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Market report: Thursday, February 25

Business

UPDATED: The Australian dollar has plunged on the back of US dollar strength.

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At noon (AEDT) on Thursday, the currency was trading at 71.62 US cents, down from 72.85 cents on Wednesday.

OANDA Australia and Asia Pacific senior trader Stephen Innes said oil price gyrations were still driving market direction, with sentiment still on a roller-coaster ride.

Persistently low oil prices, which have fallen some 70 per cent since mid-2014, have raised concerns about weak global economic growth.

“But we saw some shine off the Aussie dollar after a statement from a US Federal Reserve official,” he said.

“Jeffrey Lacker’s statement about the possibility of continuing rate rise in the US this year seems to calm investor nerves despite storm clouds building on the horizon.”

This strengthened the greenback, sending the Aussie down.

Domestic capital expenditure figures also caused a minor dip in the currency.

Australian business investment rose by 0.8 per cent in the December quarter, climbing further than expected.

But, Innes said, stabilising commodity prices and investor sentiment was supporting the Australian dollar.

KEY MOVEMENTS:

One Australian dollar buys:

* 71.62 US cents, from 72.85 cents on Wednesday.

* 80.33 Japanese yen, from 80.30 yen

* 65.04 euro cents, from 65.23 euro cents

* 107.61 New Zealand cents, from 108.46 NZ cents

* 51.43 British pence, from 51.40 pence

Government bond yields:

* CGS 5.25pct March 2019, 1.743pct, from 1.762pct

* CGS 4.25pct April 2026, 2.408pct, from 2.396pct

Sydney Futures Exchange prices:

* March 2016 10-year bond futures contract, was at 97.595 (implying a yield 2.405 per cent), down from 97.600 (2.400 per cent) on Wednesday

* March 2016 3-year bond futures contract, at 98.260 (1.740 per cent), up from 98.240 (1.760 per cent)

Earlier at 8.26am AEDT on Thursday, the share price index was up 31 points at 4,886.

Locally, in economic news on Thursday, the Australian Bureau of Statistics is due to release private new capital expenditure and expected expenditure figures for the December quarter, along with its average weekly time earnings data for the six months to November.

In equities news, Crown Resorts, Nine Entertainment, South32, Blackmores, Ramsay Health Care, Adelaide Brighton, Alumina, iSelect, SEEK, Breville, Fantastic Holdings, Village Roadshow, Costa Group, Temple and Webster Group and Sandfire Resources are expected to post half year results.

Meanwhile, APN News & Media, MYOB and Asaleo Care are slated to release full year results and Aristocrat Leisure has its annual general meeting in Sydney.

The Australasian Oil & Gas exhibition and conference continues in Perth.
NEWS

The Australian dollar has softened, following the fortunes of global shares.

The local unit was trading at 72.07 US cents, down from 72.85 cents on Wednesday.

And the Australian share market looks set to open slightly higher after mixed performance on Wall Street as plunging oil prices, low interest rates and turbulent global markets take a toll on banks.

NEW YORK – US stock indexes have closed higher, despite a early negative performance with equities dragged down by financial stocks.

shares turned around after oil prices recovered in early afternoon trading as data showed US crude inventories increased in line with expectations.

“For the near term, volatility stays and will hinge on what happens in the crude market, whether we like it or not, and will determine the assumption of risk,” said Ernie Cecilia, chief investment officer of Bryn Mawr Trust in Devon, Pennsylvania.

LONDON – Britain’s top share index has fallen as mining stocks and FTSE heavyweight Standard Chartered came under pressure for a second straight session.

Standard Chartered was among the leading losers after brokers downgraded their price targets on the Asia-exposed bank, which posted its first loss in 26 years on Tuesday.

It slumped 4.4 per cent after price target downgrades from Deutsche, Bank of America/Merrill Lynch and Nomura, taking total losses since it reported the results to more than 10 per cent.

“The continued weak revenue momentum in 4Q15 was worse than anticipated,” Deutsche Bank analysts said in a note.

“Until revenue momentum turns, we think it too early to turn positive on the shares.”

HONG KONG – Asian shares fell as oil prices skidded after Saudi Arabia effectively ruled out production cuts by major producers anytime soon, sending investors into safe-havens such as the yen and gold.

MSCI’s broadest index of Asia-Pacific shares outside Japan extended earlier losses; Japan’s Nikkei closed at its lowest level in a week on the drop in oil prices and as the stronger yen weighed on exporters.

Chinese shares however reversed earlier losses, with the CSI 300 index rising 0.4 per cent and the Shanghai Composite up 0.6 per cent.

“I suspect few people were expecting a deal to cut production so his comments are hardly a surprise. Yet, the latest development seems to suggest that for oil producers to get more united they will have to feel more pain,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.

LONDON – The British pound has traded near $US1.39 ($A1.93) for the first time in seven years, as concerns that Britons could leave the European Union deepened.

Britain’s departure from the European Union would threaten scientific research and jeopardise the 28-nation bloc’s system of drug regulation, the European pharmaceutical industry says.

Airbus Group expects the competitiveness of its British operations to fall if Britons vote to leave the European Union in a referendum, potentially threatening the scale of the planemaker’s operations in the country.

ENERGY

Oil prices have risen after strong US petrol demand offset worries over record high crude stockpiles in the world’s largest economy.

“For the near term, volatility stays and will hinge on what happens in the crude market,” said Ernie Cecilia, chief investment officer of Bryn Mawr Trust in Devon, Pennsylvania.

Data showed that crude oil stockpiles rose by 3.5 million barrels in the United States last week to an all-time peak above 507 million barrels. But petrol demand over the past four weeks rose more than five per cent compared to a year ago and inventories of the fuel also fell from lower refinery runs.

PRECIOUS METALS

Gold has risen above $US1,250 an ounce and has neared a one-year high, acting as counter against risk alongside top-rated government bonds as oil’s earlier weakness rippled into global equity markets.

The market’s rediscovered role as a shelter for risk-averse investors seemed to be gaining traction, traders and analysts said.

“Gold is rising on the back of weak risk appetite, but what stands out today is that the market is rising even though the dollar is higher as well,” Jens Pedersen, senior analyst at Danske Bank, said when the greenback was firm.

“We’ve definitely reached a new range above $US1,200 due to re-pricing risks of Fed rate hikes,” Pedersen said. He added that further sustained gains may be capped until the path for monetary policy is clearer.

BASE METALS

Copper has further eroded recent gains on concern about the strength of demand following Lunar New Year holidays in China and as investors shunned risky assets.

Nickel fell after inventories rose while tin bucked the bearish trend following the shutdown of a smelter in Indonesia.

“The yen, (US) dollar and gold are all stronger, showing the risk-off markets are again in full mode,” said Robin Bhar, head of metals research at Societe Generale in London.

“Apart from the flurry on Monday, we’ve not really seen the volumes maintaining those loftier levels so there’s still a lot of uncertainty about post Lunar New Year buying interest from China,” he said.

Also undermining metals was a drop in oil prices after Saudi Arabia ruled out production cuts and an industry report said US crude stockpiles hit a record, underlining the supply glut.

STOCKS TO WATCH ON THE AUSTRALIAN STOCK EXCHANGE ON THURSDAY, FEB 25:

ABC – ADELAIDE BRIGHTON: Adelaide Brighton is slated to post half year results.

AHY – ASALEO CARE: Asaleo Care is expected to release full year results on Thursday.

APN – APN NEWS & MEDIA: APN News & Media is slated to post full year results.

AWC – ALUMINA: Alumina is expected to release half year results.

BKL – BLACKMORES: Blackmores is listed as releasing half year results on Thursday.

BRG – BREVILLE: Breville is expected to release half year results.

CGC – COSTA GROUP HOLDINGS: Costa Group Holdings is slated to post first half results.

CWN – CROWN RESORTS: Crown Resorts is slated to post first half results.

FAN – FANTASTIC HOLDINGS: Fantastic Holdings on Thursday is expected to post half year results.

ISU – ISELECT: iSelect is expected to release half year results on Thursday.

MYO – MYOB: MYOB is expected to post its full year results on Thursday.

NEC – NINE ENTERTAINMENT: Nine Entertainment is expected to release half year results.

RHC – RAMSAY HEALTH CARE: Ramsay Health Care is slated to post half yar results.

S32 – SOUTH32: South 32 on Thursday is expected to release its half year results.

SEK – SEEK: SEEK is slated to post its half year results.

SFR – SANDFIRE RESOURCES: Sandfire Resources is slated to post half year results.

TPW – TEMPLE & WEBSTER: Temple & Webster is expected to post first half results.

VRL – VILLAGE ROADSHOW: Village Roadshow is expected to post half year results.

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