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Market report: Tuesday, February 23

Business

The Australian market looks set to open higher after strong gains on Wall Street following a surge in oil and other commodity prices.

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At 8.20am (AEDT) on Tuesday, the share price index was up 39 points at 5,000.

Locally, in economic news on Tuesday, the Australian Competition and Consumer Commission chairman Rod Sims is slated to deliver an enforcement and compliance policy update at Committee for Economic Development of Australian lunch in Sydney, while Reserve Bank of Australia Payment Policy Department head Tony Richards is scheduled to speak at the Payments Innovation 2016 Conference, also in Sydney.

Meanwhile, the ANZ-Roy Morgan weekly consumer confidence survey is due out.

In equities news, BHP Billiton, Qantas, Seven Group, Specialty Fashion, Healthscope, Virtus Health, Ainsworth Game Technology, McMillan Shakespeare, Hills, Senex and Cedar Woods are expected to post half year results.

Meanwhile QBE, Caltex Australia, Scentre Group, Oil Search and Petsec Energy are slated to release full year results.

NEW YORK – Wall Street has risen as prices of oil and other commodities surged, pointing to an uptick in investors’ risk appetite following a rout in global markets.

The recovery in prices of crude and metals comes on the heels of better-than-expected US jobs and inflation data, which has helped stabilise the market.

“Sentiment is clearly on edge and I think the market’s move has been outsized, relative to actual changes in fundamentals,” said Aaron Clark, a portfolio manager at GW&K Investment Management in Boston.

“I think it’s more of a growth scare which is getting magnified by the moves in financial markets,” he said, adding that the prevailing uncertainty would add to volatility.”

LONDON – UK shares advanced as mining companies buoyed by strengthening metals prices outweighed worries over Britain’s potential exit from the European Union and a drop for banking heavyweight HSBC.

Anglo American, BHP Billiton, Rio Tinto and Glencore gained between 8 and 11 per cent as the price of copper climbed to a two-week high.

“A lot of what is going on is a short-covering rally, so it’s not a coincidence that miners have done the best,” CAM Markets analyst Jasper Lawler said.

“I believe that we’ve hit pretty much the bottom in the mining sector, so long as we don’t make new lows in metals prices. And international sectors like the miners will be less-exposed to a Brexit.”

HONG KONG – Asian share markets rose as investors awaited a rush of February industry surveys to take the pulse of the global economy, while sterling stumbled on concerns the UK might yet vote to leave the European Union.

The Markit/Nikkei Flash Japan PMI fell to 50.2 in February, from 52.3 in January, a potentially bleak omen for the rest of the region, but investors focused on the market’s recent rebound instead.

“Equity markets successfully stress-tested and bounced from key technical support last week,” wrote analysts at RBC Capital Markets.

“While we cannot definitively say the cycle/2016 lows are in place yet, the technical evidence continues to suggest a more durable bottom may be forming.”

ENERGY

Battered oil prices have surged as speculation about falling US shale output helps feed the notion that crude prices may be bottoming after their 20-month collapse.

Benchmark Brent closed up $US1.67, or 5.06 per cent, at $US34.68 a barrel, while WTI crude was up $US1.84, or 6.21 per cent, at $US31.48 a barrel.

PRECIOUS METALS

Gold prices have slipped as much as two per cent as the US dollar strengthened and investor appetite for risk increased, but the metal remained above $US1,200 an ounce after a rally that pushed prices to one-year highs in February.

Concern over financial instability and the repricing of expectations for US interest rate rises, has helped gold outperform most assets so far in 2016 with a 15 per cent gain.

“I see this is a little bit of profit taking directly associated with the advancement in the stock market today,” said Jeffrey Sica, president and chief investment officer at Sica Wealth Management.

The US dollar rose nearly one per cent against a basket of leading currencies, supported by strong US data on Friday, and European shares jumped to multi-month highs. Oil prices soared seven per cent.

“Increases in ETF (exchange-traded fund) holdings continue to support gold higher, while we have seen some of this buying momentum offset by reductions in TOCOM positioning and recent selling in China,” said MKS Group trader Sam Laughlin, referring to the Tokyo Commodity Exchange.

BASE METALS

Zinc prices surged to a four-month peak and other base metals also gained as investors’ appetite for risk increased while they also worried about potential shortages.

Investor buying lifted industrial metals along with oil and equity markets, including shares in China, the world’s top consumer of metals.

“There’s higher risk appetite among market participants today which can be seen by the firmer Asian equity markets,” said analyst Daniel Briesemann at Commerzbank in Frankfurt.

“In most of the metals there’s tightening supply, which is most pronounced in zinc, followed by copper, and lead to some extent.”

LONDON – The British pound plunged against other major currencies on Monday as Prime Minister David Cameron tried to shore up support for remaining in the European Union when the UK holds a referendum in June.

LONDON – British factory orders weakened slightly further in February after a sharper fall in January and manufacturers expect to cut their prices in the coming months, an industry survey shows.

HARARE – The Zimbabwean government will now control all mining in the diamond-rich Marange area, after mining companies were ordered to halt all operations because their licences have expired.

STOCKS TO WATCH ON THE AUSTRALIAN STOCK EXCHANGE ON TUESDAY, FEB 23:

AGI – AINSWORTH GAME TECHNOLOGY: Ainsworth Game Technology is slated to post half year results on Tuesday.

BHP – BHP BILLITON: BHP Billiton on Tuesday is due to release half year results.

CTX – CALTEX: Caltex Australia is expected to post full year results.

CWP – CEDAR WOODS: Cedar Woods is slated to post half year results on Tuesday.

HSP – HEALTHSCOPE: Healthscope is expected to release half year results.

MSM – MCMILLAN SHAKESPEARE: McMillan Shakespeare is scheduled to release half year results.

OSH – OIL SEARCH: Oil Search is expected to release full year results.

PSA – PETSEC ENERGY: Petsec Energy on Tuesday is slated to post full year results.

QAN – QANTAS AIRWAYS: Qantas slated to post half year results on Tuesday.

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

SCG – SCENTRE GROUP: Scentre Group is slated to post full year results.

SFH – SPECIALTY FASHION GROUP: Specialty Fashion slated to post half year results on Tuesday.

SVW – SEVEN WEST: Seven Group will release half year results.

SXY – SENEX: Senex is slated to post half year results on Tuesday.

VRT – VIRTUS HEALTH: Virtus Health is expected to release half year results.

AAP

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