Morning Market Report

The market is down 19 points. The Dow Jones was down 153 points to 15,594. The market erased an initial 50-point gain, briefly hitting a new intra-day high before drifting lower over the day in a 210 point range.  Economic news was initially seen as positive with the third-quarter GDP coming in at 2.8%, ahead of 2.5% in the second-quarter and estimates of 2.0%. The weekly labour data also improved.

The S&P was down 23 to 1747.  Oil fell 0.46% to US$94.34. Gold was down US$10.20 to US$1307.60 per ounce. The US$ rose against most major currencies and the Aussie dollar was weaker, currently trading at US$0.9455. VIX volatility index fell 9.71% to 13.90.

US treasuries were stronger — The 10-year yield fell 4 basis points to 2.604%. European share were mixed — European markets initially rallied after the ECB cut interest rates but then share prices came back, with the French CAC falling 0.14% and the German DAX rising 0.44. The UK FTSE fell 0.66% after the Bank of England left rates unchanged. European bonds were stronger. French and German bonds both rose, with the 10-year yield falling 6 basis points. Italian and Spanish bond yields fell by 10 basis points.

Base metal prices lower — copper and aluminium rose by 0.54% and 0.08% respectively, but most metals were weaker, led by nickel down 0.77%. Iron ore fell US$0.20 a tonne to US$136.90 a tonne.

STORIES 

  • RBA Statement on Monetary Policy — The RBA has made it clear that more interest rate cuts could be on the cards because of the high Aussie dollar and concerns the mining industry could drop at a faster rate. The RBA has left the cash rate unchanged at 2.5%.
  • Westpac (WBC) is ex-dividend 88c plus a 10c special today. As with the NAB and ANZ, which fell 121c and 142c having gone ex dividend 97c and 91c, WBC has fallen more than its dividend today as well taking 12 points off the ASX 200 on its own.
  • Good news is bad news — The US GDP number came in better than expected overnight at 2.8% from 2.5% in the third quarter and expectations of 2.0%. But the devil was in the detail. Most of the benefit was due to a build-up in inventory and consumer spending actually rose at the slowest pace since 2011. Corporate investment fell.
  • Jobs numbers — Weekly initial claims fell 9,000 to 336,000. The all important non-farm payrolls numbers are out tonight in the US. Expectations are for an increase of 125,000 and an uptick in the unemployment rate to 7.3% from 7.2%.Qantas (QAN) – Has confirmed they will be closing their Avalon heavy maintenance facility at the end of March 2014. This will result in the loss of 300 jobs. Qantas will continue to maintain aircraft at its major heavy maintenance facility in Brisbane and conduct line maintenance at 19 ports around Australia including Melbourne.
  • Fortescue Metals Group (FMG) — Canadian mining company Teck has sold $503 million stake in the company. CIMB has placed 91.5 million shares at 550c after market yesterday — the trade crossed first thing this morning. Roughly 3% of the company. The price was a  discount to the market price of 570c. The price is up from 516c a week ago so the sale at 550c is well timed.
  • Australian Agricultural Company (AAC) — Australia’s largest beef producer had interim results yesterday and said the impact of the temporary suspension of live cattle exports to Indonesia in 2011 and drought led to a $31.6 million half-year loss. The stock was unchanged on the day.
  • Ausdrill (ASL) — Shares in mining services firm Ausdrill fell 28.7% yesterday after a profit warning — the companysaid full-year profit would fall heavily due to lower spending by the mining industry.
  • David Jones (DJS) — Lots of press about Paul Zahra being asked by institutional investors to stay on and criticism of the board for announcing his departure just before the Christmas trading period.
  • Australian labour data disappoints — Yesterday’s local jobs numbers surprised on the downside. Employment rose by only 1100 jobs compared to market expectations of an increase of 10,000. The composition also disappointed — the increase was in part-time employment, while full-time employment fell. The unemployment rate was in line with expectations at 5.7% and the participation rate remained at a seven-year low of 64.8%. The number makes a rate cut marginally more likely.