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Market report: Wednesday, March 16

Business

UPDATED: The Australian share market has opened lower.

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At 10.10am (AEDT) on Wednesday, the benchmark S&P/ASX200 index was down 16.9 points, or 0.33 per cent, at 5,094.5, while the broader All Ordinaries index was down 15.4 points, or 0.30 per cent, at 5,253.2.

On the ASX 24, the share price futures index was down 10 points at 5,095, with 54,125 contracts traded.At 8.18am (AEDT) on Wednesday, the share price index was down five points at 5,100.

Locally, in economic news on Wednesday, the Westpac-Melbourne Institute Leading Indexes of Economic Activity is due out.

No major equities news is expected.

However, BHP Billiton’s chief public affairs officer Tony Cudmore, Boral CEO Mike Kane, AGL boss Andrew Vesey, ASX head Elmer Funke Kupper, Australia Post CEO Ahmed Fahour, Coca-Cola Amatil’s managing director Alison Watkins and Wesfarmers’ Richard Goyder are slated to be at the Australian Financial Review-BHP Billiton Business Summit, in Melbourne.

Meanwhile, Sydney hosts the Destination Australia Conference.

NEW YORK – Healthcare and materials stocks have weighed down Wall Street in a second straight day of generally quiet trading as cautious investors awaited news from the Federal Reserve’s two-day policy meeting.

While the Fed is not expected to raise interest rates at its meeting ending on Wednesday (US time), investors will scour Fed chair Janet Yellen’s comments for clues indicating a path for future rate hikes.

“Everybody’s waiting for what the Fed meeting will come up with,” said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

US retail sales fell less than expected in February, but a sharp downward revision to January’s data could reignite concerns about the economy’s growth prospects.

LONDON – A drop in the shares of major mining companies and a gloomy economic outlook from the Bank of Japan has pulled Britain’s top equity index lower.

Investors also said an opinion poll giving the “Out” campaign a two percentage point lead ahead of Britain’s June 23 referendum on European Union membership was hurting sentiment.

The BOJ also dropped references to taking rates further into negative territory, six weeks after taking an initial, radical shift in that direction.

“Fears still linger over central banks running out of ammunition to jump-start global growth, while China’s woes periodically sour risk appetite,” FXTM research analyst Lukman Otunuga said.

A decline in Britain’s clubbing scene has prompted the statistics agency to drop nightclub entrance charges from the basket of goods and services it uses to calculate inflation – and instead add refill pods for home espresso machines.

HONG KONG – Asia shares fell after the Bank of Japan painted a bleaker picture of the Japanese economy and helped push the yen higher, and as oil prices dropped again.

The BOJ left policy on hold on Tuesday, as expected. Investors’ attention now turns to a two-day meeting of the US Federal Reserve’s rate-setters, who are likely to signal a slower pace of interest rate hikes than forecast after they raised the cost of borrowing in December for the first time in nearly a decade.

The Fed signalled in its “dot plot” charts of the possible path of interest rates after its December hike that it could raise rates four more times this year.

“The Fed meeting is important because … there is a risk of a hawkish statement,” RIA Capital Markets bond strategist Nick Stamenkovic said. “Investors will wait for the statement and the dot plots before taking new positions.”

WASHINGTON – US retail sales slipped last month, pulled down by sharply lower gas prices, and Americans spent much less in January than previously estimated.

US homebuilders remain optimistic that the housing market will improve, but their expectations for sales over the next six months have dimmed just as the spring home-selling season gets under way.

ENERGY

Oil prices have dropped further after the Organization of the Petroleum Exporting Countries (OPEC) said it expected lower demand for crude in 2016 than previously thought.

The oil market was on the lookout Tuesday for preliminary data on US crude stocks from industry group American Petroleum Institute.

“The rally is now retreating on fears that OPEC will continue to flood the market with oil in a world where demand may falter,” said Phil Flynn, analyst at the Price Futures Group in Chicago.

PRECIOUS METALS

Gold has fallen to its lowest in almost two weeks ahead of a Federal Reserve statement that is expected to give clues on the pace of future US rate rises.

The Fed began its two-day meeting on Tuesday (US time) and the market was awaiting a statement from the central bank at 2pm EDT on Wednesday.

“One difference from a few weeks ago is that the surprise (from the Fed) would be a rate hike, whereas perhaps a few weeks ago people thought a surprise would be a rate cut,” Macquarie analyst Matthew Turner said.

“There has been a shift towards hawkishness again, which is probably pressuring gold a little bit.” Further US rate rises could lift the opportunity cost of holding non-yielding bullion.

BASE METALS

Copper prices have fallen as a weaker US dollar balances persistent concerns over demand in top metals consumer China and uncertainty ahead of the US Federal Reserve’s policy meeting.

Large holdings of copper warrants and cash contracts on the LME has created nearby tightness and pushed the premium for the cash contract over the three-month future to a four-month high above $US25 a tonne on Monday. The premium on Tuesday was around $US18 a tonne.

Still, analysts caution against excessive optimism about demand growth in China, which accounts for nearly half of global demand estimated at around 22 million tonnes in 2016.

“One thing people will be looking at very closely is the inventory data in Shanghai warehouses. If it continues to build it will be a very bearish signal for copper,” said Barclays metals analyst Dane Davis.

ASX stocks to watch Wednesday, March 16

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

The mining giants are likely to feel the impact as the price of iron ore heads back toward the $US50 mark, losing $US2.67 to $US52.88.

STO – SANTOS

WPL – WOODSIDE PETROLEUM

Energy companies may see their shares fall with the price of oil suffering another hit.

TAH – TABCORP

Australian Federal Police are investigating allegations sports bet firm Tabcorp were involved in foreign bribery in Cambodia.

AAP

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