CMC Markets chief market strategist Michael McCarthy said trading on Thursday was marked by higher than average volumes in the trading of index futures contracts.
“It does appear to be what’s putting the weight on the market,” McCarthy said.
“The evidence for that is in the banks. After a much stronger-than-expected jobs report and a pretty positive environment, we’re still seeing them as one of the worst performers on the market.
“And there’s no basis for that other than their weight in the index.”
Investors who trade in index futures are generally larger and more sophisticated investors.
McCarthy said they could be hedging an Australian share portfolio, taking a view on China, or doing a relative value trade or global index trade.
“It’s likely that this is a relative value trade. I suspect that what might be happening is that someone is buying Hong Kong and selling Australia.
“It’s a valuation argument. The PE (price/earnings ratio) in Hong Kong is around 9.5 times where the Australian index – even at current levels – is still 18 or 19 times.”
McCarthy said better-than-expected jobs figures released on Thursday had a short positive impact on the market but that quickly faded.
The unemployment rate has fallen to its lowest level in almost two years, following the strongest two month period of jobs growth in 28 years.
Among the major banks, ANZ was down 24 cents at $26.19, Westpac fell 64 cents to $31.41, Commonwealth Bank dropped $1.39 to $78.90, and National Australia Bank reversed 53 cents to $28.43.
In the resources sector, global miner BHP Billiton climbed 32 cents to $17.48, Rio Tinto rose $1.01 to $43.06, and Fortescue Metals eased 2.5 cents to $1.795.
Telstra was off six cents at $5.25, and Medibank Private shed seven cents to $2.15.
Wagering and keno provider Tabcorp was six cents weaker at $4.61 as it signed a 10-year deal with Rupert Murdoch’s News Corp to set up a wagering and gaming website linked to The Sun newspaper in the UK.
At noon (AEDT) on Thursday, the currency was trading at 73.27 US cents, up from 72.15 cents on Wednesday.
The Aussie had jumped to 73.33 US cents by 1141 AEDT on the news that Australia’s unemployment rate fell to 5.8 per cent in November.
The total number of people with jobs rose 71,400 in the month, which easily beat expectations of a fall of 10,000.
At 10.10am (AEDT) on Thursday, the benchmark S&P/ASX200 index was down 6.6 points, or 0.13 per cent, at 5,073.9, while the broader All Ordinaries index was down 6.1 points, or 0.12 per cent, at 5,123.8.
On the ASX 24, the December share price index futures contract was down four points at 5,077, with 12,003 contracts traded.
Locally, in economic news on Thursday, the Australian Bureau of Statistics releases labour force data for November, while the ACCI-Westpac Survey of Industrial Trends for the December quarter is also due out.
No major equities news is expected.
NEW YORK – Wall Street has reversed course and closed lower as a brief rally in oil prices fizzles and shares of Apple slip, offsetting gains in raw materials stocks.
Crude oil prices resumed their slide, after rising as much as four per cent earlier in the day.
The energy index trimmed earlier gains and was up 0.8 per cent.
Dow Chemical and DuPont rose after reports that the companies are in talks to merge.
“I think at present equities are largely events driven, last week’s performance was driven by employment, this week it is oil, next week it is the Fed,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
“Uncertainties are relatively higher at the moment and accordingly prices will trend sideways into the year-end.”
LONDON – Britain’s top share index has steadied at the close, recovering after early losses on the back of a rally in commodity stocks following a sharp rise in prices of industrial metals and oil
“The market finally managed to bounce back after mining and energy shares fought back, supported by stronger commodity prices. Some brave investors are taking positive bets on commodity stocks as both the sectors have become technically ‘oversold’,” Jawaid Afsar, senior trader at Securequity, said.
The blue-chip FTSE 100 index was also supported by a sharp rally in shares of industrial equipment hire group Ashtead.
HONG KONG – Asian stocks have slipped as crumbling commodity prices and data pointing to cooling demand from China sapped investor appetite for risk assets.
Indicators this week highlighted the struggle facing China’s economy, with soft trade numbers on Tuesday cementing concerns over cooling demand.
Wednesday’s data showed Chinese factories were plagued by persistent producer price deflation – another sign that Beijing’s easing efforts have yet to restore economic momentum.
November consumer inflation did pick up slightly to 1.5 per cent but was still much lower than the 2014 average of 2.0 per cent.
WELLINGTON – The NZX 50 Index rose 24.998 points, or 0.5 per cent, to 4768.870.
ENERGY
Oil prices are hardly changed, giving up gains after an early rebound on a drop in US crude oil inventories.
US crude was initially supported by data showing a surprise 1.9-million-barrel fall in US inventories to 488 million barrels last week. But traders seemed more concerned about a build in distillates, including diesel, causing earlier gains to reverse.
PRECIOUS METALS
Gold prices have flattened, giving back earlier gains as oil prices fell and shrugging off support from the weak US dollar and shares as investors remained cautious ahead of an anticipated Federal Reserve rate rise next week.
The US central bank is widely expected to raise interest rates for the first time in nearly a decade at its next policy meeting on December 15-16.
Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.
“It has been negative for gold for quite some time and continues to be,” said James Steel, chief metals analyst for HSBC Securities in New York, referring to oil prices.
BASE METALS
Aluminium has risen as expectation of output cuts in China prompts some investors to reverse bearish bets while lead has hit a month peak as inventories hover at multi-year lows.
Capping the gains, however, were persistent concerns about aluminium exports from China, the world’s largest producer, which have helped push prices to a six-and-a-half-year low of $US1,432.50 in November.
“In exporting such high levels China is also helping ensure that the global aluminium market remains considerably over-supplied, which will prevent any lasting price recovery,” said Commerzbank in a note.
THE HAGUE – The Dutch agriculture co-operative Rabobank has announced it will cut more than a third of its local workforce, slashing 9000 jobs over the next three years as it streamlines operations.
BENGALURU, India – Yahoo has shelved plans to spin off its stake in Chinese e-commerce giant Alibaba, citing tax concerns, and will instead create a separate company to hold the rest of its assets.
DOVER, Delaware – Shares of Dow Chemical and DuPont were trading sharply higher Wednesday amid reports that the two chemical giants are in advanced merger discussions.
ASX stocks to watch
BHP – BHP BILLITON
RIO – RIO TINTO
FMG – FORTESCUE METALS GROUP: Miners may find some relief as the iron ore price lifts nearly half a US cent, although it still remains below the $US40 mark at $US39.08.
FXJ – FAIRFAX: Facebook users will be able to read Fairfax Media stories just that little bit faster after the media giant became the first local Australian outlet to sign up for Facebook’s Instant Articles program.
AAP
