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Market report: Wednesday, April 20

Business

UPDATED: The Australian dollar has fallen back from a 10-month high above 78 US cents.

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At 12pm (AEST) on Wednesday, the currency was trading at 77.90 US cents, down slightly from 77.96 cents on Tuesday.

Rising oil, copper and iron ore prices helped push the Australian dollar to a high of 78.20 US cents in overnight trade.

It has since retreated as traders weigh up the impact of a speech by RBA governor Glenn Stevens in New York overnight.

Unlike in recent speeches, Mr Stevens did not speak about the rising value of the Australian dollar.

“It was more about what he did not say rather than what he did say,” OANDA Australia and Asia Pacific senior trader Stephen Innes said.

“There were no verbal intervention shots regarding the Aussie dollar, which some market participants had anticipated.”

Traders are considering whether the central bank will remain sidelined if the currency’s gains continue.

“I suspect the RBA sees current Aussie appreciation more justified than recent moves seen across other risk associated currencies,” Innes said.

At 8.45am (AEST) on Wednesday, the share price index was up 31 points at 5,212.

In local economic news on Wednesday, the Westpac-Melbourne Institute Leading Index of Economic Activity is due out, as is the Commonwealth Bank business sales indicator.

In equities news, BHP Billiton is slated to release its third quarter operational review, while Woodside Petroleum is expected to give a first quarter production report.

Rising oil, copper and iron ore prices have helped push the Australian dollar to a fresh 10-month high.

At 8.45 (AEST) on Wednesday, the local unit was trading at 78.07 US cents, up from 77.96 cents on Tuesday.

And the Australian share market looks set to open higher after better-than-expected earnings from US companies Goldman Sachs and Johnson & Johnson pushed the S&P briefly over 2,100, within 30 points of its record high.

NEW YORK – Wall Street has closed mainly higher despite giving up early gains.

The rise in crude oil prices from below $US30 a barrel seen in February, and signs of steady economic growth in China recently, along with the US Federal Reserve’s cautious approach to raising interest rates, are all factors supporting stock prices in recent weeks.

“The predominant theme is risk on,” said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

“We came into the year concerned about Chinese growth and an aggressive (Federal Reserve), and we’ve gotten nothing even remotely similar to where our fears were.”

LONDON – European shares have risen to three-month highs, helped by a rally in commodities-related stocks and encouraging trading updates from French cosmetics firm L’Oreal and advertising group Publicis.

There were also supportive economic signals from China, the world’s top metals consumer..

“The possibility that China is stabilising is reassuring markets after a torrid couple of months at the beginning of the year,” said Lorne Baring, managing director at B Capital Wealth Management in Geneva.

HONG KONG – Asian share markets rose to five-month highs, taking their cue from gains on Wall Street after a strike in Kuwait helped pull crude oil prices above their prior-session lows.

“The effects of the Dow reaching a nine-month high created a buying trend that helped lift the Nikkei today,” said Hiroki Allen, chief representative of Superfund Securities Japan in Tokyo.

SAN FRANCISCO – Intel says it will cut 12,000 jobs – about 11 per cent of its work force – as it reorganises to confront a decline in sales of personal computers.

BEIJING – Under pressure to curb steel output and relieve a global glut, China says its production actually hit a record high last month as rising prices, and profits, encouraged mills that had been shut or suspended to resume production.

NEW YORK – Johnson & Johnson beat Wall Street’s modest expectations despite a 0.6 per cent decline in first-quarter profit, as higher sales of new prescription drugs and other key medicines nearly offset a big hit from the strong dollar.

ENERGY

Oil prices have risen following a workers’ strike in Kuwait, while a global stock index hit its highest level since early December as signs of economic stabilisation in China lifted demand for riskier assets.

The rise in crude prices drove up the currencies of countries dependent on commodity exports, including Australia and Canada, where the local currency rose to 10-month and ine-month highs against the US dollar, respectively.

The workers’ strike in Kuwait cut production to 1.1 million barrels per day from 2.8 million in March and overshadowed the weekend failure by oil producers meeting in Doha to agree to freeze output. However, an official of the Kuwaiti state refiner said output would be restored in coming days.

PRECIOUS METALS

Gold rose as much as two per cent, silver hit a 10-month high and platinum climbed to its highest in six months, as the US dollar weakened after US data came in below forecasts.

US housing starts fell more than expected in March and permits for future home construction hit a one-year low, suggesting some cooling in the housing market in line with signs of a sharp slowdown in economic growth in the first quarter.

“The severe technical damage that was done on the dollar is a big factor. I think that’s the driving force today,” said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago.

“That has not only helped precious metals … there’s not a commodity that’s not up today and that’s attributed to the weakness in the dollar.”

The dollar extended losses after the US data, falling 0.6 per cent against a basket of major currencies. The greenback has fallen to lows not seen since October 2015 in recent weeks.

BASE METALS

Copper prices have risen to a three-week high, reversing earlier losses after weak data pushed the US dollar lower and reinforced growing optimism over stronger demand from top consumer China.

Traders said copper rose as the US dollar fell after US housing data for March came in below consensus, supporting the idea that the US central bank would hold off raising interest rates in April.

“The data supports our view that we will have a modest pick-up in activity this year,” said Caroline Bain, commodities economist at Capital Economics.

“We have to be a little bit cautious as the first quarter is always quite distorted in China because of the new year holiday, but the March data definitely showed a pick-up on most fronts.”

STOCKS TO WATCH ON THE AUSTRALIAN STOCK EXCHANGE ON WEDNESDAY, APRIL 20:

BHP – BHP BILLITON: BHP Billiton is slated to release its third quarter operational review.

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

The price of iron remains comfortably above the $US60-mark, lifting to $US62.85.

ORG – ORIGIN ENERGY

STO – SANTOS

WPL – WOODSIDE PETROLEUM

Oil prices have surged more than two per cent, with Brent crude up $US1.11, to $US44.02 and WTI up $US1.18 at $US40.96.

WPL – WOODSIDE PETROLEUM

Woodside Petroleum is expected to release its first quarter production report.

AAP

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