Wednesday, July 24, 2013

China slowdown fears cap gains

Australian shares rose to a two-month closing high, underpinned by the miners, but signs of a further slowdown in China's manufacturing sector capped gains.

The S&P/ASX 200 index finished the session 0.4 per cent, or 18 points higher, at 5035.1 after reaching an intraday high of 5053.8. The broader All Ordinaries index gained 17.2 points, or 0.3 per cent, to 5021.8.

Among the major sectors, materials jumped 1.1 per cent, financials rose 0.5 per cent and telcos gained 1.1 per cent. Consumer discretionary stocks fell 0.8 per cent and industrials ended 0.4 per cent lower.

CMC Markets analyst Ric Spooner said the market was waiting for the release of Australian consumer price index (CPI) figures for the June quarter and Chinese manufacturing data.

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''I think the market is just awaiting those developments,'' he said. The content of those releases was likely to drive the market's direction on Wednesday, he said.

The Reserve Bank of Australia has an annual target range for inflation of between two and three per cent so the CPI figures, due at 1130 AEST, will affect market expectations for a rate cut in August.

Meanwhile, the Chinese figures, due around noon, will provide an insight into the state of that country's key manufacturing sector.

Resources stocks were among the best local performers on Wednesday morning, with BHP Billiton up 44 cents to $34.94, while Rio Tinto had gained $1.16, or two per cent, to $57.92 and Fortescue Metals was 13 cents, or 3.6 per cent, higher at $3.75.

Atlas Iron stocks were up 6.5 cents, or 7.8 per cent, to 90 cents after the company posted a 16 per cent increase in shipping volumes during the June quarter.

Mr Spooner said the sector had been buoyed by comments from Chinese Premier Li Keqiang indicating the country would not allow economic growth, currently at 7.5 per cent annually, to drop below seven per cent.

''I think that has reduced some of the worst case fears for what might happen in China in the short to medium term, so that is a positive for resources stocks,'' he said.

The banks also posted gains, with Commonwealth Bank up 20 cents to $72.59, Westpac 13 cents higher at $29.62,  NAB lifting seven cents to $30.56 and ANZ edging up 4.5 cent at $28.96.

What you need to know

SPI futures are 7 points lower at 4970 The $A is higher at 92.96 In New York, the S&P500 was 0.19% lower at 1692.39 In Europe, the FTSE100 lost 0.39% to 6597.44 China iron ore added 40 US cents to $US131.90 a metric tonne Gold added 0.6% to $1,342 an ounce WTI crude oil added 29 US cents to $US107.23 a barrel Reuters/Jefferies CRB index lost 0.13% at 290.65

Making news today

In economics news:

ABS June quarter inflation - 11.30am Department of Education and Workplace Relations internet skilled vacancies for June - 11am

In company news:

Aquarius Platinum full year results Australand Property Group interim results

Analyst rating changes:

Western Areas cut to neutral at UBS Leighton rated new underperform at RBC Capital BC Iron raised to accumulate at Ord Minnett Mount Gibson Iron downgraded to neutral at Credit Suisse Boart Longyear cut to neutral at Credit Suisse

Offshore overnight

United States

US stocks have closed mixed after several leading companies bested earnings estimates even as revenue lagged expectations in some cases.

Key numbers:

Dow Jones Industrial Average added 0.15% at 15,569.51 S&P 500 lost 0.18% at 1,692.53 Nasdaq Composite Index lost 0.59% to 3,579.27

Europe

European stocks closed lower, as disappointing US data dampened positive sentiment earlier brought on by better than expected American blue-chip earnings and news that China may move to stimulate its massive economy.

Key numbers:

London's FTSE 100 lost 0.39% to 6,597.44 Frankfurt's DAX 30 lost 0.20% to 8,314.23 In Paris the CAC 40 lost 0.43% to 3,923.09

Asia

Asian markets rose as unexpectedly weak housing data from the United States increased the likelihood the Federal Reserve would keep its stimulus program in place for some time.

Key numbers:

Japan's Nikkei added 0.82% to 14,778.51 China's Shanghai composite added 1.95% to 2,043.88 Hong Kong's Hang Seng added 2.33% to 21,915.42

Commodities

Energy

Oil prices moved higher in anticipation of another large inventory draw from US crude stockpiles.

US benchmark West Texas Intermediate for September delivery rose 29 US cents to close at $US107.23 a barrel on the New York Mercantile Exchange on Tuesday. European benchmark Brent for September delivery increased 27 US cents, settling at $US108.42 a barrel in London trade.

Precious metals

Gold futures ticked lower, retreating from a one-month high as investors bet rising prices may limit buying of coins and bars.

The most actively traded contract, for August delivery, on Tuesday fell $US1.30, or 0.1 per cent, to settle at $US1,334.70 a troy ounce on the Comex division of the New York Mercantile Exchange. Gold futures on Monday recorded their biggest percentage gain in more than year, settling above $US1,300 an ounce for the first time in a month on hopes for continued loose monetary policy.

Base metals

Copper prices have settled a little higher on the London Metal Exchange (LME), although the market lacked much direction as investors awaited a new batch of Chinese economic data.

By Tuesday's PM kerb close, copper prices had stabilised, with the LME's flagship three-month copper contract settling 0.1 per cent higher on the day at $US7,039 a ton. Aluminum was down 0.1 per cent at $US1,845 a ton.

How we fared yesterday

Another day of soaring gold and commodity prices helped the Australian share market to close higher.

The local market rose by 0.3 per cent, sending the All Ordinaries index above 5000 points for the first time since May 23, and keeping the S&P/ASX200 index above 5000 for a second consecutive day.

BusinessDay with agencies


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