Fed lift-off: Aus shares to open lower

Market Reports

by David Chau

This morning, the Australian share market will follow weak leads from overseas, and open lower.

Wall Street, and in particular the Dow Jones. has finally snapped its winning streak. All sectors finished in the red with the biggest losses coming from Energy and Utilities shares.

It was no surprise that the US Federal Reserve raised interest rates this morning – for the first time in a decade. As expected, the Fed increased rates by 25 basis points, which lifted its target range between 0.5% and 0.75%. The Fed also noted inflation expectations have grown considerably, and a further strengthening in the US labour market could lead to a return to its 2% inflation target.

These expectations have certainly strengthened since Donald Trump pledged greater infrastructure spending and tax cuts after winning the US election early last month.

US economic news

Bureau of Labor Statistics released data which showed that the Producer Price Index rose 0.4% in November (which was higher than its expected 0.1% increase).

According to the Census Bureau, retail sales rose just 0.1% in November, which was lower than expected.  The Bureau also released figures revealing that business inventories posted their largest decline in eleven months, falling 0.2% in October.

Data from the Federal Reserve stated tat factory production fell 0.4% in November – the first time in three months, and the biggest drop since March.

Markets

Wall Street finished lower this morning: The Dow Jones lost 0.6% to close at 19,793, the S&P 500 was 0.8% lower at 2,253, while the NASDAQ fell 0.5% to close at 5,437.

European markets finished lower as well: London’s FTSE was down 0.3%, Paris slipped 0.7%, and Frankfurt retreated almost 0.4%.

Asian markets finished mixed: both the Nikkei and Hang Seng were flat, while the Shanghai was down almost 0.5%.

The Australian share market finished stronger yesterday, with the ASX 200 closing 40 points higher at 5,585. This morning, on the futures market the SPI is down 39 points.

Currencies

The Australian Dollar at 8.30am is buying $US0.7405, 59.03 Pence, 86.72 Yen and 70.35 Euro cents.

Local economic news

Later today, the Australian Bureau of Statistics will relesae labour force and unemployment figures for November.

Company news

Santos (ASX:STO) has announced its plans to raise $1.5 billion via an Institutional Placement and Share Purchase Plan. Following the institutional placement, Santos will have a gearing ratio of around 32% and is expected to be below 30% following the Share Purchase Plan. Shares in Santos closed 2.86% lower at $4.41.

Paladin Energy Ltd (ASX:PDN) has sold a number of its non-core Australian exploration assets to Uranium Africa Ltd for $2.5 million. The assets sold include the Oobagooma and Angela/Pamela projects in WA and Northern Territory. The company expects annual savings as a result of this sale as it will no longer need to pay rent and statutory commitments to keep the tenements in good standing. Shares in Paladin closed flat at 8.3 cents.

Ex-dividends

One company is going ex-dividend today.  G8 Education Limited (ASX:GEM) will pay a fully franked dividend of 6 cents per share.

Commodities

Gold is down $16 to $US1,144 an ounce.
Silver has lost $0.11 to $16.86.
Copper was flat at $2.60.
Oil is down $1.44 to US$51.91 per barrel.