to surplus until 2015-16–the same time frame it projected in the May budget. Australia’s A$1 trillion economy has so far escaped recession, assisted by government stimulus spending and a rapid easing of monetary policy by the Reserve Bank of Australia, plus continued demand from China and elsewhere in Asia for its commodity exports.

Source: Bloomberg, Wall Street Journal, Fairfax