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Market report: Tuesday, April 19

Business

The Australian share market has opened higher.

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At 10.12am (AEST) on Tuesday, the benchmark S&P/ASX200 index was up 62.3 points, or 1.2 per cent, at 5,199.4, while the broader All Ordinaries index was up 59.5 points, or 1.14 per cent, at 5,264.4.

On the ASX 24, the share price futures index was up 51 points at 5,180, with 8,828 contracts traded.

The Australian market looks set to open lower despite a strong positive lead from Wall Street where the Dow Jones closed at a nine-month high, buoyed by Hasbro and Disney.

At 8.08am (AEST) on Tuesday, the share price index was up 53 points at 5,182.

In local economic news on Tuesday, the minutes of the Reserve Bank of Australia’s April meeting will be released while RBA governor Glenn Stevens is slated to speak at Credit Suisse 2016 Global Macro Conference in New York city.

The ANZ-Roy Morgan weekly consumer confidence survey is also due out.

In equities news, Arrium’s creditors meeting is on in Sydney.

Rio Tinto is slated to release its first quarter operations review, and Oil Search its March quarter results.

NEW YORK – The Dow Jones industrial average has climbed to a nine-month high in a market buoyed by Hasbro and Disney, as investors braced for a flurry of quarterly earnings reports through the week.

A recent rebound in oil and signs that the US economy is slowly improving have helped stocks rally from a steep selloff earlier this year that had pushed the S&P 500 down as much as 10.5 per cent.

Helped as well by a US Federal Reserve showing little eagerness to raise interest rates, the index is now up two per cent in 2016 and only about two per cent short of its all-time high.

The Dow breached 18,000 on Monday for the first time since July 21.

“It’s an agreeable, tame Fed that’s not always whooping and hollering about the threat of higher interest rates,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa.

“The lack of an ever-present threat of higher interest rates has a lot of people feeling a lot better.”

LONDON – UK shares have come under pressure after major oil producers failed to reach an agreement to freeze output over the weekend, sending shares in commodities-related stocks lower.

Oil & gas companies were among the top sectoral fallers after a deal to freeze oil output by OPEC and non-OPEC producers broke down on Sunday, sending oil prices tumbling.

British oil majors Royal Dutch Shell and BP fell 2.9 per cent and 2.2 per cent respectively, taking around 14 points off the index together.

“The fall in oil prices is sparking profit-taking as a marked slide in crude raises the question of whether BP and Shell will be able to maintain their dividend payments if oil remains lower for longer,” Russ Mould, AJ Bell Investment director, said in a note.

HONG KONG – A dive in oil prices has sent stock markets lower after a producers’ meeting in Qatar failed to agree on a plan to curb global supply, quashing the more optimistic tone that had prevailed for much of the past week.

Japan’s Nikkei index led the way on Monday, tumbling more than three per cent after a devastating earthquake in the southwest of the country, with signs from a summit in Washington that other Group of 20 governments oppose intervention to weaken the yen also playing a role.

Losses in Hong Kong and Shanghai ranged around one per cent and oil prices were down three per cent, pushing US crude below $US40 for the first time in a week.

“Energy and equity markets were flashing red this morning, as were commodity currencies like the Canadian and Australian dollars,” Societe Generale analysts wrote in a morning note. “But the scale of the carnage has lessened since London trading opened.”

ENERGY

US oil prices have edged lower while Brent crude has steadied after producers failed to agree on a plan to curb global supply at a meeting in Qatar.

Crude oil ended well off the day’s lows, however, with a strike in Kuwait slashing the country’s oil output by more than half.

Some analysts said they don’t expect oil to fall significantly more as a result of the Qatar news.

“While a few forecasters may be dusting off some old $US20 WTI expectations as a result of the Doha outcome, we expect solid support in nearby WTI at the $35 mark,” Jim Ritterbusch at Chicago oil consultancy Ritterbusch & Associates said.

PRECIOUS METALS

Gold has steadied as the US dollar fell against a basket of major currencies, world stock markets edged higher, and oil prices pared earlier losses that had been triggered by the failure by oil producers to agree an output freeze.

“Oil prices have fallen between four and five per cent, dragging equities down, and you would think to see some safe-haven buying in gold,” Citi strategist David Wilson said, referring to earlier strength in bullion prices.

On Friday, Chicago Federal Reserve president Charles Evans said the Fed seems to be on track for at least two increases over the rest of 2016.

“Gold prices are likely to stay supported around $US1,260 in the second quarter ahead of the Fed’s rate increase, which may happen in July,” Natixis analyst Bernard Dahdah said.

BASE METALS

Copper prices have risen, reversing earlier losses as funds bought base metals on the back of a weaker US dollar and offset the selling triggered by tumbling oil and global equities.

“Copper wasn’t hammered like oil and stocks earlier today. That’s a positive sign,” a copper trader said.

“The market looks robust in the face of the oil market,” said Commerzbank analyst Eugen Weinberg. “Confirmation of stronger demand going forward and sluggish supply will help prices stabilise.”

Heavy rains in Chile, prompting Anglo American and state-owned producer Codelco to suspend operations temporarily at two copper mines with combined annual capacity of 880,000 tonnes, are supporting prices for now.

However, the stoppages will have to be prolonged and spread to other parts of Chile for supplies to be severely curtailed.

NEWS

The Australian dollar has surged more than one US cent on the back of an oil price recovery.

At 0808 AEST on Tuesday, the local unit was trading at 77.51 US cents, up from 76.50 cents on Monday.

And the Australian share market looks set to open higher despite a strong positive lead from Wall Street where the Dow Jones closed at a nine-month high, buoyed by Hasbro and Disney.

At 0808 AEST on Tuesday, the share price index was up 53 points at 5,182.

ELSEWHERE:

TOKYO – The Japanese share market fell more than three per cent after a series of earthquakes measuring up to 7.3 magnitude struck a southern manufacturing hub, killing at least 42 people and forcing major companies to close factories.

NEW YORK – Argentina has returned to the international bond markets for the first time in 15 years as it winds down a long-running battle with investors following its 2001 default.

WASHINGTON – US homebuilders’ confidence held steady in April, reflecting an overall optimistic outlook in the market for new homes even as a gauge of current sales fell slightly.

STOCKS TO WATCH ON THE AUSTRALIAN STOCK EXCHANGE ON TUESDAY, APRIL 19:

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

The price of iron ore has soared, lifting $US2.08 to $US60.36.

ORG – ORIGIN ENERGY

STO – SANTOS

WPL – WOODSIDE PETROLEUM

Oil prices have rebounded from sharp losses suffered after talks in Doha between producers ended without an agreement to cut supply.

REC – RECALL

Australia’s foreign investment review board has approved the $3.4 billion takeover of data management group Recall by US logistics giant Iron Mountain and shareholders vote on the proposal on Tuesday.

RIO – RIO TINTO

Rio Tinto is expected to release a first quarter operations review.

AAP

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