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I hope everyone had a great weekend!
The Australian share market was at 4,975 at noon expected to increase higher following the modest gains in the US late on Friday, but a key reading of Chinese growth influenced market sentiment.
On the ASX24, SPI futures were 14 points higher to 4950. The Aussie dollar is down against the greenback buying 90.66 US cents in recent trade, down almost a full US cent from Friday's local close. It was also buying 90 yen, 69.36 euro cents and 60 British pence.
The Aussie dollar edged below 90 US cents late on Friday. The Aussie touched 89.98 US cents on offshore trade after China’s finance minister was quoted as saying the world’s second largest economy was growing at a slower pace than the previously forecast 7.5 per cent. Advertisement
China's economy grew 7.5% in the second quarter compared to a year earlier, while industrial production for June rose 8.9% from year-ago levels, slowing from May's 9.2% growth, the National Bureau of Statistics said Monday. The gross domestic product result was down from the first quarter's 7.7% advance, but matched projections from separate Dow Jones Newswires and Reuters surveys of economists. However, the industrial output missed the Reuters projection for a 9.1% gain. June retail sales rose 13.3% on an annual basis, beating May's 12.9% gain. Urban fixed-asset investment -- watched as an indicator of construction spending -- grew an average 20.1% in the January-June period, just short of Reuters' 20.2% projection and down from 20.4% in January-May. Fixed-asset investment is reported on a year-to-date basis.
What you need to know
•SPI futures are 14 points higher at 4950 •The $A is lower at 90.72 US cents •In New York, the S&P500 was 0.3% higher at 1680.19 •In Europe, the FTSE100 flat at 6544.94 •China iron ore added $US1.60 to $US126.80 a metric tonne •Gold lost 0.2% at $US1,282.06 to $US1277.60 an ounce •WTI crude oil 2.6% to $US105.95 a barrel •Reuters/Jefferies CRB index was flat at 286.66
Making news today
In economics news:
•ABS new motor vehicle sales for June - 11.30am •China GDP for the second quarter of 2013 - 12pm - 7.5% GDP
There is no major companies news scheduled for today.
Making news this week:
•Tuesday: RBA minutes from July board meeting, Rio June quarter update •Wednesday: Wesptac leading index for May, BHP June quarter update •Thursday: NAB business confidence for the second quarter, RBA foreign exchange transactions for June Offshore last week
United States
US stocks edged higher to new highs as strong banking earnings helped offset a profit warning from UPS and fresh trouble for Boeing’s Dreamliner aircraft.
Key numbers:
•Dow Jones Industrial Average added 0.02% to 15,464.30 •S&P 500 added 0.31% at 1,680.19 •Nasdaq Composite Index added 0.61% to 3,600.08
Europe
European stock markets rose slightly, as traders weighed higher inflation data in the US and signals from China that growth this year could be slower than forecast.
Key numbers:
•London’s FTSE 100 added 0.02 to 6,544.94 •Frankfurt’s DAX 30 added 0.66% to 8,212.77 •In Paris the CAC 40 added 0.36% to 3,855.09
Asia
Asian markets closed mixed, with a record-breaking close on Wall Street offset by profit-taking after the previous day’s broad gains.
Key numbers:
•Japan’s Nikkei added 0.23% to 14,506.25 •China's Shanghai composite lost 1.62% to 2,039.49 •Hong Kong's Hang Seng lost 0.75% to 21,277.28
Commodities
Energy
Global oil prices powered higher, pushed in part by a spike in gasoline prices and renewed market optimism about US demand.
•New York’s main contract, West Texas Intermediate (WTI) for August, leaped $US1.04 from Thursday to finish at $US105.95 a barrel. •The European benchmark, Brent North Sea crude for delivery in August, climbed $US1.08 to settle at $US108.81 in London trade.
Precious Metals
Gold prices edged lower as a stronger US dollar and disappointment over gold purchases by top consumer India offset support from weaker US data.
•The most actively traded contract, for August delivery, on Friday fell $US2.30, or 0.2 per cent, to settle at $US1,277.60 a troy ounce on the Comex division of the New York Mercantile
Base metals
Copper closed lower on the London Metal Exchange (LME), weighed by a strong US dollar and concern over demand for the commodity from top metals consumer China.
•At the PM kerb close on Friday, the LME’s flagship three-month copper contract was down 0.7 per cent at $US6,953 a metric ton. •Aluminum fared better, ending the session 0.5 per cent higher at $US1,843 a ton.
'Follow the leader'
CommSec chief economist Craig James said the futures trading indicated Australia might play "follow the leader" to the US.
Higher base metals prices might help the Australian market, while the spot iron ore price was up above $US125 ($A136.88) a tonne on Friday.
"Those Chinese GDP figures include economic growth, production, retail spending and the like and can be a real market turner," Mr James told AAP.
He pointed to the release of weaker than expected Chinese import-export prices last week as evidence and the negative effect that had on the Australian market with investors worrying about Chinese growth.
The release of Chinese economic growth figures for both the month of June and the June quarter could end up being a strong market mover, with China being Australia's most important trading partner.
It will be a big week in the US for the release of quarterly corporate earnings by major companies, which will influence the Australian market depending on how strong earnings are.
How we fared on Friday
Strength in the resources sector pushed Australian shares higher, although the market lost some ground after China's finance minister lowered expectations for the country's economic growth.
At the close on Friday the benchmark S&P/ASX200 index was up 8.2 points, or 0.17 per cent, at 4,973.9. The broader All Ordinaries index was up 10.6 points, or 0.21 per cent, at 4,957.5.
Today’s Financial Calendar
·(AU) - vehicle sales, Jun ·(CH) - GDP, Q2; 7.5% GDP ·(CH) - industrial production, Jun; 8.9% vs May 9.2% ·(CH) - retail sales, Jun ·(CH) - fixed asset investment, Jun ·(JP) - markets closed ·(NZ) - service sector PMI, June ·(US) - retail sales, Jun ·(US) - Empire State mfg index, Jun ·(US) - business inventories, May ·(AYN) - EGM ·(MLA) - EGM ·(NTC) - EGM ·(PRU) - quarterly production report
The Monday Report
On Friday night we saw a mixed bag on Wall Street as the indices stumbled their way along the flat line on small fluctuations before kicking slightly at the close. Individual stock news was the major feature of the session.
JP Morgan (Dow) and Wells Fargo, America’s biggest commercial/investment bank and biggest mortgage bank respectively, both posted quarterly results before the opening bell with both beating on earnings and matching on revenues. The results were well received and provided a fillip for all bank stocks on the day.
Online retailers E-Bay and Amazon also posted strong results while on the other side of the coin, United Parcel Service, which is considered somewhat of a bellwether, downgraded its earnings expectations and suffered a sharp drop in share price as a result.
The biggest drop of significance came from Boeing (Dow), which did not report but fell on news of a fire in a Dreamliner landing at Heath Row which is suspected to again point to battery problems. Boeing shares fell 5% and were a drag on the Dow as a result. The Dow closed up a mere 3 points while the S&P posted a 0.3% gain and the Nasdaq jumped 0.6%. Any lift for the Dow and S&P at this stage represents new blue sky.
On the data front, the fortnightly measure of US consumer sentiment slipped insubstantially to 83.9 from a strong 84.1 at the end of June while the headline producer price index jumped 0.8% on the back of higher oil prices to mark its biggest rise since September last. The core PPI nevertheless showed only 0.2% growth, supporting the Fed’s low inflation argument.
Adding to the mixed bag was another tussle from the Fed heads, with the Philadelphia Fed president suggesting tapering should begin in September with a target to end QE by year-end, followed by the St Louis president reiterating his suggestion that tapering should not begin at all at this stage. St Louis has a current FOMC vote while Philly will get to vote next year.
Such tussling only provides confusion for the US bond market, with the ten-year yield ticking up by 3 basis points on Friday to 2.60%. The US dollar index fell 0.3% to 82.97 and gold fell US$2.00 to US$1284.60/oz.
Wall Street has become rather insular right now which is often the case during result seasons, ignoring noise from the rest of the world and concentrating on domestic earnings instead. US markets thus seemed to pay little attention to what was going on in China over the weekend.
Forex traders were not going to wait to find out, sending the Aussie southward on a 1.2% fall to US$0.9061 by Saturday morning. London metal traders were also a bit spooked, selling copper down 0.7%, but other metal prices were mixed on small moves for the session.
If a weaker Chinese economy slows up global energy demand, which it should, the oil markets have not taken this on board. On lingering concerns over Egypt and the Suez Canal and soothing words from Bernanke last week that tapering is not a given in the short term the oils pushed higher again on Friday night. Brent rose US$1.27 to US$108.81/bbl and West Texas rose US$1.34 to US$106.25/bbl.
Spot iron ore rose US$1.60 to US$126.80/t.
Friday’s session on Bridge Street saw a strong opening, possibly on a bit of Bernanke double-counting, before a fade-off in the afternoon. The supposedly incorrect statement from Beijing and the lower Aussie were influential, and otherwise it was just a Friday, ending a volatile week with a whimper. Futures traders appear to be slightly to the optimistic side nevertheless, with the SPI Overnight up 14 points.
Looking at the data week overall, Australia will be relatively quiet with vehicle sales out today and NAB’s June quarter summary of business confidence out on Thursday. Tomorrow will see the release of the minutes of the July RBA meeting, from which economists will search for any clues of an August rate cut.
By contrast it will be a busy week in the US, beginning with retail sales, business inventories and the Empire State manufacturing index tonight. Tuesday brings the CPI, industrial production and housing market sentiment and Wednesday sees housing starts and the Fed’s Beige Book. Thursday wraps up with the Philadelphia Fed manufacturing index and the Conference Board leading economic index.
Fed speak this week will be dominated by the Fed chairman’s regular testimony to Congress over Wednesday and Thursday nights.
Tuesday will be important for ECB policy considerations when the Eurozone CPI and trade balance are released along with the ZEW investor sentiment survey. Japanese markets will be closed today.
Things are beginning to hot up on the local stock front, with the quarterly resource sector production report season now in full swing ahead of the August profit result season. Tomorrow sees production reports from Perseus Mining (PRU) and Rio Tinto (RIO). On Wednesday it’s BHP Billiton (BHP), Gindalbie Metals (GBG) and Iluka Resources (ILU). Thursday sees Fortescue Metals (FMG) and Woodside Petroleum (WPL) and on Friday it’s Santos (STO).
Aurizon (AZJ) will provide an operational update on Thursday and Sandfire Resources (SFR) will hold an investor presentation, while on Friday Sydney Airport (SYD) will release monthly traffic statistics.
