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Market report: Monday, May 2

Business

UPDATED: The Australian share market is trading around one per cent lower at noon as a disappointing half-year earnings report from Westpac weighs on the financial sector.

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Among the major banks at noon (AEST), Westpac had descended $1.66, or 5.35 per cent, to $29.39.

Westpac’s cash profit grew 3.3 per cent to $3.904 billion in the first half but missed analysts’ expectations of just over $4 billion due to an increase in bad loans.

Commonwealth Bank was off $2.39 at $71.50, ANZ had fallen 79 cents to $23.48, and National Australia Bank had reversed 92 cents to $26.27.

Earlier at 10.12am (AEST) on Monday, the benchmark S&P/ASX200 index was down 23.6 points, or 0.45 per cent, at 5,228.6, while the broader All Ordinaries index was down 18.5 points, or 0.35 per cent, at 5,297.5.

On the ASX 24, the share price futures index was down 25 points at 5,206, with 10,963 contracts traded.

At 6.45am (AEST) on Monday, the share price index futures contract was down six points at 5,225.

In local economic news on Monday, the Reserve Bank of Australia releases April’s index of commodity prices.

The NAB Business Survey and the Australian Chamber of Commerce and Industry business expectations survey are due out, as are the TD Securities-Melbourne Institute inflation gauge and the Australian Industry Group’s performance of manufacturing index (PMI), all for April.

Meanwhile, the RP Data Core Logic home value index for April and the Housing Industry of Australia’s new home sales data for March are also slated for release.

In equities news, Westpac is slated to release half-year results, Virgin Australia is expected to give a quarterly update, while Telstra has an investor day in Melbourne.

In Australia, the market on Friday ended the week with a modest gain as investors await next week’s Reserve Bank rate decision and earnings reports from three of the big four banks.

The benchmark S&P/ASX200 index was up 26.8 points, or 0.51 per cent, at 5,252.2 points.

The broader All Ordinaries index was up 26.6 points, or 0.5 per cent, at 5,316.0 points.

NEW YORK – US stocks have posted their largest weekly drop in more than two months as earnings reports continued to weigh, but the S&P 500 and Dow have managed to close up for April after strong showings mid-month.

Company results once more gave the market direction as a 9 per cent decline in Gilead Sciences shares weighed the most on both the S&P and the Nasdaq Composite.

Apple shares were down for the tenth session in the last 11 on Friday and closed the week down 11.3 per cent, the largest such decline since January 2013.

Its April fall was of 14 per cent.

Apple and Gilead, alongside Corning, Goodyear and Xerox are among the companies that reported earnings this week and are closing them with double-digit declines in their stock.

“Every sort of case-by-case blowup was handled in a company-specific fashion and lo and behold this week we have stumbled into some household names that kind of rolled the market over with them,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

The Dow Jones industrial average fell 57.12 points, or 0.32 per cent, to 17,773.64, the S&P 500 lost 10.51 points, or 0.51 per cent, to 2,065.3 and the Nasdaq Composite dropped 29.93 points, or 0.62 per cent, to 4,775.36.

The weekly declines were of 1.3 per cent for both the Dow and S&P and the Nasdaq fell 2.7 per cent. It was the largest weekly drop for the Dow since the week to Feb. 12, and for the S&P and Nasdaq the declines were the largest going back to Feb. 5.

LONDON – European shares fell to register their biggest weekly drop in more than two months, with travel and leisure stocks among the top losers after updates from British Airways owner IAG and Restaurant Group.

The STOXX Europe 600 Travel and Leisure index fell 2.3 per cent, putting pressure on the broader market.

British Airways-owner IAG fell 4.7 per cent. It said it would moderate its capacity expansion in the short term in response to weaker overall demand, despite reporting a forecast-beating rise in first-quarter profit.

The bank sector index fell 3.2 per cent with Royal Bank of Scotland and Bankia down 6 per cent and 3.6 per cent respectively after both lenders reported lower profits.

“Weaker earnings are starting to become a problem,” Philippe Gijsels, head of research at BNP Paribas Fortis, said.

“Companies that disappoint are being punished disproportionately while those that surprise on the positive side shoot up, indicating that markets are nervous and have little patience with underperformance,” he added.

The pan-European FTSEurofirst 300, which hit a three-month high last week, fell 2.2 per cent. It has fallen 2.1 per cent this week, its biggest weekly loss since mid-February.

The FTSE 100 fell 80.51 points, or 1.27 per cent, to 6,241.89, while Germany’s DAX lost 282.18 points, or 2.73 per cent, to 10,038.97.

HONG KONG – The yen hit an 18-month high as investors wagered the Bank of Japan might be done adding fresh stimulus to the economy, culminating in a sharp rise on the week that dragged stocks around the world lower.

With Japan on holiday, speculators drove the yen through 107.00 per US dollar for the first time since October 2014.

It was around 112.00 before the BOJ unexpectedly held policy steady earlier in the week.

“(US) Dollar/yen is not undervalued, and global macro conditions are by no means positive for risk sentiment,” Bank of America Merrill Lynch analysts wrote in a note to clients, adding that a test of 100 yen in the coming months is likely.

Earlier MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.5 per cent, on track for a decline of 1.7 per cent for the week. That would be its biggest weekly loss in over two months.

The Hang Seng fell 320.98 points, or 1.50 per cent, to 21,067.05, while the Shanghai lost 3.84 points, or 0.12 per cent, to 3,156.75.

WELLINGTON – The S&P/NZX 50 Index gained 30.6 points, or 0.5 per cent, to 6,820.59.

ENERGY

Brent crude has trimmed gains after its biggest monthly rise in seven years. It touched 2016 highs as a weak US dollar and falling US production tempered concerns about an oil glut.

A looming rise in Middle East output capped gains, but investor sentiment held the optimism that has helped lift oil futures nearly 80 per cent from January lows.

Brent futures for June delivery was down 0.40 per cent, or US40 cents, at $US47.37 a barrel, while WTI crude was down 0.24 per cent, or US11 cents, at $US45.92 a barrel.

PRECIOUS METALS

Gold and silver prices have rallied to their highest since January 2015 as the Bank of Japan’s decision the previous day to hold off expanding monetary stimulus weighed heavily on the US dollar, and European and US stocks fell.

The yen hit an 18-month peak versus the US currency and was on course for its biggest weekly gain since the 2008 financial crisis, with poor US growth and the Federal Reserve’s cautious stance this week weighing on the US dollar.

Spot gold was up 2 per cent at $US1,291.11 an ounce at 2.16 pm EDT (0516 Saturday AEST), having reached a 15-month high of $US1,296.76. US gold futures for June delivery settled up 1.9 per cent at $US1,290.50 an ounce.

For the week, the metal is up 4.8 per cent in what is set to be its biggest weekly rise since the week ended February 12.

“All the precious metals are up quite strongly on the back of weakness in the dollar, after poor GDP (gross domestic product) data in the United States and a lack of action by the Bank of Japan,” Capital Economics analyst Simona Gambarini said.

“There could be a correction in the price if the dollar starts strengthening again, but we remain positive on gold.”

Silver was up 1.5 per cent at $US17.80an ounce, having touched its highest since January 2015 at $US17.96 and being on track to rise 15.3 per cent this month, its biggest gain since August 2013 as it plays catch-up after lagging gold during its first-quarter surge.

Platinum was up 2.5 per cent at $US1,071.49 an ounce, off an earlier 10-month high of $US1,080, while palladium rose by as much as 2.3 per cent to $US634.96 an ounce, the highest in nearly six months.

BASE METALS

Aluminium has hit a nine-month peak as speculators push prices higher thanks to a weaker US dollar, but analysts are wary about a possible retreat.

Copper and other industrial metals also clawed higher ahead of new economic data in China that investors hope will confirm that a recovery there is gaining strength.

“You look at aluminium, the only buying this week has been CTA buying, we still see no consumer activity, they’re not chasing this price rally,” said Citi analyst David Wilson.

CTAs or Commodity Trading Advisors largely run speculative funds with trading decisions usually based on momentum and other technical factors.

“Aluminium is in overbought territory, given the fact we’ve seen decent volumes of producer hedging and I’d expect we’d see more going forward. Clearly, this looks overpriced,” Wilson added.

LME three month aluminium closed up 0.8 per cent at $US1,678 a tonne, the highest since July 2015.

Copper ended 2.2 per cent firmer at $US5,051 a tonne, adding to a 0.8-per cent rise in the last session.

Nickel gained 1.7 per cent to $US9,445 a tonne, lead rose 3.1 per cent to $US1,805, zinc added 1.4 per cent to $US1,938.50 and tin rose 0.7 per cent to $US17,220.

AAP

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