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Market report: Monday, December 7

Business

UPDATED: Australian shares have opened more than 1 per cent higher after US jobs data at the end of last week gave further support to the idea of a Federal Reserve rate hike this month.

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Strong performances by the financials and resources sectors that dominate the domestic market helped lift the benchmark S&P/ASX200 after US nonfarm payrolls increased 211,000 in November, suggesting the US economy is strong enough to withstand a first rate rise by the Fed in almost a decade.

“An unambiguously stronger picture of the US economy has emerged and that is supportive of share prices and profits around the globe,” CMC Markets chief market strategist Michael McCarthy said.

At 10.25am (AEDT), Commonwealth Bank was up $1.37, or 1.71 per cent, to $81.59, while ANZ and Westpac were both up 1.36 per cent.

ANZ added 37 cents to $27.48, Westpac added 44 cents to $32.74, and National Australia Bank rose 40 cents, or 1.35 per cent, to $30.01.

Bendigo and Adelaide Bank rose 24 cents, or 2.16 per cent, to $11.34, and Bank of Queensland was up 20 cents, or 1.49 per cent, to $13.64.

Insurers were similarly strong, with QBE, AMP, IAG and Suncorp all up between 1.5-2.0 per cent.

Rio Tinto was up 31 cents, or 0.7 per cent, to $44.69, and BHP Billiton was up 24 cents, or 1.34 per cent, to $18.17.

Another rise in the price of gold helped push Newcrest higher by 51 cents, or 4.39 per cent, to $12.14, and Alacer up 9.0 cents, or 3.37 per cent, to $2.76.

The rosy picture didn’t extend to the energy sector, however, with pressure on oil prices weighing on suppliers.

Origin was down 9.5 cents, or 1.75 per cent, to $5.32, Santos was down 11 cents, or 2.6 per cent, at $4.12, and Woodside Petroleum was down 9.0 cents, or 0.31 per cent, at $28.98.

At 10.10am (AEDT) on Monday, the benchmark S&P/ASX200 index was up 68.2 points, or 1.32 per cent, at 5,219.8, while the broader All Ordinaries index was up 67.0 points, or 1.23 per cent, at 5,268.5.

On the ASX 24, the December share price index futures contract was up 72 points at 5,227, with 10,621 contracts traded.

At 8.17am (AEDT) on Monday, the December share price index futures contract was unchanged at 5,155.

US nonfarm payrolls increased 211,000 in November, the US Labor Department said, while September and October data were revised to show 35,000 more jobs than previously reported.

Analysts said the report, which also showed the unemployment rate held steady at five per cent, would most likely pave the way for the Federal Reserve to raise rates this month for the first time in nearly a decade.

Locally, in economic news on Monday, the Ai Group/Housing Industry Association performance of construction index (PCI) and the ANZ job advertisements series, both for November, are due out.

No major equities news is expected.

The Australian dollar is higher after US jobs data showed a decent rise in the number of people with jobs in the world’s largest economy.

The currency was trading at 73.37 US cents, up from 73.30 cents on Friday.

And the Australian share market looks set to open flat despite solid gains on Wall Street following a decent US jobs report.

The December share price index futures contract was unchanged at 5,155.

NEW YORK – US stocks have rallied, giving the S&P 500 its biggest gain since early September, as US jobs data suggests the economy is strong enough to sustain a Federal Reserve rate rise in December.

Financials, which benefit from higher borrowing costs, led the rally. The S&P financial index jumped 2.7 per cent.

JPMorgan Chase rose 3.2 per cent to $67.89 after European antitrust regulators dropped charges against the bank on blocking exchanges from derivatives markets.

But the rally, which followed two days of sharp losses, included most sectors and allowed the three major indexes to post slight gains for the week.

“Stocks are going to have to shift to a domestic economic performance focus. We’re going to see the market focused on what the US economy is doing, rather than Fed policy,” said Brad McMillan, chief investment officer at Commonwealth Financial Network in Waltham, Massachusetts.

“I think we see a continued upward trend for the rest of the year.”

Nonfarm payrolls increased 211,000 in November, the US Labor Department said, while September and October data were revised to show 35,000 more jobs than previously reported.

Analysts said the report, which also showed the unemployment rate held steady at 5 per cent, would most likely pave the way for the Fed to raise rates this month for the first time in nearly a decade.

The Dow Jones industrial average rose 369.96 points, or 2.12 per cent, to 17,847.63; the S&P 500 gained 42.07 points, or 2.05 per cent, to 2,091.69; and the Nasdaq Composite added 104.74 points, or 2.08 per cent, to 5,142.27.

LONDON – Britain’s top equity index fell, extending losses from the previous session caused by disappointment over the European Central Bank’s policy update, with miners and oil stocks reversing previous gains following a statement by OPEC.

OPEC members failed to agree an oil production ceiling on Friday at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions.

The blue-chip FTSE 100 index was down 0.6 per cent at 6,238.29 points at its close, with markets sent lower following robust US non-farm payrolls data which signalled that a rate rise in the US was on the cards for December.

“The rate rise is not the focus – the focus is how dovish (the Fed is) going to be going forward about further rate rises,” said Zeg Choudhry, managing director at LONTRAD.

He added that he had expected markets to react positively to the figure.

HONG KONG – There was no respite for investors still reeling from the disappointment of the European Central Bank’s stimulus package, as they geared up for the latest US employment data and a key OPEC meeting of oil producers.

The prospect of less ECB stimulus than markets had discounted pushed stocks deeper into the red, while the euro snapped back after soaring 3.0 per cent on Thursday in its biggest one-day rally since March 2009 and third largest in its history.

“Investors paid the price of an ECB president (Mario Draghi) who over-promised in his recent rhetoric and under-delivered,” said Michael Hewson, chief analyst at CMC Markets in London.

“This brings us to today’s US employment report for November. We would need a number below 100,000 for the market to wobble in its belief in a Fed move this month,” he said.

In Asia on Friday, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.0 per cent. Japan’s Nikkei tumbled 2.2 per cent, down 1.9 per cent for the week, the most in three months.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen on Friday fell 1.9 per cent, to 3,677.59, while the Shanghai Composite Index lost 1.7 per cent, to 3,524.99 points.

The Hang Seng index fell 0.8 per cent, to 22,235.89, while the China Enterprises Index lost 1.5 per cent, to 9,834.28 points.

WELLINGTON – The S&P/NZX 50 index dropped 30.85 points, or 0.5 per cent, to 6094.82.

ENERGY

World oil prices have fallen after OPEC members failed to agree an oil production ceiling at a meeting that ended in acrimony.

Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions.

A final statement was issued on Friday with no mention of a new production ceiling, apparently allowing member countries to continue pumping oil at current rates into a market that has been oversupplied.

OPEC’s secretary general Abdullah al-Badri said the body could not agree on any figures because it could not predict how much oil Iran would add to the market in 2016, as sanctions are withdrawn under a deal reached six months ago with world powers over its nuclear program.

PRECIOUS METALS

Gold has risen more than two per cent to its highest in nearly three weeks after a US non-farm payrolls report, seen as likely to pave the way for the US Federal Reserve to raise interest rates this month, failed to aid the US dollar’s ascent.

Non-farm payrolls increased 211,000 in November, the Labor Department said. September and October data was revised to show 35,000 more jobs than previously reported.

“The second consecutive strong jobs report only briefly blunted the gold rally as renewed euro strength and US dollar weakness has driven further short covering in gold,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York, adding this was despite the fact that a December rate rise was now more or less guaranteed.

“I’m not sure today’s news was so surprising but more confirming,” said Rob Haworth, senior investment strategist for US Bank Wealth management in Seattle, adding that it led some holding short positions to book profits.

BASE METALS

Copper, aluminium and other base metals have climbed as investors bought back short positions after a strong US jobs report that helped to allay fears the world’s largest economy has hit a soft patch.

A surprise move by OPEC oil producers to maintain production also supported metals because a lower crude price could help the global economy and boost demand for metals.

“It’s a mixed bag,” said Robin Bhar, head of metals research at Societe Generale, referring to the US data and OPEC decision.

“I think it’s more to do with end-of-week positioning, reflecting how extreme things got with the short in metals and long in dollars. We just seeing a bit of tidy up.”

ATHENS – Greek MPs have approved a “tough” 2016 budget, forecasting near zero growth for 2015 and a small contraction next year for the debt-ridden country in its sixth year of austerity.

VIENNA – OPEC members have failed to agree an oil production ceiling at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions.

WASHINGTON – US job growth has increased solidly in November in a show of the economy’s resilience, which most likely paves the way for the Federal Reserve to raise interest rates this month for the first time in nearly a decade.

ASX stocks to watch today

BHP – BHP BILLITON

STO – SANTOS: Energy sector stocks could be hit on Monday after the price of world oil fell, with WTI dropping below the crucial $US40 mark.

AAP

 

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