OPEC agrees to cut oil production: ASX to open higher

Market Reports

by David Chau

The Australian share market will open higher this morning, according to ASX futures.  That is despite a weak lead coming from US markets, which digested several pieces of economic data released overnight.

The biggest news of today is that the world’s top oil producers, including Saudi Arabia, Iraq and Iran, have finally reached a deal to cut oil production. The prospect of that happening looked unlikely in the last few days.  However, the OPEC members agreed overnight to cut production by around 1.2 million barrels per day (which is 4.5% of current production levels). The price of oil surged on this news, and indeed shares in energy companies were the best performers on Wall Street.

US economic news

The Federal Reserve released its Beige Book, which reported modest growth was experienced in most parts of the US.

ADP and Moody's Analytics released data showing that private companies added 216,000 jobs in November.  This was well above the forecast of 165,000 new jobs.

Consumer spending rose 0.3% in October, while personal income was up 0.6%.

The Chicago Purchasing Managers Index (PMI) came in at 57.6 last month. This is a significant improvement over the October result of 50.6.

Pending home sales rose 0.1% month over month in October, which is a 1.8% year over year increase.

All that economic data is good news for the American economy.  The market is pricing in the chance of the Federal Reserve raising rise at over 90% in December.

Markets

Wall Street finished mixed overnight: The Dow Jones was flat, gaining just 2 points, to close at 19,124. The S&P 500 lost 0.3% to 2,199, while the NASDAQ slipped 1.1% to close at 5,324.

European markets finished higher: London’s FTSE was up 0.2%, Paris gained 0.6%, and Frankfurt added 0.2%.

Asian markets finished mixed: the Nikkei was up almost 1.5 points (which is practically flat), the Hang Seng added 0.2%, while the Shanghai Composite lost 1%.

The Australian share market finished weaker yesterday, with the ASX 200 closing 17 points lower at 5,441. This morning, on the futures market the SPI is up 18 points.

Currencies

The Australian Dollar at 8.15am was buying $US0.7383, 59.01 Pence, 84.47 Yen and 69.69 Euro cents.

Local economic news

The Australian Industry Group will release its November figures for the Performance of Manufacturing Index. In October, the index rose 1.1 points to 50.9, which shows mild expansion in the manufacturing industry.

The Australian Bureau of Statistics will release its September quarter Private Capital Expenditure figures. For the June quarter, the ABS’s trend volume estimate for new capital expenditure fell 3.8%.

Reserve Bank of Australia will release the Commodity Prices Index for November. In October, the Index showed a 16% year on year increase.

Company news

Tim Slattery has been appointed the new CEO of real estate investment manager, APN Property Group (ASX:APD). He will take up that role from 1 January 2017. Slattery is a former corporate lawyer, who has been a director of APN since 2014. Shares in APN closed flat at 42 cents.

The Foreign Investment Review Board has decided that it has no objections to the proposed takeover of global manufacturer, Bradken Ltd (ASX:BKN) by Japanese company, Hitachi Contruction Machinery Co Ltd. In order for the takeover to proceed, Hitachi also needs to obtain similar approvals from the South African and US authorities. Shares in Bradken closed flat at $3.19.

Ex-dividends

CVC Ltd (ASX:CVC) will pay a fully franked dividend of 10 cents.

Commodities

Gold is down $15.80 to $US1,175 an ounce.
Silver has lost $0.18 to $16.56.
Copper is up $0.02 to $2.63 a pound.
Oil has surged $3.81 to US$49.04 per barrel.