Fed keeps rates on hold: Aus shares to plunge further

Market Reports

by David Chau

The Australian share market is set to open lower again, following weak leads from all around the world.

Wall Street finished lower as the Federal Reserve concluded its November meeting overnight, and decided not to raise interest rates. The Fed has, however, left the door open for a December rate hike.

Throughout this week, The CBOE Volatility Index rose by around 16% and it’s now trading near 19.4.  According to recent polls, Donald Trump and Hillary Clinton are virtually neck and neck – with some polls even suggesting Trump is in the lead. This has made global investors quite nervous.

US Economic news

Oil prices plunged more than 3% overnight.  Crude inventories rose by more than 3.1% last week, which is a surge of 14.4 million barrels (against an expected lift of 2 million barrels).  This is the largest increase on record.

Also, US private employers added 147,000 new jobs in October. This is below economists' expectations of 165,000 new jobs.

Markets

Wall Street closed lower yesterday: The Dow Jones lost 0.4% to close at 17,960, the S&P 500 closed 0.7% lower 2,098 and the NASDAQ closed 0.9% lower at 5,106.

European markets closed lower: London’s FTSE fell 1%, Paris lost 1.2% and Frankfurt dropped 1.5%.

Asian markets closed lower as well: Nikkei was down 1.8%, Hang Seng lost 1.5%, and Shanghai Composite slipped 0.6%.

The Australian share market closed lower yesterday: The S&P/ASX 200 Index closed 62 points down to finish at 5,229. On the futures market the SPI is down 16 points.

Currencies

The Australian Dollar at 7:30AM was buying $US76.59 cents, 62.31 Pence Sterling, 79.19 Yen and 69.04 Euro cents.

Local economic news

The Australian Industry Group will release data for the month of October.  In September, its Performance of Services Index (PSI) rose by 3.9 points to 48.9. Any reading below 50 means industry contraction – so this means, in September, there was a mild decline in activity levels across the broader services sector.

Also, the ABS will release trade balance data for month of September later today. In August, the balance on goods and services was a deficit of $2 billion, which is a decrease of $111 million (or 5%) on the July deficit.

Company news

Real estate investment manager, the Cromwell Property Group (ASX:CMW), has announced the launch of its European Cities Income Fund. The purpose of this is to fund the acquisition of a €205 million seed portfolio of three prime office assets in Amsterdam, Rotterdam and the Hague. The initial investment target is €2 billion in gross asset value. Shares in Cromwell closed steady at 90.5 cents.

Adairs Ltd (ASX:ADH), the manchester and homewares chain, has reported that its first four months of trading this financial year were below expectations – particularly in the bed linen product category (which is 40% of total sales). However, the company expects improvement performance in the second half of the financial year. Adairs also expects roughly a 15% decline in FY17 earnings before interest and tax compared to the FY16 results. Shares in Adairs closed 2.41 per cent higher yesterday at $2.55.

Ex-dividends

Four companies are going ex-dividend today.

Australian Pharmaceutical Industries (ASX:API) will pay a fully franked dividend of 3.5 cents per share.
Global Health (ASX:GLH) will pay an unfranked dividend of 1 cent per share.
Legend Corporation (ASX:LGD) will pay a fully franked dividend of 0.6 cents per share.
Spring FJ (ASX:SFL) will pay a fully franked dividend of 1 cent per share.

Commodities

Gold has risen $10.20 to $US1,298 an ounce.
Silver has gained $0.08 to $18.50.
Copper has slipped $0.01 to $2.22 a pound.
Oil has dropped $0.98 to $US45.46 a barrel.