Good Morning Fellow Traders,
The Australian share market has made solid gains after a surge in energy stocks and improvements for the big banks turned around a mixed overnight lead out of the US.
The benchmark S&P/ASX200 index ended Friday up 31.3 points, or 0.51 per cent, at 6,121.4 points, as local investors turned bullish ahead of the February reporting season starting in earnest next week.
The index lifted 1.2 per cent for the week - its best performance since late December.
Citi director of equities sales Karen Jorritsma said strong business and consumer confidence, broad economic strength around the country and bullish offshore sentiment have provided positive sentiment for the local market.
"This is one of the first reporting seasons I can remember where we haven't been inundated with
earnings downgrades," Ms Jorritsma said.
Energy stocks drove ASX gains on Friday after a survey showed that
OPEC countries are sticking with commitments to restrict supply more than offset rising US oil production, which has hit 10 million barrels for the first time in almost 50 years.
Locally, Santos added 4.3 per cent to $5.37, Oil Search 2.9 per cent to $7.87, Woodside Petroleum gained 2.1 per cent at $34.24, and Origin Energy 2.2 per cent to $9.60.
Financial stocks gained ground after a midweek dip in the sector, with the big four banks up between 1.0 per cent and and 0.7 per cent.
Miners also lifted, with BHP Billiton up 0.5 per cent to $30.81, Rio Tinto found 0.7 per cent at $78.25, and the gold miner Newcrest added 1.1 per cent to $23.07
James Hardie shares surged $1.50, or 6.8 per cent, to an all time high of $23.65 after the building materials supplier conservatively upgraded the lower end of its full-year guidance and flagged improved earnings margins in its US business.
Ardent Leisure broke even at $1.985 after the entertainment operator announced it will take a $15 million to $25 million writedown on the value of its theme parks as crowd numbers remain low at the venues following the 2016 Dreamworld tragedy.
Telstra rose three cents, or 0.8 per cent, to $3.67 despite the telco giant announcing it will take a $273 million first-half impairment on its US video streaming business, Ooyala - a measure that cuts the value of the business to zero.
And shares in the poker machine supplier Aristocrat Leisure were one cent lower after the Federal Court ruled a former poker machine addict failed to prove that Aristocrat or Crown Resorts breached consumer laws.
Property trusts showed the heaviest losses on Friday as bond yields continue to rise worldwide.
The Australian dollar was struggling to keep its head above 80 US cents at 1630 AEDT, in the wake of a rise in US bond yields and a more confident picture for growth and
inflation emerging from the US Federal Reserve.
The local currency was worth 80.01 US cents at 1700 AEDT, from 80.43 cents on Thursday.
ON THE ASX:
* The benchmark S&P/ASX200 index closed up 31.3 points, or 0.51 per cent, at 6,121.4
* The broader All Ordinaries index was up 31 points, or 0.5 per cent, at 6,229.8 points
* The SPI200 futures contract was up 35 points, or 0.58 per cent, at 6,071 points.
* National turnover was 3.6 billion securities traded worth $5.3 billion
CURRENCY SNAPSHOT AT 1700 AEDT ON FRIDAY
One Australian dollar buys:
* 80.01 US cents, from 80.43 cents on Thursday
* 87.74 Japanese yen, from 87.95 yen
* 64.03 euro cents, from 64.76 euro cents
* 56.12 British pence, from 56.68 pence
* 108.55 NZ cents, from 109.13 NZ cents
GOLD:
The spot price of gold in Sydney at 1700 AEDT was $US1,347.29 per fine ounce, from $US1,344.04 per fine ounce on Thursday.
BOND SNAPSHOT AT 1630 AEDT:
* CGS 4.50 per cent April 2020, 2.0041pct, from 1.9958pct on Thursday.
* CGS 4.75pct April 2027, 2.7837pct, from 2.7607pct.
Sydney Futures Exchange prices:
* March 2018 10-year bond futures contract at 97.17 (implying a yield of 2.83pct), from 97.195 (2.805pct), on Thursday.
* March 2018 3-year bond futures contract at 97.825 (2.175pct), from 97.835 (2.165pct).
(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)
The Australian sharemarket can a expect a rough start to the week due to fairly hefty falls at the close of business on Wall Street.
Despite a strong close to the Australian stock market on Friday, factors from the US Federal Reserve including higher bond yields and higher interest rates affected markets over the weekend.
The Dow Jones closed on Friday at 665.8 points - a 2.5 per cent decline, the S&P 500 was down 2.1 per cent and Nasdaq closed 2 per cent down.
European shares also fell 1.5 per cent on Friday.
"This will be reflected in our market on Monday," said AMP Capital's chief economist Shane Oliver.
"It looks like a fairly rough start," he said ahead of the opening of Monday's Australian sharemarket.
The S&P/ASX200 futures index fell 65 points. or 1.1 per cent, pointing to a 60-70 point decline at the opening of Monday's market.
"This will more than reverse (Friday's) rise," said Dr Oliver.
The main focus this week lies on Tuesday with the Reserve Bank of Australia (RBA) predicted to leave interest rates on hold.
RBA governor Phil Lowe will also make a speech on Thursday ahead of the bank's quarterly statement that is released on Friday.
Dr Oliver said there was conflict in the Australian market with good jobs growth and high confidence levels but this was against low inflation, record low wages growth and uncertainty on the strength of the Australian consumer concerning levels of household debt.
"All this suggests it's way too early for the RBA to raise interest rates," he said.
The Australian dollar fell on Friday to around 79.1 US cents as strong figures came out of the US.
More falls are predicted, as next month US interest rates will rise above Australian interest rates for the first time since the late 1990s.
Also on Tuesday, December trade balance figures would be released and were set to show a $200 million surplus after showing a deficit for November.
On Friday, figures would be released on housing finance set to show a decline.
Worries about the impact of a tightening job market on the prospects for inflation and a surge in bond yields sent investors fleeing equities on Friday, with the Dow Jones Industrials Average swooning almost 666 points, for its biggest daily percentage loss in 20 months.
It was the biggest daily point fall in the Dow since December 2008 during the financial crisis.
With Friday’s rout, Wall Street’s three major indexes logged their biggest weekly losses in two years, after closing at record highs the previous week. The S&P 500 and Dow saw their worst weeks since early January 2016 while Nasdaq had its worst week since early Feb 2016.
“People are starting to really get increasingly uncomfortable with the rapid rise in interest rates that we have seen and the uncertainty of how that is actually going to start to play out relative to competition for stocks,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
Overnight stock price losses accelerated after the U.S. Labor Department reported employment grew more than expected in January with the biggest wage gain in more than 8-1/2 years. The picture of workers commanding higher salaries fueled expectations that inflation is on the rise, which could prompt the Federal Reserve to take a more aggressive approach to rate hikes this year.
That caused the 10-year Treasury yield to surge to 2.8450 percent the highest since Jan. 2014, which could make returns on Treasuries look more attractive relative to stocks.
But market players are not convinced that the bull market in stocks that that saw the S&P 500 rise 5.6 percent in January is over. In fact many say a pull back was overdue.
“You have a jobs report today that was pretty robust all kind of feeding into the higher interest rates, greater inflation story, and I think the markets are trying to grapple with that right now,” said Carlson.
The Dow Jones Industrial Average
.DJI fell 665.75 points, or 2.54 percent, to 25,520.96, the S&P 500
.SPX lost 59.85 points, or 2.12 percent, to 2,762.13 and the Nasdaq Composite
.IXICdropped 144.92 points, or 1.96 percent, to 7,240.95.
S&P 500 e-mini stock futures EScv1 extended losses after 4 p.m. ET close in the cash market. S&P 500 futures closed down 2.3 percent, the biggest daily percentage drop since September 2016.
All 11 major sectors of the S&P 500 closed down. Technology .SPLRCT weighed the heaviest, with Microsoft (
MSFT.O) pulling the sector down 3.0 percent.
The CBOE Volatility Index .VIX, the most widely followed barometer of expected near-term volatility for the S&P 500 Index rose more than four points to 17.86, its highest since November 2016. VIX options trading volume hit a record high.
Analysts now see fourth-quarter earnings growth of 13.6 percent for the S&P 500, up from 12 percent on January 1. Half of the index’s companies have reported, 78 percent of which beat Street expectations, according to Thomson Reuters data.
Exxon Mobil Corp (
XOM.N) and Chevron Corp (
CVX.N) shares were down 5.1 percent and 5.6 percent, respectively, after the oil companies posted lower-than-expected fourth-quarter profit.
Alphabet (
GOOGL.O) fell 5.3 percent after the Google parent’s fourth-quarter profit came in below consensus on increased spending.
Apple (
AAPL.O) shares were off by 4.3 percent as investors worried about the iPhone maker’s weak outlook amid reports of scaled back iPhone X production.
Amazon.com (
AMZN.O) was a bright spot, up 2.9 percent as Wall Street analysts quickly upped their price targets following the online retailer’s impressive earnings report.
Declining issues outnumbered advancing ones on the NYSE by a 7.70-to-1 ratio; on Nasdaq, a 3.90-to-1 ratio favored decliners.
The S&P 500 posted 18 new 52-week highs and 18 new lows; the Nasdaq Composite recorded 48 new highs and 103 new lows.
Volume on U.S. exchanges was 5.39 billion shares, compared to the 7.33 billion average for the full session over the last 20 trading days.
Source: Netwealth Morning Business Roundup
Commence the week with Assorted Wraps and to keep @paddington bear happy, there is Freshly Brewed Coffee.
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Happy trading, play nicely and make informed decisions.
