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Morning Market Report

Excitement on the markets worldwide as the US posts encouraging employment figures.

The market is down 32 pointsThe Dow Jones closed up 199 to 16,020, bouncing from a 5 session drop. The day began strongly and the market continued to strengthen during the day in a 200 point range.

Economic data was positive and was received positively. Employment rose 203,000 compared to expectations of +180,000 and the unemployment rate fell to 7%.

The S&P was up 20 points to 1805.

Oil was up 0.27% at US$97.65.

Gold fell US$2.90 to US$1229.00 per ounce.

The US$ was weaker against most major currencies. The Aussie dollar was stronger and is currently trading at US91.32c.

VIX volatility index fell 8.55% to 13.79.

US Treasury markets were stronger —  the yield on the 10 year bond fell two basis points to 2.857%.

European shares were stronger  — the German DAX was up 0.96%, the UK FTSE was up 0.83% and the French CAC rose 0.72%.

European bonds were stronger, with the yield on the Euro 10 year bond falling two basis points to 1.840%. The UK 10 year bond yield also fell two basis points.

Base metal prices were stronger —  aluminium rose 1.21%, copper rose 0.0.78% and Zinc rose 0.59%.

Iron ore fell 30c to US$139.20 a tonne.

Expectations of the timing of tapering have only changed marginally from a March starting point — the upcoming Fed meeting on December 17-18 is thought to be unusual timing by many analysts — but an earlier start cannot be ruled out.

The Aussie dollar rose over the weekend on the back of strong Chinese trade data and better than expected US Non-farm payrolls figures. It rose more than three-quarters of a US cent and is trading around US91.26c this morning. China’s exports grew much stronger than expected last month due to demand from the US and Europe with the surplus increasing to US$33.8 billion.

STORIES

  • QBE —  Write down  — Stock down 20%. Has increased its North American claims provision and has written down the division. It now expects a reported net loss of $250 million due to claims provisioning and intangibles and goodwill write-downs in North America. Cash profit is reduced from $1.042 billion to $850 million. It expects a combined operating ratio for 2013 of 97-98% and an insurance profit margin of around 6%. Investment returns are currently on track to slightly exceed the previous guidance of 2.25%. Gross written and net earned premium are on track with previous guidance of $17.8 billion and $15.2 billion respectively. QBE has also announced that the chairman Belinda Hutchinson AM will retire from the board of QBE in March 2014. Shares are expected to fall on the open.
  • Telecom NZ (TEL) — Has sold its AAPT business to TPG Telecom (TPM) for $450 million. The transaction is free of conditions and will be completed by February 28. AAPT is one of Australia’s leading telecoms infrastructure companies. It reported financial year 2013 revenue of $410.3 million. TPG is funding the acquisition by increasing its debt facility. TPM is up 7%.
  • Rio Tinto (RIO) & ERA  — Has confirmed that its containment management systems have prevented any impact on Kakadu National Park following a significant on-site incident at the Ranger Mine. Clean-up operations are well advanced and there were no injuries. The containment management system fully captured the slurry material from the failed leach tank. ERA is down 8%.
  • Australian Pharmaceutical Industries (API) — Has reported first quarter sales for its network of Priceline & Priceline Pharmacy stores. Sales were up 8.2% for the 13 weeks to November 30. On a comparable basis sales were up 5.4%.
  • Leighton Holdings’ (LEI) — John Holland Aviation Services may be put up for sale or closed as the loss-making business is hurting after losing three big contracts. The division reported a $7.13 million operating loss in the 2012 calendar year. Since July the business has lost large heavy maintenance contracts with Virgin Australia, Jetstar and Tigerair Australia.
  • Agreement on the proposed Trans-Pacific Partnership (TPP) is unlikely to be reached during a four day meeting between 12 countries including the US and Australia. US President Barack Obama has hailed the TPP as a centrepiece of renewed US engagement with Asia, but the complexity of the partnership has led to delays in negotiations.
  • The World Trade Organisation (WTO) has reached a worldwide trade reform deal in Bali after five days of negotiations. It is the first global agreement since the WTO was created in 1995 and aims to lower trade barriers through simplification of customs procedures and reduced agricultural subsidies. The deal could potentially add $1 trillion to the global economy and add 20 million jobs, mainly in developing countries.
  • China has declared that Japan has no right to criticise its newly established air defence zone it says is in accordance with international law.
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    Dulong Ttil
    Posted Monday, 9 December 2013 at 8:35 pm | Permalink

    The China’s international trade figures, which were released during last weekend, are good but only limited to the Export from Chinese side. The figures of Imports into China are weak and have dropped significantly. It means China’s demands on importing goods from other countries, e.g. Australia etc. has been reduced substantially.

    This is a not a good signal to Australia.

    In such unfavorable case, the Australian government should consider to adopt tougher monetary easing policy to drive the A$ downwards healthily. So, our Export competitiveness can be strengthened and, our economy can be improved.

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