Stock Market Analysis: Markets Consolidate Trading Sideways Again

Stock Market Analysis: Markets Consolidate Trading Sideways Again

* US stock markets rose steadily from the open and held on to early gains despite some profit taking mid-session.
* European stock markets rose the most in two weeks, after German consumer confidence and UK growth were better than expected.
* Asian markets edged lower across the region for a second session, as traders took profits with stock valuations at six month highs and commodity prices continued their fall.
* Commodities prices lower again, Gold prices are now trading around $US1,237, while crude-oil traded around $US92.

The ASX market is looking to open higher today, with the 5350 level key near-term, as markets held on to recent gains, as stocks rose across Europe and the US markets eased. The trading volumes are down ahead of the US Thanksgiving holiday on Thursday and Black Friday (half day of trading). The US will have economic releases on durable goods orders and consumer confidence , which will be keenly watched as a guide for the need for ongoing stimulus.  The Aussie market pared early gains yesterday, as across the market the miners  and energy sectors weighed.

The SPI 200 futures were up 0.2% at 5,363, giving a positive lead for the ASX market today. The Australian dollar fell again and is now trading at US90.8c. The Australian dollar is trading near three-month lows and is on track to record its biggest monthly loss against the US dollar since June, amid Reserve Bank jawboning, rising Chinese interest rates and speculation over the Fed taper. Traders will be looking to rule off November in the next couple of sessions. Note it is equities options expiry today.

US Markets

US stock markets rose steadily from the open and held on to early gains despite some profit taking mid-session.

The three benchmark indexes held on to recent gains and continued to trade around key round number record high levels. The S&P500 is holding around all-time highs, extending its third month of gains and is up 26% for the year and is on track for its best annual performance since 1999, while the Nasdaq closed above 4000 for the second time since the year 2000. The ten S&P500 sectors ended generally higher, with the gains dominated by the Tech sector up 0.8%, closely followed by the Industrials and Financials sectors rose 0.4%, and the Consumer Discretionary was up 0.3%, But the Energy sector slumped -0.8% on lower cure oil prices.

In a “Don’t fight the Fed” note  QE has fuelled the recovery on the S&P500 since 2009, and the has been a measured move of around 75+% gains, from Mar-09 to Mar-10 and Oct-11 to Now.  Investors are piling more money in stock mutual funds in the US than any time in the past 13 years.  A global poll by Bloomberg has revealed 80% of investors expect that the US Fed will delay the taper until March 2014. This may explain the record amounts of cash pouring into US equity-based mutual funds of over $US50 billion during the month of October according to analysis by Lipper.

In economic data the Case-Shiller Index of property prices in 20 cities rose 13.3 in September (up from the prior 12.8%), while another report showed US consumer confidence unexpectedly rose to 73.5 (up from 73.2) above expectations.  Th Conference Boar Index of US leading indicator, which gauges economic outlook for the next couple of quarters, rose for a fourth straight month.

For the session Dow Jones closed up 0.2% at 16,097, the S&P500 closed up 0.3% at 1,807, and the NASDAQ closed up 0.7% at 4,044, while on 10-year Treasury notes jumped at 2.74%.

European Markets

European stock markets rose the most in two weeks, after German consumer confidence and UK growth were better than expected.

The Europe Stoxx 600 rose 0.6% for the session and is trading just below its May 2008 high. The index has closed higher every December for the past four years, which bodes week for a Christmas rally. The index is still up 15% for the year and is on track for its best annual gain since 2009 and the VStoxx index is at its lowest level since February 2007.

Across the region all but two of the sectors ended in the green, with gains led by the  the Consumer  Discretionary and Diversified sectors which rose 0.8%, closely followed by the Materials, Industrials and Financials all up over 0.5%, while the Energy and Utilities sectors were down over -0.3%.

The German market rose holing around all-time highs, as consumer confidence rose to 7.4 (up from the prior 7.1). The London market edged higher, as an Office of National Statistics report showed the UK economy grew 0.8% in the third quarter, as business investment rose 1.4% but exports fell -2.4%.

In the UK the FTSE 100 closed up 0.2% at 6,649, the German DAX 30 closed up 0.7% at 9,351, the French CAC 40 closed up 0.4% at 4,293, while the Italian market closed up 0.8% at 18,924.

Asian Markets

Asian markets edged lower across the region for a second session, as traders took profits with stock valuations at six month highs and commodity prices continued their fall.

The MSCI Pacific Index ended fell another 0.2% for the session. The index is still around up over 9% for the year.  Across the region the miners were the worst performers on the back of falling commodity prices.

The Chinese market snapped a four session losing streak, as it held around one month high, but mining stocks weighed on the market, after crude oil and metals prices fell. The Chinese Third Plenum meeting has resulted in a 60-point plan of reform measures that provided a significant boost to Chinese equity markets as well as to their economic outlook.  There has been increased optimism behind China’s round of new reforms, including relaxing the one-child policy and expanding the trading band on the Yuan, both of which are seen as positive forces for overall commodity market demand.

The Japanese market eased back again from its seven month highs, led by the exporters after the yen rose from its lowest level since July.  The Hong Kong market rose, holding around its highest level since March.

For the session the Chinese Shanghai Composite closed up 0.8% at 2,201, the Hong Kong Hang Seng closed up 0.5% at 23,806, and the Japanese Nikkei closed down -0.4% at 15,449, while the South Korean KOSPI closed up 0.3% at 2,028.

Commodities

The Dollar Index was higher 80.72 on a lower Euro, and the Aussie Dollar closed lower at US90.8c. Commodities prices were lower.

Overnight the COMEX WTI Crude for NOV13 delivery closed down -1.4% at $US92.35, the COMEX Copper for NOV13 delivery closed down -0.7% at 3.196, the COMEX Gold for NOV13 delivery closed  down -0.3% at $US1,237.90.

ASX News Today

BKW – Brickworks the building products maker expects a better 2014 as housing construction recovers, boosting orders for materials, saying profitability improved last quarter thanks to Austral bricks.

BOQ – Bank of Queensland is expecting economic growth to slow as weakness remains in the non-mining sector.

ELD – Elders chief executive and managing director Malcolm Jackman is resigning from the company immediately.

GNC – Archer Daniels Midland (ADM) the US food giant, has improved its takeover offer for GrainCorp with an extra $200 million in extra commitments to the Australian agriculture sector.

HVN – Harvey Norman says a rise in consumer confidence since the federal election has not provided a boost in its sales.

QAN – Qantas says the high Aussie dollar and its foreign ownership restrictions makes it harder to compete with Virgin Australia, which is majority owned by Air New Zealand, Singapore Airlines and Etihad and can be 100 per cent foreign owned.

PRG – Programmed Maintenance Services has retained its profitability despite suffering falling revenues from weakness in its resources division.

RIO – Rio Tinto, the world’s second largest mining company, says proposed economic reforms unveiled this month by China had many positive signals, underpinning continued demand for raw materials.

Market Summary

ASX – to open flat
US & UK/Europe – consolidated

US ADRs – Broadly mixed!!…

ANZ +0.1%, NAB +0.1%, NWS +0.7%
AWC -0.6%, BHP -0.9%, RIO +1.5%, NEM -0.4%

By Michael Hevern
D2MX Investment Advisor

For trade ideas and recommendations on how to trade in this market, sign up for a free trial of the D2MX Daily Trading Report, call 1300 610 024 or email [email protected]

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Stock Market Analysis: Markets Consolidate Trading Sideways Again

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