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Market report: Thursday, February 18

Business

The Australian dollar has risen on the back of evidence the US Federal Reserve had a dovish attitude to recent global uncertainty and volatility.

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At 8.58am (AEDT) on Thursday, the local unit was trading at 71.84 US cents, up from 70.94 cents on Wednesday.

And the Australian share market looks set to open higher after solid gains on Wall Street after a surge in oil prices fired up energy stocks.

The share price index was up 66 points at 4,904.

In local economic news on Thursday, the Australian Bureau of Statistics is due to release January’s labour force figures.

Reserve Bank of Australia assistant governor Malcolm Edey is scheduled to speak at an Australian Shareholders Association Investor Forum in Sydney.

In equities news, Telstra, Origin Energy, Treasury Wine Estates, Webjet, Mortgage Choice, Tatts Group and Evolution Mining are among the companies slated to post half year results.

Sydney Airport, AMP and GPT are due to release full year results.

NEW YORK – Wall Street found a third straight day of gains after a surge in oil prices fired up energy stocks.

Brent crude surged after Iran voiced support for a move to freeze production by major oil producers such as Saudi Arabia and Russia.

Sentiment surrounding the repercussions of the fall in crude oil and its impact on debt-laden energy companies is likely to ease with oil prices stabilizing, said John Burke, chief executive of Burke Financial Strategies in New York.

LONDON – Britain’s top share index has rallied for a fourth straight session as appetite grows for underperformers in the mining sector, led by a surge in miner Glencore.

Commodities and mining firm Glencore soared 16.6 per cent, touching its highest level since November, although the volatile stock has lost around two-thirds of its value since May.

Traders said the firm’s early refinancing of some of its debt was supporting the stock.

The debt had been under close watch as falling commodity prices put a strain on balance sheets.

“One of the main reasons for the relative underperformance in the mining sector and Glencore was … high debt levels and risks of more credit downgrades,” Atif Latif, director at Guardian Stockbrokers, said.

“We are pleased to see this news allowing some de-risking on the share price as balance sheet concerns have eased.”

HONG KONG – Asian shares slipped after two sessions of solid gains, while oil prices swung higher as the market reconsidered the chances of a meaningful deal to restrict supply later in the year.

The mood was still skittish – when China set a slightly lower guidance rate for its yuan, the yen and safe-haven bonds got an instant boost. As investors realised this was not some message from Beijing on devaluation, the moves quickly reversed.

“The rally itself has been extraordinary but very thin and the failure of the yen to continue on the fairly steady path of weakening we’ve seen in the past couple of days has been reflected as nervousness in the Nikkei,” said Stefan Worrall, director of Japan equity sales at Credit Suisse.

“It’s been a very volatile two weeks and nerves are still frayed despite the fact that we’re off the bottom of those extreme sessions we saw last week.”
ELSEWHERE:

WASHINGTON – Federal Reserve policymakers worried in January that tighter global financial conditions could hit the US economy and considered changing their planned path of interest rate hikes in 2016.

WASHINGTON – US factories cranked out more cars, furniture and food last month, boosting production by the most since July.

WASHINGTON – US producer prices edged up slightly in January as the biggest rise in food costs in eight months offset a further decline in energy prices.

ENERGY

Oil has been whipsawed after top exporters, Russia and Saudi Arabia, agreed to freeze output levels but said the deal was contingent on other producers joining in.
“Albeit mostly symbolic, it is one of the first clear acknowledgements by the oil heavyweights that all is not entirely well in the current price environment,” wrote Helima Croft, global head of commodity strategy at RBC Capital Markets.

“Additionally it signals a potential willingness to be more proactive later in the year. It puts the ball back in the court of those who would not or could not comply.”

PRECIOUS METALS

Gold snapped three days of losses, after minutes of the US Federal Reserve’s latest meeting showed policymakers considered changing their planned path of interest rate hikes in 2016 but gains were limited, however, as global equity markets rallied.

“We believe that the Fed won’t be able to raise rates until later in the year and even then the central bank will only be able to raise rates twice, a path that is still more aggressive than what the market has priced in,” said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto.

Expectations that US rates will stay lower for longer have sharpened appetite for the metal.

“Even those who felt that rates were too low to effectively respond to downside shocks agreed that waiting was prudent,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York, referring to the Fed minutes.

“It’s abundantly clear that the Fed is on hold until at least June which should cheer risky assets and provide no impediment to gold continuing its recent rise.”

BASE METALS

Lead has suffered its biggest one-day loss in nine months, dropping more than three per cent after a surge in inventories highlighted the market was well supplied.

Other metals were mixed.

Data showed that lead inventories at warehouses registered by the London Metal Exchange rose by 10 per cent or 18,325 tonnes in one day.

“I don’t really think there’s any particular shortage of lead. The key market in lead is China and that’s been pretty weak,” said Citi analyst David Wilson.

ASX stocks to watch Thursday, February 18

EVN – EVOLUTION MINING: Evolution Mining is slated to post first half results.

EVT – EVENT HOSPITALITY: Event Hospitality half year results

GPT – GPT: GPT is slated to post full year results.

IOF – INVESTA OFFICE FUND: Investa Office Fund on Thursday is expected to release its half year results.

MFG – MAGELLAN FINANCIAL GROUP: Magellan Financial Group is listed as releasing half year results.

MOC – MORTGAGE CHOICE: Home loan lender Mortgage Choice is expected to release half year results on Thursday.

ORG – ORIGIN ENERGY: Origin Energy half year results

SYD – SYDNEY AIRPORT: Sydney Airport is slated to post its full year results.

TLS – TELSTRA: Telstra half year results

TTS – TATS GROUP: Tatts Group on Thursday is expected to post half year results.

TWE – TREASURY WINE ESTATES: Treasury Wine Estates half year results

WEB – WEBJET: Online flight booking site Webjet is expected to post its half year results on Thursday.

AAP

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