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Market report: Friday, March 11

Business

UPDATED: The share market has made a steady start to trade after the European Central Bank decided to cut interest rates.

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The ECB pushed the deposit rate deeper into negative territory and increased its asset buying program in an effort to boost growth in the region.

Following the announcement, stocks in the United States had a volatile session before closing flat, as investors reacted to ECB chief Mario Draghi signalling an end to further rate cuts.

OptionsXpress market analyst Ben Le Brun expects a “choppy” day on the Australian market.

“We’ve had a very flat start following on from flat leads from Wall Street last night,” Le Brun said.

“There was a lot of volatile trading after the ECB stimulus package.

“It seems the positives have been offset by potential negatives looking into the outlook.”

The major banks were all lower, with Commonwealth Bank down 38 cents at $75.76, ANZ 18 cents lower at $25.31, National Australia Bank off 18 cents at $27.49 and Westpac slipping five cents to $32.47.

Oil prices fell overnight, impacting energy stocks.

Origin Energy was down five cents at $5.03, Woodside Petroleum was down 36 cents at $26.32, Santos had dropped seven cents to $3.76 and Oil Search was off 13 cents to $7.20.

Among the miners, BHP Billiton was down one cent at $17.69, Rio Tinto had fallen eight cents to $44.65 and Fortescue was three cents lower at $2.68.

“The miners are doing okay, while energy stocks under pressure, as are the banks,” Le Brun said.

“It’s going to be a closely run race throughout the afternoon.”

At 8.37am (AEDT) on Friday, the local unit was trading at 74.52 US cents, down from 74.79 US cents on Thursday.

And the Australian share market looks set to open lower after Wall Street sharply into the red in volatile trading after European Central Bank President Mario Draghi signalled an end to further rate cuts.

The share price index was down six points at 5,152.

NEW YORK – Wall Street has reversed course and slipped sharply into the red in volatile trading after European Central Bank President Mario Draghi signaled an end to further rate cuts.

Stocks had jumped earlier in the day after the ECB pushed deposit rate deeper into negative territory and increased its asset-buying program to 80 billion euros ($A117.27 billion) a month from 60 billion euros in an effort to boost growth in the region.

“This is a classic case of ‘buy the rumour and sell the news’,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

“Over the last few weeks, stocks had soared in anticipation of more easy money, and now that we’ve got the news, stocks are selling off,” Sarhan said.

LONDON – Britain’s top share index was roughly steady ahead of an eagerly anticipated European Central Bank meeting, with Aviva boosted by well-received results.

Britain’s FTSE 100 was up 0.1 per cent to 6,150.26 by 0832 GMT (1932 AEDT) on Thursday, slightly underperforming euro zone indexes.

“The FTSE may have less … at stake in today’s ECB meeting, but it nevertheless will rise and fall on the sentiment wafting over from the euro zone, especially with its empty economic calendar this Thursday,” Connor Campbell, financial analyst at Spreadex, said in a note.

HONG KONG – The big surprise in Asia came from New Zealand’s central bank, which pre-empted the ECB by cutting its main interest rate to a record low 2.25 per cent.

The Kiwi dollar tumbled to $US0.6618 as Reserve Bank of New Zealand governor Graeme Wheeler cited China as a major risk to the bank’s outlook for economic growth and inflation, reflecting global concerns over a slowdown in the world’s second-biggest economy.

“If China had a very significant and prolonged devaluation, it would in essence spread deflation around the world,” Wheeler told reporters, adding that China was building up a number of serious imbalances.

Asian stocks edged up meanwhile, encouraged by the previous day’s rally in crude prices and expectations that an aggressive showing from the ECB later could see dovish reactions from the Bank of Japan, Fed, Swiss National Bank and Bank of England which all meet over the next week and a bit.

FRANKFURT – The European Central Bank has delved deep into its remaining arsenal of stimulus options, cutting all three of its interest rates and expanding asset-buying to boost the economy and prevent ultra-low inflation becoming entrenched.

WASHINGTON – The number of people seeking US unemployment aid fell last week to the lowest level since October, evidence that employers are confident enough in the economy to hold onto their staffs.

DUBLIN – Government statisticians say Ireland’s economy grew by a Europe-leading 7.8 per cent in 2015, its fastest rate in 15 years.

ENERGY

Oil prices have fallen, with US, crude retreating from three-month highs as refinery maintenance threatened to raise record inventories of crude and after news that leading producers were unlikely to meet to discuss the global supply glut.

A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter say, as OPEC member Iran is yet to say whether it would participate in such a deal.

OPEC officials including Nigeria’s oil minister have said a meeting would take place in Moscow on that date, potentially as the next step in widening an agreement to freeze output at January levels struck by OPEC members Saudi Arabia, Venezuela and Qatar plus non-member Russia in February.

But the biggest roadblock to a wider deal, OPEC delegates say, is Iran. Tehran feels it should be exempt from the agreement as it wants to recover market share it lost under Western sanctions. Kuwait on Tuesday said it would commit to the deal, if all major producers – including Iran – do so.

PRECIOUS METALS

Gold has rebounded by more than one per cent as the euro bounced back from a six-week low against the US dollar after European Central Bank chief Mario Draghi indicated further interest rate cuts in the eurozone are unlikely.

The ECB dropped its main refinancing rate to zero on Thursday, from 0.05 per cent, while expanding its quantitative easing asset-buying program to 80 billion euros ($A120.38 billion) a month, from 60 billion euros, and cutting its deposit rate to -0.4 per cent from -0.3 per cent.

“This was seen as maybe a prelude to further stimulus, but the fact that there has now been a line drawn under that is giving some comfort to the euro, and therefore to gold,” Mitsubishi analyst Jonathan Butler said.

“The attention now turns to what the Fed is going to do next week. Looking at the Fed futures market now, the money seems to be on a September rate rise, which is quite a change from a couple of weeks ago.”

BASE METALS

Copper prices have fallen in tandem with Chinese equities as worries about growth and demand in top consumer China dominate the mood, though a weaker US dollar has limited losses.

Chinese equities fell as investors interpreted data showing consumer inflation rising faster than forecast as largely negative for the struggling economy.

Worries about demand growth in China were reinforced by February trade data showing a far worse performance than expected, with exports tumbling the most in more than six years.

“Sentiment is not as bearish as it was. We need to see better manufacturing PMI data from China. If they remain below or around 50 then the best I can see for copper is a level around $US5,000,” Julius Baer analyst Carsten Menke said.

ASX stocks to watch Friday, March 11 

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

The price of iron ore looks to be heading toward the $US60 mark, which could bode well for mining stocks.

ORG – ORIGIN ENERGY

STO – SANTOS

Oil prices have again fallen back, as it appears there may not be a meeting later in March of major producers to discuss a production freeze.

AAP

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