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Market report: Thursday, November 19

Business

UPDATED:  The Australian share market was more than 1 per cent higher at noon, pushed up by the big banks and the miners.

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On the back of a higher iron ore price overnight and modest gains in oil, Rio Tinto was up 4.27 per cent, while BHP was up 2.32 per cent ahead of its annual general meeting.

The energy sector was mixed, with Woodside Petroleum and Origin up but Santos down.

Sonic Healthcare (up 5.33 per cent) helped that sector’s gains after it announced it was on track to lift earnings this financial year.

All the big banks were up, with National Australia Bank the best performer, up 2.12 per cent.

Earlier, the Australian share market has opened lower after a bomb threat in Germany prompted a reversal of fortunes on Wall Street and rattled investors.

The threat aimed at a football match between Germany and the Netherlands at Hanover overnight comes just days after the deadly Paris terrorists attacks sparked concern there’d be more attacks, CMC Markets chief market analyst Michael McCarthy said.

“After a strong European session and a good start to US trading we saw Wall Street reverse into negative territory after the bomb threat in Germany,” he said.

“This reversal of momentum is weighing on our market today.”

Falls in oil prices on renewed oversupply concerns and a drop in iron ore and copper prices are adding more downward pressure on the energy and resource stocks.

Energy giant Woodside Petroleum shed 43 cents, or 1.46 per cent, to $28.97, while Santos dropped 7.5 cents, or 1.73 per cent, to $4.265 at 10.15am (AEDT).

As for the major miners, BHP Billiton has fallen below $20 again, losing 57 cents, or 2.8 per cent, to $19.80.

Rio Tinto was down 97 cents, or two per cent, at $47.13 and Fortescue Metals slipped seven cents, or 3.15 per cent, to $2.15.

The big four banks were also all lower.

Explosives maker Orica was down nine cents to $15.52 after it posted a net loss due to a huge asset writedown.

Locally, no major economic news is expected on Thursday.

In equities news, James Hardie is expected to post half year results.

BHP Billiton, Village Roadshow, Paladin Energy, Sonic Healthcare have annual general meetings, as do BlueScope Steel, Patties Foods, Starpharma and Lovisa.

At 6.30am (AEDT) on Thursday, the currency was trading at 70.91 US cents, down from 71.01 cents on Wednesday.

Copper and oil prices both lost ground overnight, while iron ore rebounded slightly after falling more than four per cent the previous day.

NEW YORK – US stocks have strengthened after minutes from the most recent Federal Reserve policy meeting showed a core of officials backed a possible rate rise in December.

The minutes of the Fed’s October 27-28 meeting showed “most” participants felt conditions for a rate hike “could well be met by the time of the next meeting”.

Earlier, two Fed officials expressed confidence that they will be able to pull off a relatively smooth interest-rate rise when the time comes.

“I think the market is ready and comfortable for an increasing Fed funds rates,” said Alan Rechtschaffen, portfolio manager at UBS Wealth Management Americas in New York.

“We just have to turn this aircraft carrier around, get out of this zombie-like economy which is being fed on an elixir of low interest rates and get to a process of normalization,” Rechtschaffen said.

LONDON – Heightened security fears in the wake of the Paris terror attacks and caution ahead of an update from the Federal Reserve have weighed on European stocks and the euro.

“There was never going to be much movement in markets before the release of Fed minutes so most of the day was spent nervously watching the raid on terrorist suspects unfold in Paris,” said market analyst Jasper Lawler at CMC Markets UK.

Also, Tuesday’s bomb threat that forced Germany’s football friendly against the Netherlands to be cancelled, also had spooked investors.

“From a market’s standpoint, it’s unnerving to see public events like football matches being cancelled because of the threat of terrorism,” said Lawler.

HONG KONG – Signs of a pick-up in US inflation reinforced expectations the Federal Reserve will raise interest rates in December, supporting the US dollar in Asia but regional stock markets were subdued after rallying the previous day.

Traders are also awaiting the release of the US central bank’s October policy meeting minutes, hoping for some clues about board members’ thinking and possible pointers to their plans for December’s gathering.

“The Fed minutes will definitely be focused on tonight,” Ric Spooner, chief market analyst at CMC Markets Asia Pacific in Sydney told Bloomberg News.

“There’s now an assumption that they are going to make a move in December. The bigger question now is whether they will be able to be as gently paced in their tightening as they plan to be as they monitor wage pressures.”

ENERGY

Global oil prices have moved modestly higher as traders weighed a small gain in US inventories and a Federal Reserve report that supported expectations of a December interest rate rise.

The latest US Department of Energy oil data showed a smaller-than-expected rise in commercial stockpiles, rising by 300,000 barrels to 487.3 million barrels in the week ended November 13.

It’s the highest level recorded for this time of year, but well below expectations of a two-million-barrel build. Compared with a year ago, supplies were nearly 28 per cent higher.

“Oil prices have remained mostly unchanged on account of this report. Inventories rose far less than analysts’ expectations, but traders may have been expecting a modest decline in inventories,” said Thomas Nichols of Moody’s Analytics.

PRECIOUS METALS

Gold prices have inched higher after tapping a nearly six-year low as the market reacted to the minutes of a recent US Federal Reserve meeting that gave mixed signals about a possible rate rise in December.

“The October minutes indicate that a December rate move is not yet settled with the doctrinaire doves continuing to battle against what they believe is a hasty hike,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

“The committee’s indecision is translating into some volatility for gold and silver.”

Prior to release of the minutes, some Fed officials continued to flag December as a likely time for interest rates to rise after years near zero, with two expressing confidence they will be able to pull it off smoothly despite fears of an abrupt market reaction.

BASE METALS

Base metals have hit multi-year lows as fears persisted over waning demand in top metals user China and investors awaited the minutes of a US Federal Reserve policy meeting, which could reinforce rate rise expectations.

“Funds are bailing out of commodities at the moment, because of China, and dollar strength doesn’t help,” a London-based trader said.

WASHINGTON – A solid core of Federal Reserve officials rallied behind a possible December rate hike at the central bank’s last policy meeting, but central bankers also debated evidence the US economy’s long-term potential may have permanently shifted lower.

New construction of US homes slowed in October, led by a plunge in the multi-unit sector, but a jump in building permits pointed to a potential rebound in coming months.

LONDON – Britain wants to close all of its coal-fired power plants by 2025 and lower their output from 2023, the government says, making it the first major economy to put a date on shutting down polluting coal plants to curb carbon emissions.

INDEX CLOSE MOVE
Dow Jones 17737.16 247.66
S&P500 2083.58 33.14
Nasdaq 5075.20 89.19
FTSE100 6278.97 10.21
DAX 10959.95 -11.09
Shanghai 3715.58 -42.81
Hang Seng 22188.26 -75.99
NIKKEI225 19649.18 18.55

ONE AUSTRALIAN DOLLAR BUYS:
0.7110 US DOLLARS
0.6672 EUROS
0.4668 UK POUNDS
4.5386 CHINESE YUAN
1.0997 NEW ZEALAND DOLLARS

METAL MOVE CLOSE
Gold $US/oz 0.0100 1068.70
Copper $US/tonne -0.0260 2.0780
Iron ore $UStonne 0.77 46.35

OIL (US$/barrel) MOVE CLOSE
WTI 0.08 40.75
Brent Crude 0.57 44.14

ASX STOCKS TO WATCH

BHP – BHP BILLITON: BHP Billiton has its annual general meeting on Thursday.

BSL – BLUESCOPE STEEL: BlueScope Steel has its annual general meeting on Thursday.

JHX – JAMES HARDIE INDUSTRIES: James Hardie is expected to post half year results.

LOV – LOVISA: Lovisa has its AGM on Thursday.

PDN – PALADIN ENERGY: Paladin Energy has its annual general meeting on Thursday.

PFL – PATTIES FOODS: Patties Foods has its annual general meeting on Thursday.

SHL – SONIC HEALTHCARE: Sonic Healthcare has its annual general meeting.

SPL STARPHARMA HOLDINGS: Starpharma has its annual general meeting on Thursday.

VRL – VILLAGE ROADSHOW: Village Roadshow has its annual general meeting on Thursday.

CURRENCY SNAPSHOT AT 6.30am (AEDT) ON THURSDAY

One Australian dollar buys:

70.91 US cents, from 71.01 cents on Wednesday

87.59 Japanese yen, from 87.52 yen

66.59 euro cents, from 66.67 euro cents

AAP

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