Local shares are poised to bounce at the open on the back of a strong lead from overseas markets.
What you need2know:
• SPI futures up 30 points to 5472
• AUD at 90.95 US cents, 97.45 Japanese yen, 70.18 Euro cents and 55.89 British pence
• On Wall St, S&P 500 +0.8%, Dow +0.6%, Nasdaq +0.8%
• In Europe, Euro Stoxx 50 -0.3%, FTSE -0.2%, CAC -0.4%, DAX -0.3%
• Iron ore falls 0.8% to $US84.50 per metric tonne
• Spot gold up 0.2% to $US1235.75 an ounce
• Brent oil adds 1% to $US98.93 per barrel
What’s on today
Australia: ABS International merchandise imports for August, Westpac-Melbourne Institute Leading Indexes of Economic Activity, Premier Investments full year results
Stocks to watch
■ Hartleys Research has retained a “buy” recommendation on mining services company MACA Ltd and has a 12-month price target of $2.58 a share.
■ Commonwealth Bank initiated coverage of Healthscope Limited with an “overweight” recommendation and $2.55 price target.
■ Citi Research cut its target price for Arrium by 42 per cent to 52¢ a share and downgraded the company to “sell” after it said it would raise $754 million in equity.
■ Goldman Sachs dropped its 12-month price target on Henderson Group from $4.95 to $4.50 and with the share price having already fallen well past this point, it maintained its “buy” rating.
The following stocks will trade ex dividend today:
Bentham, Beyond International, Breville Group, Cadence Capital, Clime Investment, Embelton, Flight Centre, Panoramic Resources, SKYCITY Entertainment, Seek, Structural Systems, Swick Mining, Weebster.
Currencies
Westpac Banking Group is predicting the Australian dollar will finish the year at around its current levels of US90¢. That is based on the view that iron ore prices are overshooting and will edge back towards $US100 a tonne, from $US85 a tonne currently, as a target by year end.
“Fair value was closer to US88¢ and now is more like US85¢ if you just take today’s prices of iron ore and commodities.
“We wouldn’t be revising our view on the dollar on the assumption that iron ore will rebound,” said Westpac senior currency strategist Sean Callow.
Australia and New Zealand Banking Group chief economists Warren Hogan agreed that fair value for the Australian dollar was at least US85¢, and possibly even a bit lower, as the currency plays catch up to the weakness in commodity prices.
Commodities
Scott Schuberg, CEO at Rivkin Securities said that in keeping with the recent theme of weaker commodity prices and subdued inflationary pressures from those weaker markets, affected securities (base metals, crude oil and commodity currencies like the Australian dollar) will likely remain in step with each other, providing a trend for those keen short-sellers, or an opportunity for those betting on a swift reversal. Sustained weakness in commodity markets will ultimately feed through from producer prices, to headline consumer prices and ultimately to core consumer prices, meaning that – should the trend continue – central banks will feel less pressure to raise rates, especially in economies with high household consumption of energy.
“I do continue to believe that this commodity market weakness is an economic blessing for economies like ours that are threatened most by the potential of having to raise interest rates due to high inflation. If weaker inflation can allow the developed world to keep interest rates lower for longer, not only will it be of benefit to developed economies, but importantly the developing economies that have relied so heavily upon investment being supported by cheap first-world funding on the back of low interest rates.”
United States
The Dow Jones industrial average was up 0.8 per cent and hit a new intraday record of 17,167.05 in afternoon trading. The Standard & Poor’s 500 gained 0.9 per cent, while the Nasdaq composite index rose 0.8 per cent.
Stocks extended gains as Sina.com reported that China’s central bank is starting a 500 billion yuan ($81 billion) standing lending-facility to the nation’s five biggest banks. The report cited Guotai Junan banking analyst Qiu Guanhua.
Europe
European stock markets dipped as investors looked ahead to a policy meeting of the US Federal Reserve and the looming referendum on Scottish independence. London’s benchmark FTSE 100 index shed 0.18 per cent to close at 6792.24 points, while Frankfurt’s DAX index dropped 0.28 per cent to 9623.93 points and in Paris the CAC 40 fell 0.44 per cent to 4409.15 points.
Investor sentiment in Europe’s biggest economy, Germany, fell for the ninth month in a row in September amid jitters about the economic fallout from global crises, a survey indicated. The widely watched investor confidence index calculated by the ZEW economic institute fell by 1.7 points to 6.9 points.
Asia
Tokyo stocks closed 0.23 per cent lower, ending a five-day winning streak, after weaker-than-expected US and Chinese factory output dented sentiment ahead of the Fed meeting. The Nikkei 225 index at the Tokyo Stock Exchange, which hit a fresh eight-month high on Friday, ended down 36.76 points at 15,911.53, while the Topix index of all first-section shares fell 0.22 per cent, or 2.86 points, to 1310.86.
South Korea’s Kospi index added 0.4 per cent, Taiwan’s Taiex index slipped 0.9 per cent and Singapore’s Straits Times Index declined 1.2 per cent. India’s S&P BSE Sensex Index lost 0.8 per cent.
What happened yesterday
Australian shares and the local currency remained under pressure on Tuesday despite the biggest rebound in the iron ore price for six months. Globally, investors are focused on the US Federal Reserve’s Federal Open Market Committee meeting, which ends on Wednesday night, as they wait for clues to the direction and pace of change in interest rate policy.
The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each fell 0.5 per cent on Tuesday, to 5445.4 points and 5446.2 points respectively. In currency markets, the Australian dollar had dropped to US89.94¢ soon after the ASX closed.
Wires
