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Morning Market Report

A quiet day on the markets as the Aussie dollar drops in value.

The market is flat.

The Dow Jones closed down 104 to 15,739. The mt was weak early on and attempted to recover during the afternoon, only to drop towards the close in a 140 point range.

The data was generally positive, with retail sales up 0.7% above expectations of 0.6%. The market commentary continued to focus on the likely timing of tapering. The weekly jobless claims  were weaker than expected although an early Thanksgiving has affected the seasonal adjustment of some economic data.

The S&P was down seven points to 1,776.

Oil was down 0.05% at US$97.39.

Gold fell $32.40to US$1,224.80 per ounce.

The US$ was stronger against most major currencies. The Aussie dollar was weaker, reaching a low of US$0.8917, and is currently trading US$89.36c.

VIX volatility index rose 0.78% to 15.54.

US Treasury markets were weaker  —  the yield on the 10 year bond rose three basis points to 2.883%. The Federal Treasury completed the final tranche of a three part $64 billion auction with $13 billion of 30 year bonds auctioned at 3.9%.

European shares were weaker  — the UK FTSE was down 0.96%, the French CAC fell 0.43% and the German DAX was down 0.66%.

European bonds were weaker, with the yield on the Euro 10 year bond up two basis points at 1.837%.

Base metal prices were mostly weaker  —  led by aluminium down 1.39%, lead down 0.83% and nickel down 0.13%. Copper was the exception, rising 0.21%.

Iron ore was down US$1.20 at US$137.90 a tonne.

STORIES

  • A quiet night in overseas markets. US retail sales were strong, rising 0.7% compared to 0.6% in October. The data reinvigorated talk of an early start to tapering at next week’s Fed meeting. Other data wasn’t as upbeat. The weekly jobless claims increased 68,000 to 368,000 compared to expectations of 315,000.
  • The Australian dollar hit a low of US$0.8917 last night and is now trading at US$0.8935. There have been a number of factors pushing the dollar lower. RBA Governor Glenn Stevens commented to the Australian Financial Review that the Australian dollar is overvalued and a fall in value would be preferable, from an RBA perspective, to a further cut in interest rates. He believes a value of US 85c is about right. Previously Mr Stevens has been clear about wanting the Aussie dollar to fall but has not given any specific level of fair value or a “target”. The rise in the unemployment rate from 5.7% to 5.8% and comments from Tony Abbott in parliament yesterday suggesting the RBA could use its addition capital injection to intervene in markets also put pressure on the Aussie dollar. Further falls were seen overnight following the release of strong US data, which led to general US dollar strength.
  • Silverchef (SIV) — Have issued a profit downgrade. The Company expects profit for the six months to 31 December 2013 to be down 5%-10% compared with the prior corresponding period. The main reason for the lower guidance is the slower asset acquisition rate within the GoGetta business. The slower rate of growth was first recognised in the second half of the 2013 financial year and has continued into the 2014 financial year. Financial year profit is expected to be 10%-15% below previously advised guidance of $13 million.
  • Tatts Group (TTS) — Former Queensland Liberal Party leader David Watson has been appointed to the board of directors. The shares were steady at $2.97.
  • Virgin Australia Holdings (VAH) — rose 1c or 2.27% yesterday after announcing Singapore Airlines, Etihad Airways and Air New Zealand will increase their stakes to almost 70 per cent as part of a $351.5 million capital raising.
  • Qantas Airways (QAN) and Emirates could be a step closer to forming a deal which will involve their Jetstar’s Asian arm.
  • Transfield (TSE) — Closed down 13.78% and is the latest mining services company to be sold off despite reaffirming fiscal 2014 earnings guidance for a profit of $65-70 million. The investor day presentation highlighted continued increases in near-term gearing and the substantial amount of work needed to change the business. Gearing is also on the way up. The weakening in the resources sector will weigh on company earnings.

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