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Market report: Wednesday, February 24

Business

UPDATED: The Australian share market is around 1 per cent lower after a sharp slide in oil prices prompted selling on Wall Street.

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Wall Street closed lower overnight as crude oil prices tumbled more than 4 per cent after Saudi Arabia’s oil minister said production cuts “won’t happen” and that the market should be left to deal with the supply glut even if some operators are forced out of business.

CMC Markets chief market analyst Ric Spooner said Australian stocks, particularly energy-related ones, were affected.

“Today’s move reflects the fact that markets generally, and investors, remain pretty risk averse,” Spooner said.

“The negative impact on the energy sector and on credit markets is a concern.”

Locally, Origin Energy dropped 14.5 cents to $4.175, Woodside Petroleum fell 57 cents to $27.12 and Oil Search slid nearly four per cent, or 26 cents, to $6.77.

The big banks were all more than 1.5 per cent lower, with ANZ the hardest hit, down 43 cents at $22.69.

Mining giants BHP Billiton and Rio Tinto continued their slide, dropping $1.0 to $16.62 and almost $2 to $42.68, respectively.

Spooner said it was unclear what direction Wednesday trade would take.

“I think a lot will depend on what will happen with the Chinese markets and whether sentiment flows through there for the rest of the day.”

In another busy day of company profit results, Coles supermarket owner Wesfarmers announced a first half net profit lift of 1.2 per cent to $1.393 billion.

Wesfarmers’ shares were in the red however, down 74 cents at $42.88.

Freight logistics company Asciano said its first half profit rose to $199.8 million but warned that full year earnings could be flat.

Its shares were just in the green, trading two cents higher at $9.03.

Meanwhile, Telstra said chairman Catherine Livingstone was stepping down with Asciano boss John Mullen to take over.

Earlier at 8.32am AEDT on Wednesday, the share price index was down 31 points at 4,916.

Locally, in economic news on Wednesday, the Australian Bureau of Statistics is due to release the wage price index and construction work done figures, both for the December quarter.

In equities news, Wesfarmers, Fortescue Metals, Asciano, Flight Centre, BC Iron, Worley Parsons, Qube Holdings, Sirtex Medical, Bega Cheese, AWE, ThinkSmart, Australian Vintage and Vitaco Holding are expected to post half year results.

Meanwhile Westfield Corp is slated to release full year results and Aristocrat Leisure has its annual general meeting in Sydney.

And, the Australasian Oil & Gas exhibition and conference is on in Perth.

The Australian dollar has lost some steam after the recent recovery in oil and equities fizzled out.

The local unit was trading at 72.07 US cents, down from 72.29 cents on Tuesday.

NEW YORK – A fresh bout of selling has swept through Wall Street in the wake of a sharp slide in oil prices, snapping yet another rally in what has been a turbulent year for financial markets.

All three major US indexes were down nearly one per cent as crude sank more than four per cent after Saudi Oil Minister Ali Al-Naimi ruled out any production cuts.

The steep fall in oil prices is starting to hurt other sectors, with banks now bracing for a wave of potential defaults from energy companies.

“The fact that (Al-Naimi) was so clear, and that he repeated that statement, is what unnerved the markets,” said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, New Jersey

LONDON – Britain’s top equity index has fallen as a slump in major bank Standard Chartered and miner BHP Billiton pushed back the market, although shares in the London Stock Exchange surged on merger news.

The potential union would be structured as an all-share merger of equals under a new holding company.

Weaker metals prices and lower oil prices on worries that rising Iranian output would deepen a global crude oversupply, pushed down energy and mining stocks.

Concerns about a weakening global economy have affected oil and metals prices since the start of 2016.

“Although European and American equities may continue to enjoy short term gains, the factors which have left global stocks heavily depressed remain intact,” said FXTM research analyst Lukman Otunuga.

HONG KONG – Asian shares retreated from a seven-week high as the oil price rally that had boosted global equity markets reversed.

Oil markets jumped as much as seven per cent on Monday as speculation about falling US shale output fed the notion that crude prices may be bottoming after their 20-month collapse.

But they retreated on Tuesday on concern that any cuts to US production may be countered by rising output from Iran.

“The oil market seems to have become firmer recently,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
HOUSTON – Saudi Arabia’s oil minister says production cuts to boost oil prices won’t work, and that instead the market should be allowed to work even if that forces some operators out of business.

FRANKFURT – Mars Inc has recalled chocolate bars and other products in 55 countries, mainly in Europe, after a piece of plastic was found in a Snickers bar in Germany, the US confectionery maker says.

LONDON – Deutsche Boerse and the London Stock Exchange are taking a fresh run at a merger that would create a large European exchange operator potentially capable of facing down strong competition from the United States and Asia.

ENERGY

Oil prices are mixed after earlier falling around one per cent on fears Iran could feed the oil glut and Saudi would not cut production.

Oil markets on Monday had jumped as much as seven per cent – and had rallied around 30 per cent from their lows of a month ago – as speculation about falling US shale output fed the notion that crude prices may be bottoming after their 20-month collapse.

But they retreated on Tuesday on concern that any cuts to US production may be countered by rising output from Iran, before WTI changed direction.

Also, Saudi’s oil minister said the market should be left to deal with the oil glut noting that if low-cost producers cut output, that effectively would be subsidising higher-cost producers.

PRECIOUS METALS

Gold has risen about one per cent, spurred by a fall in global equities and inflows into bullion funds that helped the precious metal recover ground lost in previous sessions.

Traders said investor demand is strong on the price dips, even as producers have resumed hedging output to take advantage of the 15-per cent rally in 2016.

“The metal continues to be supported by ETF inflows, but I would not be surprised to see a setback before another leg-up,” Commerzbank analyst Eugen Weinberg said.

“If there is another big sell-off in equity markets, then levels around $US1,260 are very achievable because you’d see defensive investors coming forward,” said ETF Securities analyst Martin Arnold.

BASE METALS

Copper prices have slipped as a fall in Chinese equities and the central bank’s setting of a lower fix for the yuan currency reinforced concerns about the economy and demand growth in the top consumer.

The People’s Bank of China (PBOC) set the yuan’s midpoint rate at 6.5273 to the US dollar before the market opened, down 0.17 per cent from the previous fix. And, Chinese equities slid as investor focus moved to a meeting of the National People’s Congress in March

“Some of the positive sentiment about China has diminished because the PBOC weakened the CNY and Chinese equities fell,” said Bank of China International’s head of commodity strategy, Xiao Fu. “That’s why we are seeing some retracement in commodity markets.”

Global miner BHP Billiton added to the negative sentiment by saying it expects the copper market to remain in surplus until the end of the decade.

ASX stocks to watch Wednesday, February 24

AIO – ASCIANO: Asciano is expected to post half year results on Wednesday.

ALL – ARISTOCRAT LEISURE: Aristocrat Leisure holds its annual general meeting in Sydney on Wednesday.

AVG – AUSTRALIAN VINTAGE: Australian Vinatge is due to release half year results on Wednesday.

AWE – AWE: AWE is listed to release half year results.

BCI – BC IRON: BC Iron is expected to release half year results.

BGA – BEGA CHEESE: Bega Cheese is expected to release its first half results on Wednesday

FLT – FLIGHT CENTRE: Flight Centre is slated to release half year results.

FMG – FORTESCUE METALS

QUB – QUBE HOLDINGS: Qube Holdings on Wednesday is slated to post half year results.

SRX – SIRTEX MEDICAL: Sirtex Medical on Wednesday is slated to post half year results.

TSM – THINKSMART: ThinkSmart on Wednesday is slated to post half year results.

VIT – VITACO HOLDINGS: Vitaco Holdings is scheduled to release its full year results.

WDC – WESTFIELD GROUP: Coca-Cola Amatil is slated to post full year results.

WES – WESFARMERS: Wesfarmers is slated to release its half year results on Wednesday.

WOR – WORLEY PARSONS: Worley Parsons is slated to post half year results on Wednesday.

AAP

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