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Market report: Tuesday, March 1

Business

The Australian market looks set to open slightly lower after Wall Street backtracks on early gains and lands in negative territory.

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At 8.30am (AEDT) on Tuesday, the share price index futures contract was down 12 points at 4,862.

In local economic news on Tuesday, the Reserve Bank of Australia holds its monthly board meeting and makes its interest rate decision.

The RBA is also due to release the index of commodity prices for February.

Meanwhile, the Australian Bureau of Statistics will release January’s building approvals figures, December quarter balance of payments and international investment position data, and government finance statistics for the same period.

The RP Data Core Logic Home Value Index for February is also due out, as is the ANZ-Roy Morgan weekly consumer confidence survey, the Dun and Bradstreet business expectations survey, and the Australian Industry Group’s performance of manufacturing (PMI) index for February.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Outlook 2016 conference is on in Canberra

No major equities news is expected.

NEW YORK – Wall Street has done an about turn into negative territory after earlier edging up on China’s move to boost its slowing economy and higher oil prices.

China’s central bank on Monday cut its reserve requirement ratio, or the amount of cash that banks must hold as reserves, for the fifth time in a year.

“It’s sort of like a sugar shock, a bump in near-term growth at the expense of longer-term credibility. I think investors are caught weighing the two,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

US crude prices rose more than three per cent after Saudi Arabia said it would work with other producers to limit oil market volatility.

LONDON – Britain’s top share index has closed in marginally positive territory, as a rally in mining stocks following new stimulus measures from China – the world’s top metals consumer – lent support to the market.

The latest moves by China to prevent a slowdown in its economy spurred UK mining stocks, given China’s importance in terms of demand for metals. Anglo American rose 6.6 per cent while rival Glencore advanced four per cent.

The G20 group of the world’s top economies failed to come up with a firm plan on Saturday for specific coordinated stimulus spending to boost activity, as some investors had been hoping after markets nosedived at the start of 2016.

“The G20 outcome was disappointing, as there was a lot of talk and not a lot of action, but it’s good to see China still has some ammunition in its warchest to try and spur demand,” said Dafydd Davies, partner at Charles Hanover Investments.

HONG KONG – Asian shares retreated after a weekend meeting of G20 finance chiefs ended with no new plan to spur global growth and as investors fretted the US Federal Reserve could raise interest rates before year-end.

The US dollar, however, tumbled against the Japanese yen as investors sought shelter from the fall in equities, which saw Chinese stocks lose nearly three per cent.

G20 finance ministers and central bankers, meeting in Shanghai on Friday and Saturday, agreed to use “all policy tools – monetary, fiscal and structural – individually and collectively” to reach the group’s economic goals.

But there was no plan for co-ordinated stimulus, which some investors had been seeking after concerns about a slowdown in China depressed markets at the beginning of 2016.

BRUSSELS – Official figures show that inflation across the 19-country eurozone turned negative in February, a development that will boost expectations that the European Central Bank will unveil another stimulus package at its next policy meeting on March 10.

BEIJING – China’s central bank has reduced the amount of cash that banks must hold as reserves for the fifth time since February 2015, as it seeks to revive a slowing economy.

NEW YORK – Argentina and its main holdout creditors have reached a $US4.653 billion ($A6.52 billion) agreement in principle to settle a sovereign debt default dispute that has lasted 14 years.

ENERGY

Crude futures prices have risen after Saudi Arabia said it would work with other oil producers to limit oil market volatility.

Brent futures closed at $US35.97 a barrel, up 87 US cents, or 2.48 per cent, from their previous close.

US crude, or WTI, futures rose $US1.01 or 3.08 per cent to $33.79.

PRECIOUS METALS

Gold has risen one per cent, boosted by lower equities and weak US data, leaving the metal well placed to log its best monthly performance in four years as turmoil in wider markets increases its safe-haven appeal.

“This has started as a rocky year for global markets and while some countries are moving into negative rates, the outlook for US interest rates hikes is not as positive,” Natixis analyst Bernard Dahdah said.

“Coming into March, technical indicators look fairly solid and the ETF movements look quite supportive,” said Mitsubishi Corp strategist Jonathan Butler.

“On the macro-economic side, however, next week we are going to have the ECB (European Central Bank) announcement of possible further quantitative easing, which is going to weigh on the euro against the dollar and all commodities should come under pressure again.”

BASE METALS

Aluminium has hit a four-and-a-half-month high and copper has trimmed losses after top metals consumer China cut its reserve ratio for banks in an effort to revive flagging growth.

Investors welcomed the move by China’s central bank to reduce the amount of cash that banks must hold as reserves for the fifth time since February 2015.

“Any sense of pro-active policymaking in China towards stabilising the economy and the exchange rate will be taken positively by commodity markets,” said Nicholas Snowdon, metals analyst at Standard Chartered in London.

Some big aluminium producers are seeking an increase in surcharges of 14-18 per cent for physical delivery to Japanese buyers for April-June primary metal shipments, sources said.

ASX stocks to watch Tuesday, March 1

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

Shares in the mining giants could enjoy a lift on Tuesday, as the price of iron ore creeps closer to the $US50 mark, lifting $US1.33 to $US49.62.

ORG – ORIGIN ENERGY

STO – SANTOS

Energy companies may see their shares rise with the price of oil gaining overnight.

AAP

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