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Market report: Monday, April 18

Business

UPDATED: The Australian share market has got off to a rocky start, as energy and mining stocks drag the index lower after talks to freeze global oil output failed.

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The benchmark index was about 0.5 per cent lower in early trade, with financial stocks under pressure.

“It is shaping up to be a pretty rough start to the week,” Australian Stock Report head of research Chris Conway said.

“We know the co-relation between the oil and equity markets, and the outcome of the OPEC meet in Doha will weigh on the market for a few days.”

Crude oil prices fell nearly six per cent after oil-rich countries failed to reach an agreement on freezing production. Traders had expected an agreement would help support the recent rally in prices.

Local energy stocks were among the worst performers, with Santos down 26 cents, or 6.2 per cent, at $3.91, Oil Search skidding nearly five per cent to $6.18 and Woodside down 2.7 per cent at $25.44.

Mining shares also declined after iron ore prices retreated from the $US60 a tonne level. BHP Billiton was down 3.2 per cent at $18.67, while rivals Rio Tinto and Fortescue Metals were each down 1.3 per cent.

Financial stocks joined the rout with concerns again surfacing about bad debts due to lenders’ exposure to mining and energy sectors.

Commonwealth Bank was down 66 cents at $74.34, National Australia Bank lost 21 cents to $26.55, Westpac was down 44 cents at $30.48, and ANZ declined 25 cents to $23.60.

Telstra shares went against the tide, rising 1.3 per cent to $5.31, after the telco said it will sell most of its stake in Chinese online carsales business Autohome in a deal worth $US1.6 billion ($A2.08 billion).

Shares in Transurban were also up 0.5 per cent to $11.35 after the toll road operator lifted its March quarter revenue 13 per cent on increased traffic and collections.At 8am (AEST) on Monday, the share price index was down four points at 5,142.

Locally, in economic news on Monday, the Australian Bureau of Statistics will release new motor vehicles sales data for March.

No major equities news is expected.

The Australian dollar has plunged sharply as crude oil prices tumble.

And the Australian share market looks set to open flat after Wall Street fell as oil price declines weighed on energy shares and Apple dragged on the market.

NEW YORK – Wall Street has dipped as oil price declines weighed on energy shares and Apple dragged on the market, but major indexes still posted gains for the week.

Energy was the worst performing sector. Oil prices fell as traders and analysts anticipated a weekend meeting of major oil exporters will do little to clear global oversupply quickly.

The recent run is “giving investors pause, wondering if there’s going to be a little pullback at some point,” said Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.

“You take in the fact of oil dropping a fair amount here today … that’s giving people pause. Oil is still an important contributor here to expectations within the stock market.”

LONDON – British shares retreated as concerns about a possible Brexit and stagnation at the top-end of the market put pressure on housebuilding companies.

Investors cited concerns around a June referendum on whether Britain should stay in the European Union and worries about a slowdown in the luxury sector.

“Ahead of Brexit, people have been selling the housebuilders and the pressure will remain until we get the vote out of the way – that’s the main headwind for UK housebuilders,” Zeg Choudhry, managing director at LONTRAD, said.

“It’s [a] fear of the UK being not the place to invest or … less competitive outside of the eurozone,” he added.

HONG KONG – Reassuring Chinese GDP data has helped stocks, commodity markets and the US dollar consolidate strong weekly gains, as focus turned to a meeting of top oil producers about a potential output freeze.

Data from China drew approval as it showed the country’s giant economy grew at 6.7 per cent in the first quarter year-on-year, bolstering the view its slowdown may be bottoming out.

Speculation was also circling about whether top oil producers led by Saudi Arabia and Russia would hammer a deal in Doha to curb output.

“Chinese economic data is showing signs of stabilisation, including recent PMI numbers, as well as the latest figures on industrial production and retail sales,” said Suan Teck Kin, economist at the United Overseas Bank in Singapore.

DOHA – A deal to freeze oil output by OPEC and non-OPEC producers fell has fallen apart after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.

WASHINGTON – Financial leaders from the Group of 20 nations say they are heartened by a recent recovery in financial markets, but warn that global growth is “modest and uneven” and threatened by weakness in commodities-based economies.

US industrial production fell more than expected in March as manufacturing and mining production decreased, the latest indication that economic growth braked sharply in the first quarter.

ENERGY

Crude oil prices have fallen ahead of a weekend meeting that it was hoped may yield an output freeze by major producers, while the US dollar and stocks across the globe edged lower but posted weekly gains.

The meeting in Doha later ended without an agreement after Saudi Arabia demanded Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.

Tehran had refused to stabilise production, seeking to regain market share after the lifting of Western sanctions against it in January.

PRECIOUS METALS

Gold has risen after three days of declines as the US dollar and major stock markets weakened, but bullion was headed for its first weekly drop in three.

“Gold was off this morning on a stronger European stock market but it didn’t last as the this morning’s capacity utilisation and industrial production numbers were weaker than expected, indicating continued US economic weakness,” said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.

Gold prices have steadied after posting their biggest quarterly rise in nearly 30 years in the first quarter, driven by a reining in of expectations that the US Federal Reserve will push ahead with several interest rate increases this year.

“We are seeing central banks having separation anxiety with their stimulus policies and so much stimulus tends to devalue currencies and that’s the follow through from negative real rates,” ETF Securities analyst Martin Arnold said.

BASE METALS

Copper has fallen after strong Chinese economic data raised fears that government stimulus programs in the top metals consumer are not sustainable, and as the market also looked ahead to a key meeting of oil producers.

China posted its slowest economic growth since 2009, but a surge of new debt appears to be fuelling a recovery in factory activity, investment and household spending in the world’s second-largest economy.

“The Chinese numbers were pretty good — the problem is that they were too good,” said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.

The data showed that Chinese banks extended 1.37 trillion yuan ($A276 billion) in net new yuan loans in March, nearly double February’s lending.

“The Chinese government cannot continue to rely on such a big injection of credit. People can see this dynamic as unsustainable and there is speculation that the yuan can see financial outflows because people are scared.”

ASX Monday, April 18

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

The price of iron has again fallen, dropping further from the $US60 mark it briefly reached last week. It’s down $US1.10 at $US58.28

ORG – ORIGIN ENERGY

STO – SANTOS

WPL – WOODSIDE PETROLEUM

Oil prices have fallen as a meeting of producers in Doha ended without agreement to cut production to stabilise prices.

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