Morning Market Report

The market is up 33 points. Dow Jones was up 75. It was up 79 at best. The Dow was up 454 last week or 3.04%, the biggest weekly gain since January. S&P 500 was up 5 to 1688. The US$ fell and the A$ jumped on the news that Lawrence Summers was withdrawing his name from consideration as the next Federal Reserve chairman. He was seen as being against quantitative easing more so that Janet Yellen, who remains in the frame. It makes money printing more likely in future and in so doing weakens the US$.

The A$ also jumped to 93.38c on a Chinese official confirmation that better than expected economic performance confirms a 7.5% GDP forecast for this year. Retail sales came in below expectations at +0.2%. Consumer sentiment came in at a five-month low.  July business inventories came in above expectations. Syria’s diplomatic solution is crystallising — it is happening in stages with an inventory of chemical weapons needed from Syria this week or the threat of military action remains. Either way it looks like the stock market significance of the issue is fading. Oil price down 1.6% on the week. Gold down another $22 to a five-week low as the prospect of military action in Syria fades. We sold our gold trade on Friday as the chart tipped over. The gold price was down 5.62% on the week.

Federal Open Market Committee meeting this week — it is a two-day meeting — the statement will be out Thursday morning 4am our time. It is expected to implement a token reduction in quantitative easing of maybe $5 billion-10 billion to $75 billion-$80 billion of asset purchases a month instead of the current $85 billion.

BHP was down 0.61% in the US overnight. The stock closed in the US down 55c on the close on Friday largely thanks to a jump in the A$. RIO was down 0.50% in the US. US Bonds up small — The US 10-year bond yield down 2bp to 2.887%. Iron ore price down 70c to $134.50. European markets quiet. Intel up 3.6% and Sears up 6.1% on broker upgrades Metals mixed — copper, zinc and aluminium down, nickel up, but not by much. 

STORIES 

  • Banks scare — A front page article in the AFR says Foreign hedge funds are concerned about big share price falls in the Australian banks as a slowdown in emerging market growth (India, China, Asia generally) spreads to the Australian market.
  • Tapering less likely — Generally weaker than expected US retail sales, consumer sentiment and PPI numbers on Friday as well as the Summers withdrawal from Fed Chairman candidacy suggest the need for quantitative easing tapering is marginal.
  • A$ jump — The US$ fell on the news that Lawrence Summers was withdrawing his name from consideration as the next Federal Reserve Chairman. He is seen as being more against QE than Janet Yellen and more likely to accelerate tapering. The A$ jumped to 93.38c helped by a World Bank comment that better than expected economic performance confirms a 7.5% GDP forecast for this year.
  • Japan closed today for the “Respect for the Aged” Day.
  • Bigger stocks going ex dividend today — FLT (91c), TEL (6.76c), PRY (11c).
  • WBC says the election result has boosted business and consumer sentiment but the weak jobs report last week still shows that the economy is soft.
  • Leighton Holdings (LEI) — Cross City tunnel placed in voluntary administration.
  • Iluka (LIU) – Competitors Tronox, Kronos and Huntsman stocks surge in US trading last Friday.
  • CSL — Former CSL boss Brian McNamee left the top position at the blood products and vaccines supplier at the end of June with pay and entitlements worth almost $2 million.
  • iSelect (ISU) — The ACCC has demanded internal documents in a probe of the insurance comparison website’s disastrous stock exchange debut. The stock is down from 185c to 140.5c since listing.
  • Coca–Cola Amatil (CCL) — Has bought Vonu Beer with the aim of turning the Fijian premium draft lager into a regional export winner.