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Market report: Monday, March 21

Business

UPDATED:  The Australian share market has got off to a flat start as investors look to book some profits after gains over the past two weeks.

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The benchmark index was trading marginally higher after the first half-hour of trade, with energy and materials stocks, which have rebounded in recent weeks, coming under some pressure.

“There is a lack of driving forces this week, and we are seeing some moderation coming in,” IG market analyst Angus Nicholson said.

“However, we are seeing stocks slowly pushing into positive territory, so we can hope to get a close above 5,200 today.”

Wall Street closed higher on Friday, as the US Federal Reserve’s dovish tone and a strengthening economic outlook compelled investors to take on more risk, helping to push the Dow Jones industrial average 0.69 per cent higher.

However, the expected gains in the local market were tempered with oil prices slipping below $US40 a barrel, and base metals prices also easing.

Energy stocks reflected that trend on Monday, with Santos trading seven cents, or 1.8 per cent, lower at $3.99, Woodside down 30 cents at $26.77, and Origin Energy easing five cents to $5.32.

BHP Billiton shares slipped 10 cents to $17.99, Fortescue fell three cents to $2.72, but Rio Tinto shares were trading five cents higher at $44.20.

Among the major banks, Commonwealth Bank was down 52 cents, or 0.7 per cent, at $77.63, ANZ fell 14 cents to $28.20, Westpac lost 18 cents to $32.50, while National Australia bank declined 14 cents to $28.22.

Healthcare and retail stocks were among the gainers in early trade.

Shares in Virgin Australia jumped more than seven per cent after the airline said it had secured a $425 million loan facility from its four major shareholders, buying it time to fix its balance sheet.

At 8.06am (AEDT) on Monday, the local unit was trading at 7596 US cents, down from 76.41 cents on Friday.

And the Australian share market looks set to open higher after gains on Wall Street as the US Federal Reserve’s dovish tone and a strengthening economic outlook compelled investors to take on more risk.

The share price index was up 29 points at 5,193.

Earlier at 6.45am (AEDT) on Monday, the share price index was up 29 points at 5,193.

Locally, in economic news on Monday, the Commonwealth Bank business sales indicator for February is due out as is the MasterCard Index of Consumer Confidence Report 2016.

No major equities news is expected.

In Australia, the market on Friday closed slightly higher, buoyed by gains in mining and energy stocks as commodity and oil prices continue to climb.

The benchmark S&P/ASX200 index was up 14.9 points, or 0.29 per cent, at 5,183.1 points.

The broader All Ordinaries index was up 12.9 points, or 0.25 per cent, at 5,239.3 points.

NEW YORK – Wall Street has closed higher as the US Federal Reserve’s dovish tone and a strengthening economic outlook compelled investors to take on more risk.

In part, the rally on Friday was a continued reaction to the Fed’s move on Wednesday, in which it scaled back expectations for the number of rate hikes in the coming months.

Major indexes gained for five weeks in a row and the Dow closed higher every day this week.

“It was a huge gift to the market,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

“I think the market was bracing for a more hawkish view.”

Following the Fed move, the US dollar weakened and drove up commodity prices. Oil rose above $US42 a barrel.

“People are realising that this means a weaker (US) dollar and that should benefit a lot of the stocks in the S&P and Dow, stocks with lots of exposure overseas,” said Kim Forrest, research analyst at Fort Pitt Capital Group in Pittsburgh.

Stronger-than-expected economic data, such as recent jobs and wages reports, and improved expectations for corporate earnings, have also eased recession fears and emboldened investors, Forrest said.

Contrary to sentiment in January and early February, investors are beginning to think “we are not experiencing a recession,” Forrest said.

The Dow Jones industrial average closed up 120.81 points, or 0.69 per cent, to 17,602.3, the S&P 500 gained 8.97 points, or 0.44 per cent, to 2,049.56 and the Nasdaq Composite had added 20.66 points, or 0.43 per cent, to 4,795.65.

LONDON – Britain’s top share index has steadied at the close, consolidating a week in which shares have closed in on their 2016 highs, although commodity stocks paused after a strong run.

The FTSE 100 index finished 0.19 per cent lower at 6,189.64 points on Friday after hitting an intra-day high of 6,237.02, not far from its 2016 high of 6,242.32.

The benchmark index managed to rise 0.8 per cent this week after slipping in the previous week.

Much of the recent strength in the index has been down to appetite for mining and oil stocks, which rose on Thursday as a weaker US dollar made dollar-denominated commodities cheaper for holders of other currencies.

The oil and gas sector hit its highest level since November, but pulled back on Friday as oil turned lower.

Gains in miners were capped by a dip in copper and gold prices, as well as a downgrade by Credit Suisse.

IG analyst Chris Beauchamp said the sector, up 60 per cent from January lows, had done fantastically well but slightly weaker commodity prices on Friday after enjoying a good day put some pressure on the sector.

“The China demand story continues to pick up, and if the dollar weakness continues, then they should recover, and that will help the FTSE 100 hit new highs,” Beauchamp said.

HONG KONG – World shares headed for a fifth straight week of gains, their best run in over two years, as the week’s thumping for the US dollar, soothing central bank noises and a 2016 high for oil, boosted confidence.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8 per cent on Friday, entering positive territory for the year for the first time after Wall Street had done the same overnight.

Asia ex-Japan ended up 2.3 per cent for the week, and has surged 10.4 per cent so far this month. Emerging market stocks globally are up 20 per cent since mid-January.

The Hang Seng index was up 0.8 per cent, for a weekly rise of 3.6 per cent. China’s Shanghai Composite index and CSI 300 climbed roughly 1.6 per cent each, with gains of about 6.4 per cent for the week.

They were helped by data showing Chinese home prices rose at their fastest clip in almost two years in February thanks to red-hot demand in big cities.

The Chinese yuan also firmed sharply against the dollar to reach a 2016 high, after the People’s Bank of China set the midpoint rate at 6.4628 per dollar prior to market open, compared with the previous fix of 6.4961, the biggest daily rise since November.

“We have got an important week out of the way from a macro data perspective, and not only have we come out of it unscathed, we are seemingly in a stronger place than where we started the week,” said Ben Le Brun, market analyst at online brokerage OptionsXpress in Sydney.

“We have heard from central banks in all corners of the globe now and the liquidity party rolls on with the potential for more to come.”

WELLINGTON – The S&P/NZX 50 Index rose 50.06 points, or 0.8 per cent, to 6,623.51.

DHAKA – Bangladesh has formally sought assistance from the US Federal Bureau of Investigation to track down the cyber crooks who stole $US81 million ($A105.93 million) from its central bank’s US account.

SAO PAULO – Roger Agnelli, the former chief executive officer of Vale SA, the world’s largest iron ore producer, was among seven people killed when a small plane crashed in Brazil.

HAVANA – Starwood Hotels & Resorts Worldwide has become the first US hotel company to sign a deal with Cuba since the 1959 revolution, announcing a multimillion-dollar investment a day before President Barack Obama is due to visit Havana.

ENERGY

Oil prices have slipped after hitting 2016 peaks.

US, or WTI, crude prices fell after trading above $US41 a barrel for the first time since early December as the weekly US oil rig count rose for the first time since December.

The ended down 76 US cents, or 1.89 per cent, at $US39.44.

Brent crude’s May delivery contract fell 0.82 per cent, or 34 US cents, to $US41.20 a barrel.

PRECIOUS METALS

Gold has edged lower, as the US dollar steadied above a five-month low, after the Federal Reserve scaled back rate increase expectations.

“Since the Fed statement, gold’s been backing off the highs,” said Phillip Streible, senior commodities broker at R.J. O’Brien in Chicago.

“The way we would see this rally build is if you saw more statements like one from the ECB (European Central Bank). We continue to see countries dig deeper in the red.”

The US dollar rose 0.3 per cent against a basket of major currencies but was still near a 17-month low against the yen.

BASE METALS

Copper has slipped from a four-month high as investors locked in gains after a rally prompted by a more dovish US rate outlook, though stronger oil prices and lower inventories cushioned the fall.

Analysts said the market was generally taking its cue from positive factors such as higher oil prices and a weaker US dollar, which makes commodities less expensive for consumers paying with other currencies.

“Whilst the dollar weakens and oil rises we are back to a reflationary environment for commodities, which to some extent overpowers the micro factors,” Standard Chartered metals analyst Nicholas Snowdon said.

Copper also drew support from declining physical stocks in London Metal Exchange warehouses. Copper in the warehouses stood at 158,275 tonnes, down about 30 per cent since late November, though much of the inventory has just moved to warehouses monitored by the Shanghai Futures Exchange.

Stocks to watch Monday, March 21

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

The price of iron is again above the $US57 mark, rising $US1.41 to $US57.50.

ORG – ORIGIN ENERGY

STO – SANTOS

WPL – WOODSIDE PETROLEUM

Oil prices have again fallen, with WTI crude down 1.89 per cent, or 76 US cents, at $US39.44, and Brent crude is down 0.82 per cent, or 34 US cents, at $41.20.

AAP

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