Stock Market Analysis: Traders Hold Their Nerve On M&A …

Stock Market Analysis: Traders Hold Their Nerve On M&A …

* US stock markets finished higher again, for the easiest trade in the past three months on “turnaround Tuesday”.
* European stock markets continued to find support rising to three week highs overnight, on the back of M&A activity and corporate earnings.
* Asian stock markets generally rose spurred on by gains in China, as it found support at its key level.
* Commodities prices edged lower, Gold prices eased to $US1,295, while crude-oil held just below $US101. Copper held above the key crucial US3.0c level.

The Australian share market slumped -0.9% to 5486 pulling back from six year highs yesterday. Early strength in the banks evaporated and turned negative, as they joined the miners was offset by selling the mining sector, particularly in the iron ore stocks and leading a broad-based sell-off in the market that saw the benchmark index dip back below the key 5500 level. Iron ore prices hit a seven week lows, owing to a continuing weakness in Chinese economic activity. Woolies are due to update on sales today and the ANZ bank will report tomorrow.

The SPI 200 futures are up 0.3% at 5496, giving a positive lead for the ASX market today as it trades around six year highs. The 5500 level is key near-term for the ASX200, as markets across Europe and in the US recovered. The Australian dollar held at US92.6c level.

US Markets

US stock markets finished higher again, for the easiest trade in the past three months on turnaround Tuesday, as US markets have risen 17 of the past 19 Tuesdays.

The three benchmark indexes rose 0.5% towards record highs again. Eight of the ten S&P500 sectors closed higher again for the session, with gains led by the tech and the Financials sectors up 0.7% and 1.0% respectively.

The tech heavy Nasdaq outperformed, after internet stocks rose for the first time in five sessions, but after hours Ebay and Twitter are trading lower after reporting. The S&P500 is just in the green for the month up 0.3% and is less than 1% from its all time highs, while the Nasdaq slumped -2.3% for the month.

Over 35 companies reported and with the 280 S&P500 stocks that have reported to date over 74% have beaten on profits and 52% beat on sales, while analysts are predicting profits have fallen -0.9% in the first quarter (1Q), while sales are projected to have risen by 2.6%, according to Bloomberg.

In economic news the Fed FOMC two day meeting is underway, where it is expected that monthly bond buying will be cut to $US45 billion. The S&P/Case Shiller index of property values in 20 US cities rose at a slower pace in February up 12.9%, down from 13.2% and the slowest rise since August, while the consumer confidence eased to 82.3 in April (back from 83.9).

Investors are keenly awaiting the US GDP figures and the Fed release which are due for release tomorrow and the NFP monthly employment report due on Friday.

For the session Dow Jones closed up 0.5% at 16,535, the S&P500 closed up 0.5% at 1,878 and the NASDAQ closed up 0.7% at 4,103, while on 10-year Treasury notes held at 2.70%.

European Markets

European stock markets continued to find support rising to three week highs overnight, on the back of M&A activity and corporate earnings, which offset concerns over the geopolitical situation in the Ukraine.

The Europe Stoxx 600 recovered a further 1.2% for the session, on the back of better earnings from Deutsche Bank and Statoil, which propelled the Energy and Financials sectors over 1.2% for the session, the Utilities sector rose 1.5%.

Trader sentiment was boosted by economic confidence figures for the eurozone came in at -8.6 but better than elected, while in the UK GDP expanded by 0.8% in the first quarter, up from 0.7% in the final quarto of 2013. The M&A activity was in the pharmaceuticals sector and was helped by better earnings from Bayer, Orange (up 3.3%), Nokia (up 2.9%), Statoil (up 4.5%) and Duetsche Bank (up 2.2%).

In Germany the market rose on the back of better earnings reports and this market is just over 1% below its all time record level now. In London the market headed up again towards its highest level in over six weeks.

For the session the German DAX 30 closed up 1.4% at 9,584, the UK the FTSE 100 closed up 1.0% at 6,769, the French CAC 40 closed up 0.8% at 4,497, while the Spanish market close up 0.1% at 10,320.

Asian Markets

Asian stock markets generally rose spurred on by gains in China, as it found support at its key level.

The MSCI Pacific Index recovered late in the session to close up 0.2% after early selling sent it down -0.4%. Across the region the miners have declined as gold prices eased and iron ore prices hit a seven week low.

The Chinese market bounced after Chinese policy makers have supported expansion including reserve ratio cuts for rural banks, but the Chinese Premier Li Keqiang has reiterated that the government is not considering stronger stimulus and analysts are concerned that the 7.5% annual growth target may be at the top end of the range for this year.

The Hong Kong market jumped up from three lows. The Japanese market was closed.

For the session the Shenzhen Composite closed up 1.1% at 2,158, the Hong Kong Hang Seng closed down 1.5% at 22,453, and the Japanese Nikkei was closed at 14,288, while the South Korean KOSPI closed down -0.2% at 1,964.

Commodities

The Dollar Index higher at 79.80 on a lower Euro, and the Aussie Dollar held at US92.6c. Commodities prices edge lower.

Overnight the COMEX WTI Crude for MAY14 delivery closed down -0.6% at $US100.70, the COMEX Copper for MAY14 delivery closed down -0.1% at 3.073, the COMEX Gold for MAY14 delivery closed down -0.1% at $US1,295.10.

ASX News

AIO – Asciano the rail operator says it is on track to achieve its full year profit target thanks to stronger-than-expected coal volumes.

CCV – Cash Converters says a surge in demand for “pay day” loans has driven quarterly revenues significantly higher.

EGP – Echo Entertainment Group the casinos operator has appointed gaming veteran Greg Hawkins as MD of the group’s biggest asset, The Star in Sydney.

HZN – Horizon Oil share have recovered from sharp falls after announcing plans for an $800 million merger with fellow energy explorer and developer Roc Oil.

LEI – The German-based and Spanish-owned construction company Hochtief will pay Leighton shareholders sooner than previously expected if they accept Hochtief’s proportional takeover offer for the Australian construction and contract mining group.

OSH – Oil Search says the liquefied natural gas (LNG) production has started early at the $US19 billion Papua Guinea LNG project in which Australian companies Oil Search and Santos are partners.

WES – Wesfarmers sold off after its third quarter sales figures fell short of market expectations.

WHC – Whitehaven Coal produced and sold less coal during the March quarter while battling low prices but says it’s flagship and controversial Maules Creek project is more than one-third complete.

Market Summary

ASX –open higher
US & UK/Europe – higher

US ADRs – Broadly higher!…

ANZ -0.9%, NAB -1.0%, NWS +0.2%
AWC +0.5%, BHP +0.6%, RIO +0.8%, NEM +1.4%

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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