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Market report: Wednesday, December 23

Business

UPDATED: The Australian dollar is extending its gains on the back of a rising local stock market and a bounce in market confidence after oil prices stabilised.

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At noon (AEDT) on Wednesday, the currency was trading at 72.31 US cents, up from 72.19 cents on Tuesday.

However, OANDA Australia and Asia Pacific senior trader Stephen Innes said the Aussie dollar’s gains could be short lived as it comes under pressure in the weeks to come.

“I think renewed pressure on commodities and the slowdown in capital investment will likely dictate a lower interest rate trajectory from the Reserve Bank in early 2016,” he said.

“If this scenario starts to build momentum we should expect renewed pressure on the Aussie dollar in early 2016.

“The benchmark share index was trading nearly around 0.5 per cent higher in early trade on Wednesday, with gains across most sectors.

“There were positive cues from Wall Street as well as the stabilisation in commodities prices,” optionXpress market analyst Ben LeBrun said.

“We are seeing very low volumes, but the signs of a rally are in place. The main thing at this stage is to make up for the lost ground this year.”

US stocks climbed higher overnight, buoyed by energy shares and by fairly healthy data on US economic growth, as sliding oil prices stabilised.

The Dow Jones industrial average ended nearly one per cent higher.

Energy shares in the local market were also trading higher. Woodside Petroleum rose 21 cents to $27.51, Origin Energy was up nine cents to $4.47, while Oil Search added seven cents at $6.22.

Mining shares also seemed to be making up for the losses in the past few sessions, with BHP Billiton up 20 cents to $17.03, and Rio Tinto climbed $1 to $43.23.

Shares in troubled law firm Slater and Gordon slipped three cents to 95 cents.

The seasoned litigant, which has lost 90 per cent of its share value since taking over Quindell’s professional services business in the UK, looks set to face a class action from local rival Maurice Blackburn.

At 8.29am (AEDT) on Wednesday, the March share price index futures contract was up 24 points at 5,095.

In Australia, the market on Tuesday slight gains, not showing any signs of a Christmas rally.

The benchmark S&P/ASX200 index was up 7.7 points, or 0.15 per cent, at 5,116.7 points.

The broader All Ordinaries index was up 9.9 points, or 0.19 per cent, at 5,167.7 points.

NEW YORK – Wall Street rallied as crude oil prices recovered slightly and after the release of some encouraging economic data.

New figures showed that the US economy grew at a fairly healthy clip of an annual rate of two per cent in the third quarter.

The Dow Jones industrial average rose nearly one per cent, with Caterpillar up 5.3 per cent and on the way to its biggest one-day gain since October.

Brent crude prices recovered marginally but remained near their lowest levels since mid-2004.

That recovery was enough to push the S&P energy sector 1.38 per cent higher. The sector has been the worst performer in 2015, falling about 24 per cent so far this year.

Much of Tuesday’s gains were a result of last-minute tweaks by investment funds, said Ken Winans, president of Winans Investments in Novato, California.

“It’s shoring up, late-in-the-month repositioning of portfolios and reallocation,” Winans said.

LONDON – European stocks ended little changed on Tuesday after a volatile day but energy plays rose as oil prices recovered, while Spanish equities rebounded following a sell-off in the previous session prompted by
concerns over a political stalemate.

Trading was volatile as the holiday season approached and some investors remained cautious over prospects for next year.

“There are no easy gains to make,” said Marco Vailati, head of research and investment at Italy’s Cassa Lombarda.

“Companies must deliver on the earnings front, the Greek crisis is still unresolved and there is political instability in Spain. Against this uncertain backdrop, investors should be opportunistic and seek to buy on the dips and sell during the moments of euphoria,” he said.

HONG KONG – Chinese stocks have given back some of the previous session’s sharp gains, with investors growing skittish about the impact of a new wave of initial public offerings.

“The mood will likely depend on moving oil prices for now,” said Yutaka Miura, a senior technical analyst at Mizuho Securities in Tokyo.

The US dollar index, which tracks the currency against a basket of six others, was flat at 98.344.

Traders were looking to US data, including revised third-quarter GDP and housing price indicators, later in the session but with many markets closed later this week, activity was expected to be thin.

US and most European markets will close on Friday for Christmas, while in Japan, markets will be closed on Wednesday for the emperor’s birthday.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent higher, after Wall Street logged solid gains overnight.

China’s CSI300 index was slightly higher, erasing earlier losses, while Japan’s Nikkei stock index ended down 0.2 per cent, though above session lows.

WASHINGTON – The US economy grew at a fairly healthy clip in the third quarter as strong consumer and business spending offset efforts by businesses to reduce an inventory glut.

US home sales plunged sharply in November as buyers faced rising prices and new regulations that might have delayed some closings.

TOKYO – Japan’s financial regulator will fine an Ernst & Young affiliate 2.1 billion yen ($A24.2 million) after the firm’s audit of Toshiba Corp failed to spot accounting irregularities in the country’s worst accounting scandal in four years.

BERLIN – Scarred by a public relations thrashing over its “Dieselgate” scandal, Volkswagen is planning an image offensive, and its “Das Auto” global advertising slogan is an early casualty.

ENERGY

US crude prices have stabilised after a few sessions of steep falls, following the release of some encouraging US economic data.

The US economy grew at an annual rate of two per cent in the third quarter as strong consumer and business spending offset efforts by businesses to reduce an inventory glut.

“The oil price is still the big driver of market sentiment at the moment for stock markets, but I’m not sure if it will hold above those lows, given the concerns about a glut of supply,” said Hantec Markets’ analyst Richard Perry.

PRECIOUS METALS

Gold futures prices ending a two-day rally, but losses were limited due to a retreat in the US dollar.

However uncertainty over the pace of US interest rate increases capped any gains the metal could make.

The metal has risen around three per cent since touching its lowest in almost six years last week after the Federal Reserve announced its first rate rise in nearly a decade.

“Gold is going to remain rangebound for now … (it is) being supported by the dollar weakness,” ETF Securities analyst Martin Arnold said.

“Going into next year, there’s probably a bit of downside risk because investors are not yet focusing on the potential for interest rates to remain stable,” Arnold said.

BASE METALS

Copper prices fell as traders were reluctant to try to push the metal above Monday’s five-week peak given slowing economic growth in China.

Losses were limited, however, by signs of shrinking supply and as China pledged new policy support for 2016.

Chinese share prices ended slightly higher as investors turned more positive about the prospects for the world’s second largest economy after Beijing had unveiled on Monday plans for a number of fiscal and monetary management reforms in 2016.

These include making China’s monetary policy more flexible, expanding the budget deficit, cutting taxes, and tackling overcapacity in industries such as metals. Beijing also vowed to take steps to expand aggregate demand.

Metals investors nonetheless remain nervous about the industry-led slowdown in growth in the economy of the world’s largest metals consumer.

ASX stocks to watch on Wednesday

AIO – ASCIANO – up eight cents, or 0.92 per cent, at $8.80

QUB – QUBE HOLDINGS – up four cents, or 1.7 per cent, at $2.35: The competition watchdog is seeking market feedback after a fresh undertaking by Canada’s Brookfield in its takeover battle for ports and rail operator Asciano.

BRS – BROADSPECTRUM – up 1.5 cents, or 1.14 per cent, at $1.33: Detention centre operator Broadspectrum says a $692 million takeover offer from Spanish company Ferrovial undervalues the company, and has advised its shareholder to take no action.

WOW – WOOLWORTHS – steady at $23.57: Woolworths is has engaged China-based e-commerce company eCargo Holdings to expand into China and build and manage a Woolworths store front.

ECG – ECARGO – up 23.5 cents, or 223.8 per cent, at 34 cents

AAP

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