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Market report: Friday, April 29

Business

UPDATED:  The Australian dollar has recovered from an overnight fall triggered by expectations of a rate cut.

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At noon (AEST) on Friday, the currency was trading at 76.41 US cents, up from its overnight low of 75.95 US cents, and down only marginally from the 76.46 US cents it was at late on Thursday.

OANDA Asia Pacific senior trader Stephen Innes said the currency’s rebound comes despite market nervousness about the possibility of a cash rate cut by the Reserve Bank next week, heightened by weak inflation data released on Wednesday.

“There are signs the Aussie is coming back to life, even ignoring the increased calls for an RBA rate cut,” he said.

The currency could even rally again on the back of firming crude oil prices, Innes said.

“External factors should continue to dominate the Aussie landscape, and provided risk sentiment can rebound convincingly, we could see Aussie traders quickly dismiss this week’s CPI driven weakness,” he said.

At 10.44am (AEDT) the benchmark index was trading as up 0.1 per cent with energy and banking shares among the early leads.

“We will probably see a bit of hesitation from investors until the RBA decision on rates and the Budget,” CommSec market analyst Steven Daghlian said.

He doesn’t expect any major moves in the markets before Tuesday’s session, with no major economic data due until then.

Overnight, US stocks closed lower as investors were rattled by the Bank of Japan’s surprise call not to expand its massive stimulus policies, and data showed US economic growth has braked sharply to its slowest pace in two years.

The Dow Jones industrial average fell 1.2 per cent, while the S&P 500 ended down 0.92 per cent.

In the local markets, mining shares were under pressure, but energy and financials were having a better day.

BHP Billiton was down 1.5 per cent at $20.25, while rival Rio Tinto fell 0.2 per cent at $50.19.

However, Woodside Petroleum, Santos, Oil Search and Origin Energy were all trading around 1 per cent higher.

The four major banks were also up between 0.5 per cent and one per cent.

Shares in detention centre operator Broadspectrum surged nearly a third to $1.48 after its board reversed its earlier decision and recommended a takeover offer by Spanish infrastructure giant Ferrovial.

Atlas Iron shares were also up nine per cent after the struggling iron ore miner received court approval to proceed with a debt restructuring that could save it millions in interest payments.

At 10.10am (AEST) on Friday, the benchmark S&P/ASX200 index was down 9.0 points, or 0.17 per cent, at 5,216.4, while the broader All Ordinaries index was down 7.4 points, or 0.14 per cent, at 5,282.0.

On the ASX 24, the share price futures index was down four points at 5,197, with 10,704 contracts traded.

Earlier at 8.06am (AEST) on Friday, the share price index was down eight points at 5,193.

In local economic news on Friday, the Reserve Bank is due to release financial aggregates data for March, while RBA Assistant Governor (Financial Markets) Guy Debelle speaks at the ACI World Congress Conference.

In equities news, Motorcycle Holdings and Reliance Worldwide are slated to list on the on ASX, while Hutchison Telecoms hold its annual general meeting.

The local unit was trading at 76.28 US cents, down from 76.46 cents on Thursday.

And the Australian share market looks set to open lower after Wall Street fell as the Bank of Japan’s shocking call to cap monetary stimulus continues to rattle investors while a late day decline in Apple shares on remarks by billionaire investor Carl Icahn added to selling pressure.

US stocks have closed down as the Bank of Japan’s shocking call to cap monetary stimulus continued to rattle investors while a late day decline in Apple shares on remarks by billionaire investor Carl Icahn added to selling pressure.

“This really personifies how important central bank policy is on the market,” said Jack Ablin, chief investment officer at BMO Private Bank.

Stocks fell early on the BOJ’s decision to hold steady in the face of soft global demand and a rise in the yen, jarring markets particularly after media reports that the central bank would likely go deeper into negative interest rates.

They later dipped further, after Apple stock took a hit following billionaire investor Carl Icahn’s remarks that he was “still very cautious” on the US stock market and believed there would be a “day of reckoning” unless there was some sort of fiscal stimulus.

LONDON – European stock indexes closed little changed after after the Bank of Japan surprised markets by holding interest rates steady and declining to adopt more stimulus, pushing the yen sharply higher against major currencies.

The Japanese currency recorded its biggest one-day gains against the US dollar, euro and sterling since March 2011.

The BOJ’s decision was particularly jarring in the face of soft global demand and after earlier media reports said the central bank intended to cut rates deeper into negative territory.

London’s FTSE 100 was flat, lifting just 2.49 points, or 0.04 per cent, to 6,322.40 while Germanys DAX gained 21.32 points, or 0.21 points, to 10,321.12.

HONG KONG – The lack of fresh stimulus from the Bank of Japan sent the yen soaring and stocks into the red, half a day after the US Federal Reserve signalled it too was hitting the policy pause button.

The yen surged almost three per cent against both the US dollar and the euro in a sharp reaction to the BOJ inaction, putting it on course for its biggest jump against the greenback since February and in five years against the euro.

“The market was expecting something from the BOJ and they did not deliver so the market has basically wiped out all the rally in dollar/yen of the last couple of weeks,” said Societe Generale FX strategist Alvin Tan.

“For the last two to three years the big theme in the market was monetary divergence. But in the last few months the legs have really been cut off that … so currencies are all over the place.”

WASHINGTON – US economic growth has braked sharply to its slowest pace in two years as consumer spending softened and a strong US dollar continued to undercut exports, but a pick-up in activity is anticipated given a buoyant labour market.

NEW YORK – Comcast is buying DreamWorks Animation for approximately $US3.55 billion ($A4.68 billion).

DEARBORN – Ford Motor Co’s net income more than doubled to $US2.5 billion ($A3.30 billion) in the first quarter on strong sales of trucks and SUVs in North America.

ENERGY

Oil prices have touched fresh 2016 highs for a third day in a row, bolstered by the weakening US dollar as traders look beyond record high US crude inventories and relentless pumping by major producers to the prospect of future demand.

Brent futures for June delivery was up 73 US cents, or 1.54 per cent, to $47.91 a barrel, while WTI was up 55 US cents, or 1.21 per cent, at $45.87.

PRECIOUS METALS

Gold has risen more than one per cent as the Bank of Japan held off from expanding monetary stimulus, boosting the yen versus the US dollar, and after the Federal Reserve signalled it was in no rush to tighten monetary policy.

The Fed left interest rates unchanged after its latest meeting on Wednesday and, while keeping the door open to a rise in June, showed little sign it was in a hurry to tighten policy amid an apparent slowdown in the US economy.

“The Fed in the end was dovish when a slightly more hawkish message was expected, so that was supportive for gold, while the Bank of Japan clearly wrong-footed the market,” Societe Generale analyst Robin Bhar said.

BASE METALS

Copper prices have risen due to a lower US dollar after the Federal Reserve left interest rates on hold and as the market awaited for confirmation of stronger demand in top consumer China.

“Markets are waiting to see if there is a basis for the recent rally,” said Danske Bank analyst Jens Pederson.

“The last part of the rally we saw in base metals was due to sentiment regarding improvements in China … We need to see that feeding through into base metals demand to see higher prices, see them back above $US5,000.”

Clues to Chinese demand will come next week with the release of surveys of purchasing managers in the country’s manufacturing sector.

“Feedback from recent investor meetings would suggest most are still underweight the metals and mining sector,” UBS said in a note. “Concerns are clearly centred on the sustainability of the recent Chinese momentum.”

ASX stocks to watch on Friday, April 29

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO

The iron ore price has jumped $US2.57 to $US63.66, still a way off the $US70.46 this time last week.

WPL – WOODSIDE PETROLEUM

ORG – ORIGIN ENERGY

STO – SANTOS

Benchmark crude oil prices have edged up more than one per cent, with Brent crude lifting 73 US cents, or 1.55 per cent, to $US47.91 and WTI up 54 US cents, or 1.19 per cent, to $US45.87.

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