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Morning Market Report

A strong start to the financial year across all markets.

The ASX 200 is up 40 points. The Dow Jones was up 92 points at 17,068  —  The market rose strongly on the opening after good employment data good economic data which supported cyclical sectors. Consumer Discretionary and Financials were the best performing sectors while Health Care and Utilities lagged. It was shortened trading session due to the Independence Day holiday on Friday and the market traded in a 95 point range.

US economic data was stronger  —  June nonfarm payrolls exceeded expectations (288,000 v consensus 210,000) and the unemployment rate fell to 6.1% from 6.3% (economists were expecting no change). The trade deficit narrowed to US$44.4 billion from US$47 billion in April but the ISM Services Index fell to 56.0 from 56.3 when a rise to 56.5 had been expected.

European shares were mostly stronger —  The UK FTSE was up 0.72%, the German DAX was up 1.19% and the French CAC was up 1.02%.

The European Central Bank left monetary policy unchanged. After the meeting, ECB President Mario Draghi announced that policy meetings were set to become six-weekly, rather than monthly, and a record of its meetings would be published. Further details of the new long-term lending program for banks were provided.

The US Treasury market was weakerafter the strong employment data and the yield on the benchmark 10 year bond rose one basis point to 2.637%.

The Aussie dollar  — RBA governor Glenn Stevens said the currency was overvalued during a speech in Tasmania yesterday. Stevens said low interest rates had been having their intended impact on the economy but suggested that the RBA retained scope to cut again if it needed to. He said the Australian dollar was “overvalued, and not by just a few cents”. The Aussie dollar fell after his comments, then fell further in the US overnight, reaching a low of US 93.27c. It is currently trading at US93.47c.

Oil was down US$0.42or 0.40% to US$104.06.

Gold price down for the first time in five sessions - down US$10.30 an ounce.

Base metals were mixed —  Copper was up 0.66%%, nickel was up 1.26% and aluminium was up 0.54% but zinc was 0.47% lower.

Iron ore rose US$1.80 to US$96.50 a tonne.

Retail spending fell 0.5% in May, after a 0.1% fall in April. Analysts had expected no change. The worse than expected result was blamed on the Budget, poor consumer confidence and a mild winter.

Building approvals were up 9.9% in May, above forecasts for a rise of 3.2%. Over the 12 months to May approvals were up 14.3%.

In China, the HSBC/Markit China services PMI was 53.1, above market expectations of 50.7. But the official services PMI slipped to 55.0 from 55.5. The services sector, which accounted for 45 percent of China’s gross domestic product in 2012 and roughly half of all jobs in the country, is expected to post steady growth in coming years as the economy matures.

European data  — the final composite PMI was a 6-month low of 52.8, in line with the flash estimate. Euro zone retail sales were flat in May and up 0.7% year on year. Analysts had expected a monthly increase of 0.2%.

STORIES

  • Evolution Mining (EVN 73c) — Has achieved record gold production and met production guidance for financial year 2014. Group production of 427,703 ozs gold equivalent, up 9% on financial year 2013. June quarter production was 111,899 ozs gold equivalent, above guidance.
  • Magellan Financial Group (MFG 1108c) — Released Funds Under Management (FUM) data Total FUM was $23.513 billion, up from $23.267 billion in May. In June, Magellan had net inflows of $348 million, which included net institutional inflows of $193 million, and net retail inflows of $136 million into the Magellan Global Fund/Colonial First State Magellan Global Option.
  • Steadfast Group (132.5c) — Has acquired Allied Insurance Group Limited, the second largest broker network in New Zealand. Allied has 31 independently owned members and 40 offices across metro and regional New Zealand and EBITA for the year ended March 14 was $0.3 million .
  • M2 Group (MTU 590c) — Reported growth of 71,000 post paid services for the second half of 2014, after growth of 50,000 in the first half. The growth was delivered in all segments, across fixed voice, broadband and energy services. The board also confirmed guidance at the mid-point $150-170 million for EBITDA and $60-70 million NPAT. M2 CEO Geoff Horth said the highlight was the 17% annualised growth rate of the broadband subscriber base.

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