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Morning Market Report

Trading is unusually quiet in the market and in the retail sector.

The market is down five points. The Dow Jones closed down 78 at 16,009. The market traded around opening levels before drifting towards the close in a 112 point range.

While encouraged by stronger than expected economic data, some thought the economic strength may bring forward tapering. The market was also disappointed with lacklustre retail trading in the first week of the holiday season.

The S&P was down 5 points to 1,801.

Oil was up 1.20% at US$93.83

Gold fell US$30.60to US$1220.00 per ounce.

The US$ was stronger against most major currencies. The Aussie dollar fell after the strong US manufacturing data. It fell below US$0.91c and is currently trading at US$0.9106.

VIX volatility index rose 3.87% to 14.23.

US treasury markets were weaker  —  the yield on the 10 year bond rose five basis points to 2.798%.

European shares were weaker  — the UK FTSE fell 0.83%, the French CAC fell 0.22%% and the German DAX fell 0.04%. Peripheral markets were weaker with the exception of Greece, up 2.72%.

European bonds were weaker, with the yield on the Euro 10 year bond rising five basis points to 1.744%. The UK 10 year bond yield rose eight basis points.

Base metal prices were weaker  —  copper fell 1.19%, aluminium fell 0.77% and lead fell 0.64%.

Iron ore rose was rose US$0.40 to US$136.80 a tonne.

STORIES

  • Good US economic data  — The US ISM index of manufacturing rose to 57.3 in November against expectations of 55.0 and from 56.4 in October. The employment component of the index was positive for the main payrolls data release on Friday. Construction spending was up 0.8% to be at the fastest pace since May 2009.
  • The US dollar rallied as a result of the manufacturing data — strong data suggests tapering may start sooner — and the Aussie traded lower, hitting a low of around US 90.90c. Its currently around US 91.32c.
  • RBA meets today  — no change to monetary is policy is expected. An AAP survey of economists has none expecting a change this month and only eight (of the 14) expecting a rate cut next year.
  • Data today  — retail trade, current account balance and the government finance statistics.
  • AGM season winding up – today we have a Brambles (BXB) EGM on the demerger of the Recall business.
  • Chinese PMI data – yesterday the HSBC manufacturing PMI came in at 50.8, higher than the 50.5 expected (previously 50.9). Today we have the official Chinese services PMI.
  • Overseas data tonight  — car and truck sales in the US and UK construction PMI
  • 2 IPOs this week  — Dick Smith lists tomorrow and Nine Entertainment on Friday.
  • Qantas Airways (QAN) — CEO Alan Joyce has ruled out a capital raising and said the Australian public was  in favour of it remaining the national carrier and be locally owned. Fund managers have urged the airline to raise capital to strengthen their balance sheet. But this would mean the already low share price would fall even more, as the raising would be done at a discount.
  • Rio Tinto (RIO) —  Investor Seminar  — Rio said they are cutting costs quicker than expected and committed to lowering capital expenditure by around 40% over the next two years. They delivered a $US1.8 billion improvement in operating cash costs in the 10 months to October. The miner remains on track to post the $US2 billion target for 2013. They also announced an $US800 million reduction in exploration spend. RIO forecasts 2013 total capital expenditure of less than $14 billion, a reduction of more than 20% compared to 2012. CEO Sam Walsh said market fragility and volatility were persisting with the impact of decisions like quantitative easing and austerity programmes still continuing.
  • Virgin Australia (VAH) — Will go ahead with their $350 million equity raising despite after getting approval from the Takeovers Panel. The airline’s equity raising plans will see three foreign airlines — Air New Zealand, Etihad Airways and Singapore Airlines increase their stake in the company from 62.6% to almost 70%.
  • Stockland (SGP) —  Has confirmed that it is on track to grow EPS by 4%-6% this financial year. MD Mark Steinert said ,”Our new management team is in place, with the right mix of skills and experience to deliver our strategy; we have allocated $507 million of capital from the trust to the corporation; successfully divested our FKP stake at a premium to carrying value; and we are making excellent progress in each of our operating businesses.” He also said profit would be skewed to the second half and SGP will maintain their distribution at 24c.

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