World Summary: OIL STILL RISING; EQUITIES STUMBLE 07:44, Monday, 21 March 2005
Sydney - Monday - March 21: (RWE Australian Business News) - US financial markets were unsettled at week's end as the oil price hovered around record levels.
Also, indications of inflation were emerging, triggering the threat of an acceleration of increased interest rates while confidence declines.
Wall Street was on the back foot with traders absorbing a second weekly decline, although the Dow Jones made it into positive territory at the last moment.
The key barometer index rose 3 points on Friday while the S&P 500 shed less than 1 point.
The Nasdaq retreated 9 and the 100 index 3.
In addition, the stockmarket was clouded by triple witching hour - the expirations of contracts on stocks, stock indices and options.
And the S&P indices were also going through some re-weighting problems, causing unexpected re-alignment of portfolios.
There was a change in calculating the S&Ps.
As if this wasn't enough, the University of Michigan has reported its confidence index dropped to 92.9 in a March preliminary reading, the lowest since November, from 94.1 in February.
The Labor Department disclosed that import prices rose 0.8 per cent in the same month, including the biggest gain in foreign petroleum costs since October.
Americans generally are being hurt by the surging price of gasoline, which is changing consumer spending patterns.
Oil prices have risen six weeks in a row and are now up 22 per cent since February.
The April crude price settled 32c higher at $56.72 barrel and touched a high of $57.
The May contract was even higher at $57.24, up 33c, while the high was $57.45 barrel.
The Federal Reserve Open Market Committee will meet this week to decide on US interest rates.
It is pretty certain that a 25 basis point rise is on but the real cruncher will be whether the Fed will stick to its policy of a "measured pace increase".
This time round the FOMC could be satisfied with the anticipated rise, but change its policy strategy as a warning of tighter monetary policy to come.
Another quarter of a per cent will lift the Fed Funds rate target to 2.75 per cent.
Treasuries have fallen away, reflected by the 10-year cash paper yield up 4 points to 4.597 per cent.
In international news President George W Bush has invited Israeli Prime Minister Ariel Sharon to his Texas ranch next month and hopefully will show the same evenhandedness to the Palestinians.
Meanwhile, the Swiss National Bank plans to resume raising interest rates once the economy recovers.
WALL STREET ... settled 3.32 points higher at 10,629.67 on the Dow Jones Industrial Average on Friday. But the broadly-based S&P 500 was down 0.56 to 1189.65, the Nasdaq composite finished 8.63 behind at 2007.79 and the 100 index eased 3.23 to 1484.40. Treasuries were under selling pressure. The 10-year cash paper fell 10/32 ticks to 95 31/32, lifting the yield 4 points to 4.4507 per cent.
US DOLLAR ... has been firmer against major currencies. The greenback is selling at 104.71 yen, up from 104.54 at the previous close in NY. The euro is at 1.3313 (prev 1.3375) and sterling is 1.9207 (prev 1.9247). The greenback is at 1.1642 Swiss francs (prev 1.1568).
AUSTRALIAN DOLLAR ... has traded erratically on the greenback. It is changing hands at US79.46c, up 18 points on Friday's local close. High for the weekend was US79.48c and low was US78.55c. Crosses were stronger. The yen is at 83.29 (prev 82.89) 0.5969 euros (prev 0.5928) and 41.39 pence on sterling (prev 41.21).
AUSTRALIAN SHAREMARKET ... will be looking to continue its latest record run today, but faces mixed signals. The market indices set new peaks on Friday with the All Ordinaries closing up 19.5 to 4236.8 and the ASX 200 up 16.7 to 4249.1 after touching 4242.3 and 4258.1 respectively.
Over the week the All Ords rose 44.2 and the ASX 200 put on 45.3. After the flat finish on US markets, local futures were weaker on Saturday and the June SPI 200 fell 3 to 4268 and September 7 to 4275. This week is shortened for the Easter long weekend. The market will close at 2pm on Thursday and resume the following Tuesday.
Another quiet week of economic data starts tomorrow with new motor vehicle sales in February and dwelling unit commencements for the December quarter (analysts expect a 9pc fall) from the Australian Bureau of Statistics, along with the Reserve Bank's March financial stability review.
The Department of Employment and Workplace Relations will announce the skilled vacancies index for March on Wednesday. On the same day, Reserve Bank governor Ian Macfarlane will address a banking forum, although he probably won't discuss interest rate settings, since his speech is entitled "Gresham's Law of Payment Systems".
In the sharemarket, Sigma Company is scheduled to report its annual results today. Interim results are due from David Jones and Angus & Coote tomorrow. Foodland Associated will announce its interim result on Wednesday while Chemeq will hold its annual meeting. Stocks to be quoted ex-dividend include Brickworks ex 10c, Invocare 9c, Prime TV 5.5c and Gale Pacific 3.5c today; Tribeca Learning 0.6c tomorrow; PBL 27c, Iluka Resources 12c, IOOF Holdings 10c and JB Hi-Fi 3.6c on Wednesday and Telstra 20c, Woolworths 24c, AMP 14c and IBT Education 1.7c Thursday.
The ASX has confirmed two new listings for this week. Westralian Gas and Power's 25c shares and free attaching options will open at midday today and Macquarie Private Capital Group's $1 stapled securities come on at 11am tomorrow.
EUROPEAN SHAREMARKETS ... closed flat to modestly higher on the major exchanges on Friday, except for Zurich.
In London, while the blue-chip FTSE 100 Index edged up 0.02 per cent, the more broadly-based FTSE 250 measure of mid-cap stocks did better, gaining 0.39 per cent or 28.2 points to 7222.90.
The standout gainer was Anglo-Dutch steel producer Corus, whose shares advanced 3.13 per cent to 57.75p. Brokerage CSFB raised its price target for Corus to 70p a share from 65p after the group reported its maiden full-year net profit and announced its intention to restart dividend payments in 2005. Conversely, supermarket chain Wm Morrison was the biggest blue-chip decliner, falling 2.3 per cent to 201.75p, extending the previous session's slide. The retailer had noted "an increasingly competitive marketplace", triggering alarm bells on 2005/06 results as well as 2004/05.
Merrill Lynch reiterated its "sell" recommendation while Citigroup downgraded its investment rating on Morrison to "hold" from "buy". The retailer reports results next Wednesday. GlaxoSmithKline shares dropped 1.84 per cent to 12.24 pounds following worries the company could face a further probe into manufacturing defects at a plant in Puerto Rico, together with a hefty fine.
On the Continent, shares of defence contractor and manufacturer of the Airbus EADS fell 1.03 per cent to 22.08 euros despite news that China Eastern Airlines had agreed to buy five A319 aircraft. German car maker BMW advanced 1.17 per cent to 34.46 euros following a stock rating upgrade by Deutsche Bank to "buy" from "hold." Also in Frankfurt, software house SAP saw its shares gain 0.47 per cent to 121.03 euros despite US database giant Oracle raising its rival bid for Retek Inc by 25 per cent to $11.25, trouncing SAP's $11 per share offer.
In other technology areas, German semiconductor maker Infineon Technologies fell 1.5 per cent to 7.24 euros while counterpart STMicroelectronics dipped 0.69 per cent to 12.89 euros in Paris. Dutch chip equipment maker ASML Holdings saw its shares fall 1.02 per cent to 12.67 euros.
At the finish, London's FTSE 100 index edged up 1.20 to 4923.30, Paris's CAC 40 gained 18.70 to 4050.77 and Frankfurt's DAX added 11.26 to 4327.18. Amsterdam edged up 1, Madrid rose 28 and Zurich dropped 32.
METALS ... were mixed Friday with precious metals a touch better on a slightly stronger US dollar while base metals were in negative territory in London. Spot gold rose 60c to $439.70 oz and the June contract added a similar amount to $442.30 oz on COMEX.
Silver on the May contract eased 1c to $7.397 oz while April platinum improved 50c to $880 oz on NYMEX. New York May copper gained 25 points to 150.70c lb. Closing three-month prices on the LME were copper $3255 tonne, tin $8450, lead $954.50, zinc $1369, aluminium $1971.50 and nickel $15,875.
Three-month London Metals Exchange official bid prices were all weaker. Copper fell $31 to $3255, lead $11.50 to $954.50, zinc $59 to $1369 and tin $10 to $8450. Nickel came off $115 to $15,875 and aluminium ended $13.50 lower at $1971.50 tonne.
OIL ... settled 32c higher at $56.72 barrel for April crude on the New York Mercantile Exchange. High for the session was $57 and low $56.10. May crude finished 33c in front at $57.24 barrel and set a high of $57.45 and low of $56.60. The market was influenced by an Energy Department report that US gasoline inventories fell more than expected last week.
In London, May Brent crude oil futures rose 53c to $55.65 a barrel on the International Petroleum Exchange. High was $55.70 and low $54.80 after failing to emulate yesterday's futures record of $56.15, the highest since trading began in 1988.
