Markets react to news of Australia’s free trade deal with South Korea.
The market isdown 35 points.
The Dow Jones closed down 68. It was down 80 at worst.
Tapering talk was reinvigorated after a stronger than expected third quarter GDP revision to 3.6% from the second estimate of 2.8%. Weekly jobless claims were weaker than expected. Jobs numbers tonight are the main data point of the week.
The S&P was down 8 points to 1,785.
Oil was up 0.12% at US$97.32.
Gold fell US$23.50 to US$1223.70 per ounce.
The US$ was weaker against most major currencies.The Aussie dollar was stronger and is currently trading at US90.68c.
VIX volatility index rose 2.86% to 15.12.
US Treasury market was weaker — the yield on the 10 year bond rose four basis points to 2.873%.
European shares were weaker — led by the French CAC down 1.17%, the German DAX down 0.61%. The UK FTSE fell 0.18%.
European bonds were weaker, with the yield on the Euro 10 year bond rising nine basis points to 1.860%. The UK 10 year bond yield also rose 9 basis points.
Base metal prices were mixed — copper down 0.38% after a 2% rise yesterday.
Iron ore fell 20c to US$139.50 a tonne.
Holden — A leak from Canberra suggests Holden may quit Australia in 2016 and may already have decided to leave the country regardless of what action or additional assistance Canberra offers. There are also reports that a decision on the car maker’s future has already been made in Detroit US. This pre-empts ongoing talks with the Australian government and any official announcements from the company at a later date. It rather undermines the argument about Australia’s manufacturing base filling a gap left by the resources boom and highlights how uncompetitive Australia is as a manufacturing base thanks to the high A$ and labour costs.
The government has struck a free trade agreement with South Korea — tariffs will be eliminated on local exports of agricultural products such as beef, sugar, wheat, wine and dairy, as well as energy, resources and manufactured goods. The new FTA with South Korea will also lead to cheaper cars, but it will almost certainly crush what’s left of the Australian auto manufacturing industry, affecting both Holden and Toyota. Other industries that will have to compete with Korea include the steel, textiles and clothing industries. Although a negative for some industries it will double Australian beef exports to Korea (one of our main customers) by 2030.
NineEntertainmentHoldings (NEC) — Will make its debut on the ASX at 12pm today. NEC which owns the Nine Network, Ticketek and ninemsn will list at 205c, which is the bottom of the range put forward in the company’s PDS. At this price, the company will be worth $1.93 billion, making it the biggest IPO of the year.
Qantas (QAN 107c) — Shares have been placed in trading halt, pending receipt of information from Standard & Poors in relation to its credit rating. QAN have said the announcement is likely to be materially price sensitive.
Nufarm (NUF - 440c) — Closed down 7.56% yesterday after a subdued market update at its AGM. It said that seasonal conditions remain challenging and the summer crop is likely to be below average. Credit Suissse have this morning cut its target price by 11% to 510c.