Tag Archive | "US Market"

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Markets Mixed After Strong August

Posted on 01 September 2008 by Alex

 

It’s hard to feel sorry for a bunch of investors in the US and here who think things are getting better.

For example, in just 24 hours Wall Street went from boom, as the economy surges on export drive, to the grim reality that US consumers are not spending: exports might account for around 19% of the US economy at most, consumers for upwards of 70%, the strength is with consumers.

Wall Street finished August with a thump, we finished with a bang and and on Monday, with the US on holiday on Monday night, things will go sideways. But there could very well be a thump here as chartists were claiming the US was becoming more bullish.

Did anyone notice that the 10th US bank went bust over the weekend: it was small, just over $US1 billion in assets: the 9th was the week before. That’s going to refocus attention on the still weak US financial sector.

Oil and commodities took a pounding Friday and in August.

Japanese inflation surged over 2%, the highest in a decade and the Government revealed a $US105 billion stimulus package Friday night. Indian economic growth sagged, hitting a three and a half year low, with inflation still high.

In Britain, UK house prices sagged by more than 10% in the year to July and the country’s Chancellor of the Exchequer (Treasurer), Alistair Darling said the country’s economic state was the worst in 60 years. 

It was a very gloomy end to a week and a month where many investors started believing that the bottom had been reached and the worst of the volatility was over.

Far from it for the US, Japan, Europe and the UK: in Australia; despite the $5 billion or more in red ink that flowed Friday as the boom losses flooded the market, there was a feeling that perhaps things had overshot.

Our market rose 3.2% in August, and it was all down to the performance last week which turned a losing month into a winner. The market rose around 4.1% last week.

Earnings for June 30 companies outside financial and property. Infrastructure sectors seem to have been solid, but there were some nasty losses among smaller commodity companies and the $A31 billion in earnings from Rio Tinto (interim) and BHP Billiton (final) does distort the figures.

This week’s interest rate cut won’t help or hinder sentiment: banks, builders and building suppliers have all seen improvements in prices since it became apparent a month ago that rates were coming down.

In the US the poor consumer spending figures for July (despite a rise in consumer sentiment) saw the markets all but reverse Thursday’s optimistic bounce. 

The Standard & Poor’s 500 fell 17.85 points, or 1.4%, to 1,282.83; the Dow lost 171.22, or 1.5%, to 11,543.96 and Nasdaq dropped 2%, or 44.12 to 2,367.52.

The S&P 500 gained 1.2% in August, breaking a two- month retreat; the gain was fueled by a more than 20% drop in oil which boosted car companies, retailers and those companies supplying them. There was also some improvement in a wide spread of US financial stocks.

For the month, though, the Dow added 1.5% and Nasdaq rose 1.8%.

It was only the S&P 500’s third monthly advance since reaching a record 11 months ago in October, 2007. It is still down 13%.

The Australian share market closed higher on Friday, driven by gains in the financial sector. The benchmark ASX200  index was up 69.1 points, or 1.4%, to 5,135.6, while the All Ordinaries rose 72.2 points, or 1.4%, to 5,215.5.

But after Wall Street’s fall on Friday, the futures market has our market opening down around 29 points. But traders will play it safe with the US closed for the Labor Day holiday.

For August the best stocks in the ASX 200 were Resmed, up 36%, Spotless, up 28.6% (after a 25.6% rise last week in the wake of an average profit). PMP was up 27.8%, CSR, 27.5% as investors factored in positive news from the interest cut for its building products businesses and Billabong rose 27.3% after a solid annual result.

The dogs were dominated by the Babcock and Brown groups: B&B Power lost 88.8%, BNB itself shed 62.3%, B&B Infrastructure, 37.2%, Great Southern, 30% and  Gunns shed 29.3%.

Oil fell 6% and the Australian dollar shed more than 8.5% to close around 85.60 US cents in New York early Saturday, compared to more than 93.70 US cents at the start of August.

That has helped taken the pressure of many exporters, but has clipped the fall in oil and petrol prices, reversing the way that the stronger dollar soften the blow of record oil and petrol prices earlier in the year.

European stocks rose for a fourth day on Friday with the Stoxx 600 Index erasing August’s losses to finish up 1.6% for the month.

London’s FT 100 rose 0.3% on the day and finished with its first monthly gain since April.

German and French indexes were also higher.

The Footsie rose 2.4% last week (despite more gloomy news on housing and economic growth) and it finished up 4.2% for the month, the biggest rise among the world’s 20 major indexes.

Asian shares also finished on a solid note.

Australia of course rose on the day, the week and the month, while the MSCI Asia Pacific Index finished up 3% on the week, the first weekly gain since late July.

It’s still down 21% over the year so far.

The Nikkei in Tokyo finished higher on the day and the week but was down 0.7% for the month

In Hong Kong the Hang Seng index rose 4.3% over the week, but was still off 6.6% in the month. India’s BSE index rose 4.5% over the week. China’s markets were down for a 5th successive week last week. although they were higher on Friday.

 

The AMP’s Dr Shane Oliver says that the Australian June half profit reporting season has now effectively wrapped up and while the results over the last week had a somewhat better tone, the broad themes were of basically flat profits overall, a low proportion  of companies surprising on the upside and caution regarding the outlook.

For the first time since earlier this decade more companies came in below expectations (29%) than came in above (27%). 44% of results were in line with expectations which is well up on an average of 27% of results in line over the previous four years. See the top chart.

Resources stocks generated the strongest upside surprises whereas the key sectors to disappoint were diversified financials, consumer services and utilities.

More significantly though, there have been more  companies with cautious or outright negative outlook comments than with positive comments whereas back in August last year the ratio of positive to negative outlook comments was running at 12 to 1.

The bottom  line is that profit growth for 2007-08 was close to flat and analysts’ earnings growth expectations for 2008-09 have been revised down further.

Other themes flowing from the reporting season have been a mixed picture for margins, rising interest costs, the negative impact from the strong $A.

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us stock market news

Posted on 05 August 2008 by Alex

NEW YORK - Wall Street fell moderately Monday in an erratic session dominated by worries about inflation, somewhat soothed by a steep drop in the price of oil.
That decline eased some of investors’ worries about inflation.
Wall Street initially sold off after the Commerce Department said an inflation gauge tied to consumer spending rose by a sharp 0.8 per cent in June, reflecting higher gasoline prices — the biggest jump in the indicator since a one per cent rise in February 1981.
The report fed investors’ growing concerns about the impact of rising prices on consumers, whose spending is the lifeblood of the economy.
The Dow Jones industrial average fell 42.17, or 0.37 per cent, to 11,284.15. The Dow had been down more than 100 points in early trading.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 11.30, or 0.9 per cent, to 1,249.01, and the Nasdaq
composite index declined 25.40, or 1.1 per cent, to 2,285.56.

LONDON - Europe’s main stock markets closed lower on Monday, with fears about the impact of an economic slowdown and a fall in profits at global banking giant HSBC weighing on sentiment, dealers said.
The FTSE 100 index shed 34.5 points, or 0.64 per cent, to end at 5,320.20.

FRANKFURT - The Dax fell 46.65 points, or 0.73 per cent, to finish at 6,349.81.

PARIS - The CAC 40 lost 33.71 points, or 0.78 per cent, to close at 4,280.63.

TOKYO - Japanese share prices closed down 1.23 per cent on Monday, ending below the key 13,000 points level as investors worried about weak company earnings and losses on Wall Street.
The Tokyo Stock Exchange’s benchmark Nikkei-225 index slid 161.41 points to 12,933.18, the lowest close since July 18.

HONG KONG - Hong Kong share prices closed down 1.5 per cent Monday as concern about oil prices once again spooked investors, while banking titan HSBC posted a 29-per cent profit tumble.
The Hang Seng index shed 347.68 points to 22,514.92 after a jump in US unemployment and a fall on Wall Street also soured sentiment.

WELLINGTON - The New Zealand sharemarket was one of the few markets to post gains.
The benchmark NZSX-50 index was up 16.06 points at 3319.22, after losing 33 points on Friday.

SYDNEY - The Australian stock market is expected to decline after US equities fell on worries about accelerating inflation.
Resource stocks may slip after commodities including oil and gold declined overnight.
At 0735 AEST on the Sydney Futures exchange, the September share price index futures contract was 44 points lower at 4,817.
In economic news today, the Reserve Bank of Australia announces its decision on interest rates following its monthly board meeting.
The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index for July is due.
In company news, Seven Network Ltd releases its annual results and AXA Asia Pacific Holdings Ltd releases interim results.
Telstra Corp Ltd group managing director of public policy and communications Dr Phil Burgess speaks at an American Chamber of Commerce in Australia lunch.
Campbell Brothers Ltd holds its annual general meeting.
Yesterday, the Australian share market closed weaker today on lower base metal prices and a profit downgrade by Lend Lease Corporation.
While resources and property stocks came under pressure, infrastructure firm Asciano Group soared following a $2.9 billion unsolicited takeover offer by a private equity player and an independent investment fund.
The benchmark S&P/ASX200 index fell 16.3 points, or 0.33 per cent, to 4887.7, while the broader All Ordinaries index lost 20.4 points, or 0.41 per cent, to 4957.6.

NYMEX
Oil prices plunged to a three-month low on Monday, briefly tumbling below $US120 a barrel in another huge sell-off after Tropical Storm Edouard seemed less likely to disrupt oil and natural gas output in the Gulf of Mexico.
Crude’s steep drop - prices fell more than $US5 at one point during the day - dragged down other commodities from corn to copper and mimicked the big nosedives of the past three weeks, adding to growing beliefs that the oil bubble is at least temporarily deflating.
A gallon of regular gasolene fell on average about half a cent overnight to $US3.881 ($US1.02 a litre).
Also weighing on oil prices Monday was a report by the Commerce Department that consumer spending after adjusting for inflation fell in June as shoppers dealt with higher prices for gasoline, food and other items. That fed investors’ expectations that a US economic slowdown is sharply curbing US demand for fossil fuels.
Light, sweet crude for September delivery fell $US3.69, or 2.9 per cent, to settle at $US121.41 a barrel on the New York Mercantile Exchange. It was crude’s lowest settlement price since May 5.
Earlier, prices plummeted to $US119.50, the lowest level since May 6.
Crude has now fallen in six of the last nine sessions and has shaved 18 per cent off its trading record of $US147.27 reached July 11.
In London, Brent crude for September delivery fell $US3.50 to settle at $US120.68 a barrel, after earlier falling to a contract-low of $US118.80.
Natural gas futures also fell sharply, dropping 66.3 cents, or 7.1 per cent, to settle at $US8.726 per 1,000 cubic feet.
Gasoline futures fell 8.41 cents, or 2.7 per cent, to settle at $US3.0002 a gallon.
In other Nymex trading, heating oil futures fell 8.67 cents to settle at $US3.3501 a gallon.

COMEX
Gold fell as a drop in energy costs reduced the appeal of the precious metal as a hedge against inflation. Silver declined, too.
Gold futures for December delivery fell $US9.60, or one per cent, to $US907.90 an ounce on the Comex division of the New York Mercantile Exchange. The metal fell 2.1 per cent last week, the third straight decline.
Silver futures for September delivery declined 38 cents, or 2.2 per cent, to $US17.14 an ounce. Silver has gained 15 per cent this year, while gold advanced 8.3 per cent.
Copper futures for September delivery tumbled 13.85 cents, or 3.9 per cent, to $US3.44 a pound on the Comex. Earlier, the price touched $US3.426, the lowest since Feb 8.

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Standard And Poor’s Revises Down Its Target For US Market

Posted on 15 June 2008 by Alex

As the market is currently demonstrating there remain a number of risks to any recovery in global share prices over the second half of 2008 and Standard & Poor’s has acknowledged this by reducing its year-end target for the S&P500 Index in the US to 1490 from 1560 previously.

The achievement of the group’s revised target would still see the market gain a little over 8% net between now and the end of the year, while it would also mean the market will ultimately book a slight gain over the full calendar year.

There are a few reasons supporting the group’s view, including that a number of its positive forecasts for the economy and share price drivers remain in place. As an example the expectation now is for US GDP to register positive numbers in all four quarters of the year, which compares to a previous assessment of two negative quarters followed by two positive ones.

GDP growth is tipped to strengthen over the course of the second half of the year as the government’s tax rebates flow through into increased expenditure and as the full impact of the cuts to official interest rates work their way through the economy as a whole.

As well the group’s analysts expect operating earnings among US companies are likely to recover in the second half of the year across all ten sectors of the Index, which would signal a turnaround in the financial and consumer discretionary sectors in particular given their recent weakness.

Valuations are also supportive according to the group’s Investment Policy Committee as at an Index level of 1385 the 12-month trailing P/E (price to earnings ratio) is 16.5x, which represents a 15% discount to the average P/E for the Index since 1988.

Headwinds for the market include increased inflationary pressures in the US economy and higher oil prices, while the Investment Policy Committee also notes analysts in the US have been steadily scaling back their estimates of earnings growth for 2008 for stocks in the S&P500 Index to around 8% now from 16% earlier this year.

In terms of asset allocation the Policy Committee has not changed its views, continuing to recommend a neutral weighting on both US and international equities, a negative weighting towards bonds and a positive weighting on cash.

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