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Market report: Wednesday, December 16

Business

UPDATED: The Australian dollar has fallen below 72 US cents, after copper and iron ore prices dropped overnight.

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At noon (AEDT) on Wednesday, the currency was trading at 71.97 US cents, down from 72.52 cents on Tuesday.

Westpac senior currency strategist Sean Callow said the Aussie dollar’s losses came despite upbeat comments from Reserve Bank governor Glenn Stevens in a Fairfax interview, that was released at midnight.

“He did note, though, that the Australian dollar could at some point respond to the large commodity price fall,” Mr Callow said.

The key focus for markets will be the US Federal Reserve two-day policy meeting this week, with an announcement expected early on Thursday morning, Australian time.

The Fed is widely expected to raise its interest rate for the first time in almost 10 years.At 10.12am (AEDT) on Wednesday, the benchmark S&P/ASX200 index was up 50.2 points, or 1.02 per cent, at 4,959.8, while the broader All Ordinaries index was UP 48.8 points, or 0.98 per cent, at 5,012.7.

On the ASX 24, the December share price index futures contract was up 55 points at 4,959 with 59,142 contracts traded.

US stocks rallied broadly on Tuesday, led by energy and financial shares as crude oil prices rose and ahead of Wednesday’s interest rate decision from the Federal Reserve.

Higher underlying inflation in November cemented market bets that the Fed will raise rates after their Wednesday meeting.

Bell Direct equities analyst Julia Lee the local market was taking its cues from overseas ahead of the Fed decision, and as junk bonds recovered and China devalued its currency.

“It’s due to overseas markets,” Lee said.

“Traders would be set in their positions ahead of the Fed.”

The US Federal Reserve holds its two day policy meeting this week and will make an announcement early on Thursday morning, Australian time.

The Fed is widely expected to raise its interest rate for the first time in almost 10 years.

The big miners were all stronger, with BHP Billiton up 31 cents to $16.60, Rio Tinto rose 15.5 cents to $41.91 and Fortescue Metals Group was flat at $1.80.

The big banks were also in positive territory as ANZ pays its dividend on Wednesday.

Commonwealth Bank shot up $1.04 to $77.91, NAB rose 27 cents to $27.93, ANZ added 30 cents to $25.63 and Westpac was 39 cents higher at $30.98 ahead of its dividend payment on Monday.

At 8.36am (AEDT) on Wednesday, the December share price index futures contract was up 53 points at 4,957.

The major US stock indexes are on track The S&P 500 and the Dow were on track for their best two-day run since mid-October as recovering oil prices lifted energy shares.

Locally, on Wednesday the Westpac-Melbourne Institute leading indexes of economic activity will be released and Reserve Bank assistant governor for financial markets Guy Debelle give a speech in Sydney.

In equities news, Ten Network Holdings, gas explorer Metgasco and the Dulux Group all hold their annual general meetings.

In Australia, the market on Wednesday the benchmark S&P/ASX200 index slipped to its lowest level for the year.

The benchmark S&P/ASX200 index was down 19 points, or 0.39 per cent, at 4,909.6 points.

The broader All Ordinaries index was down 18 points, or 0.36 per cent, at 4,963.9 points.

NEW YORK – US stocks rallied broadly on Tuesday, led by energy and financial shares as crude oil prices rose and ahead of Wednesday’s interest rate decision from the Federal Reserve.

Higher underlying inflation in November cemented market bets that the Fed will raise rates after their Wednesday meeting.

Bank stocks, which will benefit from higher rates, led the market with a 2.7 per cent advance on the S&P financial sector index.

Investors have come to terms with the Fed’s anticipated rate hike decision, said Joseph Benanti, managing director, sales and trading at Rosenblatt Securities in New York.

“The economy is getting a little bit better and raising rates does not mean the market is going lower; it’s actually a positive sign,” he said.

LONDON – European equities bounced back onTuesday from sharp declines in the previous two sessions as energy stocks tracked higher crude oil prices and steel makers gained following a European Commission move on Chinese and Russian steel imports.

“A short-term reversal of the decline in oil prices that began on Monday and continued through Tuesday has relieved the pressure on stock markets,” Jasper Lawler, analyst at CMC Markets, said.

“There is significant market risk going into the Federal Reserve meeting on Wednesday

TOKYO – Stocks have risen in Asia, though volatile oil prices kept investors cautious before a widely anticipated increase in US interest rates later in the week.

Oil prices resumed their fall and the euro rose against the US dollar. Concerns in the high-risk US corporate debt market about the potential impact of a rate hike weighed on low-rated euro zone government bonds.

China stocks ended slightly lower on Tuesday, with a correction in banking and resource shares countering a surge in property firms that was triggered by hopes of more support measures for the real estate market.

WASHINGTON – The Federal Reserve is meeting to weigh a landmark interest rate increase that will signal the end of more than seven years of crisis-era, easy-money monetary policy.

US consumer prices were unchanged in November but underlying inflation hit the Federal Reserve’s target, government data shows.

BERLIN – Volkswagen will shed about 600 temporary workers at a factory in Zwickau, Germany next year as it battles to cope with the fallout from its cheating of diesel emissions tests, labour representatives at the carmaker say.

ZURICH – The number of women among the world’s billionaires has risen faster over the past two decades than that of men, mostly thanks to Asian female entrepreneurs.

ENERGY

Oil prices have reversed early falls to stem a six-day slide as bargain hunters moved in after crude dropped to its lowest level since December 2008 in the prior session.

The bounce helped lift equities in both the United States and the Europe.

Prices have been falling for weeks due to a global glut of oil and, in the northern hemisphere, a mild start to winter.

Low oil prices and worries about higher interest rates have unnerved investors through the energy-dominated U.S. high-yield corporate bond markets.

PRECIOUS METALS

Gold prices have steadied following the previous day’s one per cent slide ahead of a US Federal Reserve interest rate announcement.

Gold has fallen 10 per cent this year, largely on the back of expectations of a US rate increase. Rising rates increase the opportunity cost of holding bullion rather than interest-bearing assets.

The central bank’s Federal Open Market Committee (FOMC) is expected to announce the increase at the end of its two-day policy meeting on Wednesday, but has hinted that it intends to raise rates only gradually from there.

Gold could bounce higher after the move as attention switches from the timing of the first rise to the pace of tightening, analysts said.

BASE METALS

Copper prices are down as caution prevailed ahead of the Federal Reserve’s policy meeting, though signs that China’s economy is stabilising put a floor under prices.

Investors have mostly priced in a Fed rate hike on Wednesday. However, there are concerns that a rate rise could hurt highly leveraged companies, including some miners.

Almost $US2 trillion of debt sold by energy and mining companies since 2010 is facing a wave of credit rating downgrades, and defaults are rising.

“Investors are worried that a big miner might default … this is impacting metals, it’s a sentiment thing,” said Gianclaudio Torlizzi, partner at T-Commodity.

ASX stocks to watch today 

DLX – DULUX GROUP: up two cents, or 0.32 per cent, at $6.31: Dulux Group holds its annual general meeting on Wednesday.

MEL – METGASCO: steady at 5.6 cents: Gas explorer Metgasco holds its annual general meeting.

TEN – TEN NETWORK: Ten Network Holdings holds its annual general meeting.

AAP

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