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Morning Market Report

Markets finish up, but the Aussie dollar continues to fall against the greenback.

The market is up 40 points. The Dow Jones was up 293 at 16,168. The market traded nervously ahead of the FOMC decision and then spiked following the Fed announcement. The market traded in a 360 point range.

The US Fed announced that it would reduce its $85 billion a month bond buying program, known as quantitative easing, by $10 billion a month. The news was accompanied by positive comments about maintaining easy monetary policy and ultra-low interest rates until the economic recovery has gained momentum and the unemployment rate is below 6.5%. Economic data was positive, with housing starts up over 22% in November, but the Fed decision was the key feature.

The S&P rose 30 pointsto 1,781.

Oil was up 0.44% at US$97.65.

Gold fell $12.60 to US$1217.50 per ounce.

The US$ was strongeragainst most major currencies. The Aussie dollar was volatile and traded between US88.30c and US89.40c. It is currently trading at US88.63c.

VIX volatility index fell 14.87% to 13.8.

US treasury markets were weaker  —  the yield on the 10 year bond rose five basis points to 2.890% following the Fed announcement of tapering.

European shares were stronger  — the UK FTSE rose 0.09%, the German DAX was up 1.06% and the French CAC rose 1.0%.

European bonds were weaker  —  the yield on the Euro 10 year bond rose two basis points to 1.843% and the UK 10 year bond yield rose five basis points to 1.843%.

Base metal prices were mixed  —  nickel rose 0.56% and lead was up 0.42% but zinc fell 0.95% and copper was down 0.24%.

Iron ore was down US$0.90 at US$133.40 a tonne.

STORIES

  • NAB  —  AGM: Chairman Michael Chaney says Australia faces years of modest growth and higher unemployment. But they expect increased business activity in 2014, and business confidence to be better than the last three years. They have also welcomed the Abbott government’s Financial Systems Inquiry.
  • Caltex (CTX) — Has released a full year profit outlook, with an  operating profit of $320-340 million. It has forecast a historic cost profit of $540-560 million. Operating Profit in 2012 was A$458 million.
  • Ausenco (AAX) — Has announced it has secured an Optimise phase contract with Karara Mining Limited to provide engineering and project support services for Karara’s iron ore operation in Western Australia.
  • NextDC (NXT) — Broker presentation to Morgans.
  • Sundance Resources (SDL) — Strong response to tender process.
  • Commonwealth Property Office Fund (CPA) — Clarification to DEXUS Announcement of 13 December 2013.
  • Wotif.com (WTF) — Closed down 31.82% yesterday after issuing a profit downgrade. Almost $280 million was wiped from the market value. Profit for the half is expected to be in the range of $21.9-22.6 million, compared to $27.5 million in the prior half-year. The outlook for the second half remains volatile with retail conditions in key Australian and New Zealand retail market continuing to be soft. Given this volatility, WTF has not provided guidance for the full 2014 fiscal year at this time.
  • Bega Cheese (BGA) — Closed up 1.61% and has effectively pulled out of the three way battle for WCB by deciding it will not extend the offer. Their offer will close 7pm this Friday December 20. Once the offer is closed, BGA will consider their options regarding their shareholding in WCB.
  • The Aussie dollar had a volatile night and is trading slightly lower with the market not surprised by the US Federal Reserve announcement. The dollar is currently trading at US88.46c down from US89.04 cents on Wednesday. Early this morning the currency rose as high as US89.44c and fell as low as US88.21c its weakest level since August 2010. Once investors realised that the Fed was going to taper gently and slowly, it shouldn’t be long before the Aussie dollar trades around the US85c level, exactly what the RBA is hoping for.

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