The Australian share market looks set to surge into a new week after global markets rallied on hopes for stimulus action from the US Federal Reserve and the European Central Bank.
US economic news
America’s economy grew at a rate broadly in line with expectations from April to June 2012. According to the Commerce Department US gross domestic product growth eased to an annual rate of 1.5 per cent in the second quarter from a rate of 2 per cent in the first quarter.
A read on consumer sentiment defied expectations for a steady read and sunk to the lowest level this year. Thomson Reuters and the University of Michigan’s consumer sentiment index dropped to 72.3 in July from 73.2 the month before.
Figures
Wall Street finished Friday stronger: The Dow Jones Industrial Average gained 188 points to close above the psychologically significant level at 13,076, the S&P500 gained 26 points to close at 1,386 and the Nasdaq gained 65 points to close at 2,958.
European markets also rose at the end of last week: On Friday London’s FTSE added 54 points, Paris added 73 points and Frankfurt added 106 points.
Asian markets also finished Friday higher: Hong Kong’s Hang Seng added 382 points, Tokyo’s Nikkei added 124 and China’s Shanghai Composite added 3 points.
The Australian share market ended last week on a high note, advancing 1.5 per cent and erasing the week’s losses: The S&P/ASX 200 Index advanced 62 points on Friday to finish the week 11 points higher at 4,210. On the futures market the SPI is now 47 points stronger.
Currencies
The Australian Dollar at 7:15AM was buying $US1.048 cents, 66.61 Pence Sterling, 82.24 Yen and 85.23 Euro cents.
Company news
Fortescue Metals Group Limited’s (ASX:FMG) Pilbara iron ore expansion has again been called into question as the price of iron ore retreats. According to Fairfax Media, JP Morgan analyst Lyndon Fagan says if the price averages below $US115 per tonne for the next 18 months the company may need to look at funding options outside of debt which would mean its debt and cash flow would be insufficient to complete the expansion. A Fortescue spokesperson has told Fairfax this scenario is “highly unlikely” and the company expects the price of iron ore to return to a range between $US120 and $US150 within a few months. Shares in Fortescue recovered some recent losses on Friday, rising 3.75 per cent to close at $4.15.
The chairman of takeover target Alesco Corporation Limited (ASX:ALS), Mark Luby, has urged shareholders to reject DuluxGroup Limited’s (ASX:DLX) $210 million takeover offer of $2.05 per share. Lodging the statement after the market closed on Friday Mr Luby labeled DuluxGroup’s revised offer as materially inadequate and says DuluxGroup has made no genuine attempt to negotiate. Shares in Alesco Corporation closed steady on Friday at $2.02.
Ex-dividends today
Alcoa (ASX:AAI) with a $0.0247 unfranked dividend
Ex-dividends tomorrow
GUD Holdings Limited (ASX:GUD) with a 35 cent fully franked dividend
Commodities
Gold is up $18.20 to $US1,618 an ounce for the August contract on Comex.
Silver is up $0.05 to $27.50 for September.
Copper is up $0.04 at $3.43 a pound for September.
Oil is up $0.74 at $90.13 a barrel for September light crude in New York.