need2know: Weak lead from Wall St

Local shares appear set to open lower to start the week as the global rally lost some momentum in trading on Wall Street on Friday.
Shanghai night field

What you need2know

SPI futures down 18pts at 5249

AUD at 73.34 US cents, 88.07 Japanese yen, 64.51 Euro cents and 47.81 British pence

On Wall St, S&P 500 flat, Dow +0.2%, Nasdaq +0.%

In Europe, Stoxx 50 +0.8%, FTSE +0.7%, CAC +0.5%, DAX +1%

Spot gold up $US17.52 or 1.5% to $US1156.53/ounce

Brent crude down 51 US cents or 1% to $US52.54/barrel

Iron ore adds 0.1% to $US56.01/tonne

What’s on today

lending finance, credit and debit card lending; US Columbus Day holiday – US stock markets open, bond markets closed; The Organisation of Petroleum Exporting Countries publishes its Monthly Oil Market Report in Vienna; London Metal Exchange Chief Executive Officer Garry Jones and Hong Kong Exchanges & Clearing CEO Charles Li are among speakers at the LME Metals Seminar, kicking off LME Week in London.

Stocks in focus

Bell Potter has a “buy” on Macquarie Group and a target price of $91.50 a share, both unchanged. Goldman Sachs retains a “neutral” on Macquarie Group.

Goldman Sachs has a “neutral” recommendation on Medibank Private and a target price of $2.65 a share, up 6 per cent. “We expect MPL to remain focused on reducing the growth in claims given the demographic headwinds it faces. We forecast gross margin to improve only modestly in the medium term (13.9 per cent in FY18, up from 13.6 per cent in FY15).”

Macquarie Wealth Management has an “outperform” on Westfield Corp and a price target of $12.13 a share.

Currencies

A “persistent” weakening of the yuan would be inconsistent with the fundamentals of the world’s second-biggest economy, and the country is committed to making its currency regime more flexible and market based, said People’s Bank of China deputy governor Yi Gang said at the International Monetary Fund annual meetings in Lima.  The yuan has fallen 2.1 per cent against the US dollar since August 11, when the central bank announced steps to put the currency more in line with market forces.

The Bank of England suggested that inflation could remain below 1 per cent until the spring of 2016, which is longer than anticipated, writes Kathy Lien, managing director of FX strategy for BK Asset Management.

Commodities

Iron ore capped the biggest weekly increase since the start of August as traders and steel mills in China sought to replenish inventories after returning after a week-long break. Ore with 62 per cent content delivered to Qingdao rose 5.4 per cent this week, the largest gain since the five days to August 7, according to Metal Bulletin Ltd. Prices climbed 0.1 per cent to $US56.01 a dry metric ton on Friday.

Zinc surged 12 per cent to a two-month peak on Friday and other base metals also rose strongly after commodities group Glencore said it would cut its zinc output by a third, sparking a short-covering rally across the board. Zinc’s jump, its biggest one-day gain in at least a decade, followed Glencore’s announcement that it will cut 500,000 tonnes of annual zinc production, equivalent to around 4 per cent of global supply, in its latest response to weak commodities prices.

London Metal Exchange three-month zinc shot up to an intraday peak of $US1875 a tonne, a gain of 12.5 per cent. That was its highest price since August 11 and its biggest single-day gain in Reuters data, which goes back to mid-2005. It closed up 10.1 per cent at $US1835. Zinc prices sank to their lowest in over five years at $US1601.50 late last month, partly on an overhang of inventories.

United States

US stocks rose, with the Standard & Poor’s 500 Index posting its strongest weekly gain this year, as equities continued to rebound from their worst quarter since 2011. The S&P 500 had a weekly gain of 3.3 per cent, its best week since December. For the week, the Dow rose 3.7 per cent while Nasdaq rose 2.6 per cent.

Shares advanced Friday without the help of energy and raw-material companies, the two best-performing groups so far this month, as energy snapped its longest winning streak in six years. Apple added 2.4 per cent to boost technology shares. Alcoa slumped 6.8 per cent to weigh on commodity related companies.

“Policy makers are trying to be prudent with policy, but not panicking over the global outlook,” said Brian Jacobsen, who helps oversee $250 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “We’ll see whether or not we can hold above 2,000 in the S&P 500 and build from here ahead of earnings.”

Europe

A rally in mining shares buoyed European stocks on Friday, sending them to their biggest weekly gain since July. Commodity companies climbed for a ninth day, the longest streak since 2000. Zinc producer Boliden jumped 13 per cent after Glencore cut its output of the metal by a third, while ArcelorMittal and Anglo American gained 6 per cent or more. Glencore gained, taking its weekly surge to a record 36 per cent.

In London, BHP Billion added 4.32 per cent and Rio Tinto rose 3.15 per cent. Miners represented six of the top 10 performers on the FTSE 100.

Norsk Hydro gained 5 per cent after signing a letter of intent to acquire Vale’s 40 per cent stake in Brazilian bauxite producer Mineracao Rio do Norte.

What happened on Friday

The ASX rose for the fifth straight day to enjoy its best week since December 2011, thanks to a stunning reversal in fortunes among energy stocks and bets the US Federal Reserve will delay its interest rate hiking cycle. The S&P/ASX 200 added 69 points, or 1.3 per cent, on Friday to close at 5279.7, or 4.5 per cent higher for the week. The broader All Ordinaries index gained 1.3 per cent on Friday and 4.3 per cent over the five sessions at 5309.2.

Among the blue-chips, BHP was up 2.4 per cent on Friday and 13.3 per cent for the week to $25.60, while Rio Tinto was up 3.7 per cent for the day and 13.2 per cent for the week.

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