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Market report: Friday, December 11

Business

UPDATE: The Australian dollar has given back some of the gains made after November’s unemployment rate fell to a 20-month low.

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At noon (AEDT) on Friday, the currency was trading at 72.65 US cents, down from 72.86 cents on Thursday.

The total number of people with a job also rose 71,400 in November, building on a gain of over 56,000 the month before, which was the strongest two months of employment growth since January 1988.

“The huge upside surprise on the Australian jobs data is another shocker as the market continues to churn volatility on data,” OANDA Australia and Asia Pacific senior trader Stephen Innes said.

“(But) the past two prints are indicating a positive trend in employment. And this came as a surprise to most analysts and caused reflux attacks among Aussie bears.”

Innes said focus will now turn to a widely expected interest rate hike by the US Federal Reserve next week.

“It seems that the commodity price action is playing second fiddle in traders’ year end decision,” he said.

“The market is clearly positioning for a soft (interest rate) liftoff with a dovish lean.”

At 10.12am (AEDT) on Friday, the benchmark S&P/ASX200 index was down 13.9 points, or 0.28 per cent, at 5,023.8, while the broader All Ordinaries index was down 11.5 points, or 0.23 per cent, at 5,076.0.

On the ASX 24, the December share price index futures contract was down 18 points at 5,020 with 12,470 contracts traded.

The unemployment rate fell to its lowest level in almost two years, to 5.8 per cent in November, beating expectations, and over 70,000 jobs were created in the month.

St George chief economist Hans Kunnen said US and European markets were quiet during the offshore session.

“There was little data or news of major significance release last night to tilt markets in any particular direction,” he said.

The Bank of England kept its interest rate unchanged and investors are waiting for the US Federal Reserve policy meeting next week.

At 8.30am (AEDT) on Friday, the December 2015 10-year bond futures contract was trading at 97.087 (implying a yield of 2.913 per cent), down from 97.118 (2.882 per cent) on Thursday.

The December 2015 three-year bond futures contract was at 97.795 (2.205 per cent), down from 97.805 (2.195 per cent).

Locally, in economic news on Friday, the Australian Bureau of Statistics releases October lending finance data.

In equities news, Westpac has its annual general meeting in Sydney.

In Australia, the market on Thursday closed lower as big investors look to markets overseas for better value shares.

The benchmark S&P/ASX200 index was down 42.8 points, or 0.84 per cent, at 5,037.7 points.

The broader All Ordinaries index was down 42.4 points, or 0.83 per cent, at 5,087.5 points.

NEW YORK – US stocks closed higher on Thursday after three days of declines but pared some gains as oil prices fell to near seven-year lows.

Major US indexes have had a bruising week as a rout in oil prices made investors worry about economic growth.

“People tend to get a little bit spooked and feel low oil is a net negative [for the broader market], when really it’s not,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.

“You could argue the S&P is a bit oversold right now after the three down days we’ve had,” said Frederick, also citing technical trading after the S&P hit a 50-day moving average of 2054.

LONDON – European shares ended slightly lower on Thursday after touching a two-month low, with retailers and tech firms under pressure even as commodity shares stabilised.

“We think investors are going into 2016 with very little faith in the future,” strategists at Barclays said in a note.

“Overseas inflows have moderated considerably … (and) risk appetite is depressed.”

Semiconductor stocks took a hit, with Germany’s Aixtron, which provides equipment for the semiconductor industry, falling 41 percent after China’s Sanan Optoelectronics slashed its order for new-generation tools.

The Bank of England’s rate-setters have focused on a renewed fall in global oil prices and slower wage growth at home as they voted 8-1 again to keep interest rates at their record low of 0.5 per cent.

TOKYO – Asian stocks have slipped as weak oil prices continued to feed global growth worries.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.1 per cent.

“The process of taking money off the table is likely to be driven by nervousness ahead of the US Federal Reserve’s moves next week, along with the soft oil price being viewed as a barometer of future economic activity,” said Angus Gluskie, managing director of White Funds Management in Sydney.

DUBLIN – Ireland’s economy has grown 7 per cent in the year to the end of September, data shows, leaving it on course to be the fastest-growing in Europe for the second year running.

ZURICH – Glencore, the world’s largest mining company, has widened its debt-trimming strategy to include new share sales and plans to spin off copper mines in Australia and Chile.

WOLFSBURG, Germany – Volkswagen has said only a small group of employees were responsible for cheating US diesel emissions tests and there is no indication board members were involved in the scandal.

DUBAI, United Arab Emirates – A Dubai real estate firm building a $US6 billion ($A8 billion) golf complex with Donald Trump has stripped the property of his name and image amid a backlash over his proposal to ban all Muslims from entering the United States.

ENERGY

Oil prices fell to near seven-year lows and overall markets were more subdued as investors looked ahead to the US Federal Reserve’s December 15-16 policy meeting.

US crude fell as worries over a global glut persisted and prices were seen as vulnerable to further weakness in the run up to year-end.

“People are focused on two things right now: they’re looking at commodity prices, they’re looking at interest rates, and they’re tying to figure out how that is going to impact growth heading into next year,” said Bryan Novak, portfolio manager at Astor Investment Management in Chicago.

PRECIOUS METALS 

Gold futures prices have edged lower and are vulnerable to further weakness as the dollar rebounded and ahead of a widely anticipated US interest rate rise next week.

The Federal Reserve is expected to raise rates for the first time in nearly a decade at its next policy meeting on Dec. 15-16.

Higher rates should dent demand for non-interest-paying gold, which has already lost nine per cent of its value this year and is on track for its third year of losses.

Bullion prices traded at the low end of the prior session’s range in quiet dealings ahead of next week’s Fed meeting.

BASE METALS 

Aluminium prices stagnated on Thursday on disappointment over the scope of production cutbacks in China, while a firmer dollar also weighed on the industrial metals market.

Aluminium producer China Hongqiao Group said it would shut down 250,000 tonnes of production capacity starting on Thursday as Chinese producers look to combat a slump in local prices to record lows.

LME copper ended up 0.2 per cent at $US4,590 a tonne, holding above a six and a half year low of $US4,443.50 touched last month.

Analyst Lynn Zhao at Macquarie said Chinese copper smelters were battling to support prices but were struggling.

Stocks to watch today

WBC – WESTPAC BANKING CORP – down 64 cents, or two per cent, at $31.41: Westpac has its annual general meeting in Sydney on Friday.

WOW – WOOLWORTHS – down 23 cents, or one per cent, at $23.37: The consumer watchdog has launched action in Federal Court, alleging that Woolworths sought to reduce its expected profit shortfall by seeking around $60 million in payments from a group of suppliers to its supermarkets. The announcement was made after the stock market closed on Thursday.

AAP

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