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Morning Market Report

Markets slightly up on the back of favourable half-year results.

The market is up 36 points. The Dow Jones closed up 129 to 15,885. The market opened strongly and largely maintained its strength throughout the day in a 170 point range.

Economic data was mostly stronger than expected, with the exception of the New York manufacturing index which came in at one compared to the five expected. Industrial production rose 1.1%, ahead of expectations for a 0.4% increase and productivity rose 3% in the third quarter. Capacity utilisation was also strong. The generally positive economic picture increased expectations of an early start to tapering after the December FOMC meeting this week.

The S&P rose 11 points to 1,787.

Oil was up 0.77% at US$97.34.

Gold rose $5.50 to US$1,240.10 per ounce.

The US$ was weaker against most major currencies. The Aussie dollar was generally weaker and is currently trading US$89.43c.

VIX volatility index rose 1.71% to 16.03.

US Treasury markets were weaker  —  the yield on the 10 year bond rose two basis points to 2.881% in quiet trade.

European bonds were weaker, with the yield on the Euro 10 year bond rising one basis point at 1.833%. The peripheral markets were generally stronger.

Base metal prices were mixed  —  copper, zinc and lead rose, with zinc and copper up around 0.60% each, while nickel fell 0.48% and aluminium was 0.40% lower.

Iron ore was down US$1.90 at US$136.00 a tonne.

STORIES

  • Warrnambool Cheese and Butter (WCB) — Shares have gone into trading halt ahead of an announcement from the Australian Takeovers Panel. In a statement to the ASX this morning, WCB said it expected an announcement from the panel regarding Saputo later in the day.
  • REA Group (REA) — Is losing chief executive Greg Ellis. REA is down 7.5%.
  • APA Group (APA) — Has finally struck a takeover deal with Envestra (ENV) who upped the value of its offer. APA moved to take full control of Envestra with a bid valuing the Australian pipeline operator at $2.20 billion.
  • Labor’s budget deficit will be unveiled by Joe Hockey, expected to be $47 billion. The federal government will warn of a further decade of deficits and without a dramatic realignment of public sector spending and revenue through improved economic growth, the nation will face deficits for the next 10 years. The mid-year economic and fiscal outlook (MYEFO) today will show deficits totalling more than $120 billion over the next four years. Economists now don’t expect a return to budget surplus until at least 2017/18.
  • Dividend support  — payments of dividends this week, mostly by the banks ANZ, NAB and WBC will add over $8 billion to the accounts of shareholders this week. Some should be reinvested, hopefully proving a catalyst for a pre-Christmas market rally. Contrary to earlier bullish analyst forecasts, the ASX200 index is currently trading at 5089 — well shy of estimates of 5500-5600 some analysts were predicting.
  • NBN chairman Ziggy Switkowski has conceded that the NBN could become obsolete in decades. In an interview with the AFR he said there is room for improvement on the numbers produced in the strategic review of the NBN. The report found that the coalition plan would cost $41 billion more than the $29.5 billion expected in April.

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