Outlook: ASX to absorb S&P euro downgrades

Market Reports

The SPI is tipping a lower start to the week for the Australian share market as investors absorb news nine eurozone nations have been downgraded by Standard & Poor’s. The agency has warned the eurozone now faces a 40 per cent risk of a recession this year.
 
On Friday January 13, Wall Street was weighed down by reports of the credit ratings and disappointing earnings but US stocks still managed to notch up a second straight week of gains.
 
Economic news

After last month putting 15 member of the euro currency union on review for a rating cut Standard and Poor’s has downgraded the credit ratings of nine eurozone nations: France and Austria’s top-tier AAA credit ratings have been lowered by one notch from AAA to AA+. Italy, Spain, Portugal and Cyprus had their credit ratings cut by two notches. Malta, Slovakia and Slovenia had their credit ratings cut by one notch. Germany, Finland, the Netherlands and Luxembourg maintained AAA ratings. The ratings agency said it made the move because, “…the policy initiatives that have been taken by European policymakers… may be insufficient to fully address ongoing systemic stresses in the eurozone”.
 
US economic news

America’s trade deficit widened more than expected in November following four consecutive months of narrowing. According to the Commerce Department the US imported $US47.75 billion more goods and services than were exported, increasing 10.4 per cent from a gap of $US43.3 billion the month before.
 
US consumers experienced a lift in sentiment at the beginning of 2012. The University of Michigan’s Consumer Sentiment Index increased to 74 in January from 69.9 the month before. The rise of 4.1 points exceeded expectations for a rise of 1.3 points.
 
Figures

Ahead of the Martin Luther King public holiday today, on Friday Wall Street dipped: The Dow Jones Industrial Average lost 49 points to close at 12,422, the S&P500 lost 6 points to close at 1,289 and the Nasdaq lost 14 points to close at 2,711.

European markets also slipped on Friday: London’s FTSE was down 26 points, Paris was down 3 points and Frankfurt was down 36 points.
 
Asian markets closed mixed on the last day of the week: Hong Kong’s Hang Seng was up 109 points, Tokyo Nikkei was up 114 and China’s Shanghai Composite was down 30 points.
 
The Australian share market firmed 0.4 per cent at the end of last week to gain 87 points over the week. On Friday the S&P/ASX 200 Index added 15 points to finish at 4,196. On the futures market the SPI is now 17 points lower.

Currencies

The Australian Dollar at 8:20AM was buying $US1.0295 cents, 67.41 Pence Sterling, 79.38 Yen and 81.52 Euro cents.

Economic news

Due out today from TD Securities and the Melbourne Institute: Inflation gauge for December. From the Australian Bureau of Statistics: Housing finance data for November. From ANZ Banking Group (ASX:ANZ): Job advertisements series for December.

Company news

Shares in David Jones Limited (ASX:DJS) dropped 2.47 per cent on Friday, closing at $2.37. Department store retailer DJs and surf-wear retailer Billabong International Limited (ASX:BBG) are among the companies earmarked by Deutsche Bank as potential takeover targets. A Deutsche Bank note obtained by The Australian says DJs, along with fellow department store Myer Holdings Limited (ASX:MYR) and electronics retailer Harvey Norman Holdings Limited (ASX:HVN) are "the most likely to attract private equity interest". The prediction comes just one week after US private equity giant Kohlberg Kravis Roberts (NYSE:KKR) made a move on Pacific Brands Limited (ASX:PBG). In the 2011 financial year David Jones posted a net profit of $168 million.

Shares in White Energy Company Limited (ASX:WEC) jumped 13.98 per cent at the end of last week, finishing at $0.53. Last year’s worst performing stock was one of Friday’s biggest gainers. Amid speculation the coal company is eyeing a major acquisition White Energy told the Australian Securities Exchange it knew of no reason for the price and volume movements. Friday’s best performer, Linc Energy Limited (ASX:LNC), gained almost 18 per cent in the absence of any announcements. Speculation is mounting Linc is close to selling its Teresa coal project in Queensland. In the 2011 financial year White Energy Company booked a net loss of $18.8 million.
 
Ex-dividends

Four companies are going ex-dividend today: Countplus Limited (ASX:CUP) Euroz Limited (ASX:EZL), Merchant House International Limited (ASX:MHI) and Tower Limited (ASX:TWR). Coming up later this week: Mirrabooka Investments Limited (ASX:MIR).

Commodities

Gold is down $19.70 to $US1,630 an ounce for the February contract on Comex.
Silver is down $0.60 to $29.52 for March.
Copper is down $0.02 at $3.64 a pound.
Oil is down $0.40 at $98.70 a barrel for February light crude in New York.