The market is up 23 doing a bit better than the 5 point fall predicted by the SFE Futures this morning. Financials and property outperforming — up 1.8% and 2% in anticipation of an RBA rate cut this afternoon. Resources down 1.6% on a fall in metal prices overnight and a 4% fall in BHP and RIO in the UK on the back of weak Chinese August manufacturing numbers.

Wall St closed for the Labor Day long weekend. European and Asian indices all finished lower – FSTE 100 down 0.60%, Dax down 0.01%, Nikkei 225 down 1.83%, Hang Seng down 1.67%, Shanghai Composite down 3.01%. Energy markets down on a 4% fall in the oil price as hurricane Gustav (renamed hurricane Nancy) hit New Orleans as a weakening category 1 storm instead of the Mayor’s prediction that it would be the “Storm of the Century”.

China posts weaker-than-expected manufacturing data — there’s been softer demand in China’s export markets and some fears that the Chinese demand for metals won’t lift post the Olympic disruption as expected. USD stronger against other currencies.

  • Both BHP and RIO down in the UK, 4.06% and 4.19% respectively.
  • Metals all down overnight — Nickel down 4.65%, Copper down 2.94% and Zinc down 1.67%. Aluminium down 0.38%.
  • Oil price down $4.49 to $111.06 as Hurricane Gustav weakened along the Gulf Coast and posed less of a threat to oil drilling and refining operations.
  • Natural gas down 43.3c of 5.5% to 7.50 per million BTU to the lowest price this year.
  • Gold closed in the US.

In the news

Wayne Swan has already indicated that a 25bp rate cut is a fait accompli …”It’s certainly a good sign that the RBA is deciding to loosen policy.” RBA decision at 2.30pm today. Brokers expecting 4 rate cuts before the end of next year — the change in RBA rhetoric in July has underpinned property trusts and REITS and retail consumer stocks. Since July 15th: The ASX 200 bottomed and is up 6.3%. The financial sector bottomed and is up 11.7%. The banks sector bottomed and is up 8.7%. The insurance sector bottomed and is up 10%. The property trust sector bottomed and is up 24.9%. The building sector bottomed. The retail sector bottomed and is up 32% with Woolworths up 17%, Harvey Norman 24% and David Jones 61%. The Transport sector bottomed on the lower oil price and is up 15%. Industrials bottomed and are up 12%. At the same time commodity prices peaked: The gold price peaked and fell 15.1%. The oil price peaked and fell 16.7%. The A$ peaked and fell 12.8%. The resources sector peaked and is down 2.05%.

  • Australian July building approvals fall 2.3% in July month on month…below expectations for a rise of 0.3%. All the more reason to cut interest rates. June number was revised from a fall of 0.7% to a 2.2% gain.
  • Western Areas (WSA) upgrades their world class mineral resource at Spotted Quoll by double to 1.05m tons at 7.2% grade nickel. WSA up 23c or 2.1% to 961c.
  • Pan-Australia’s (PNA) Phu Kham process plant achieved nameplate capacity. PNA down 0.5c or 0.6% to 83.5c.
  • Macquarie communications (MQG) has successfully completed the buyback of exchangeable bonds at a face-value of A$390m at a cost of A$284m. MQG up 82c or 1.8% to 4581c.
  • Leighton Holdings (LEI) has entered into a construction alliance contract worth AED 2.1bn with Tameer Holdings. LEI up 42c or 0.9% to 4636c.
  • Australand (ALZ) in a trading halt pending the announcement about the outcome of its entitlement offer. ALZ  

 MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.

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