insto - Australian financial markets

What should have been a fairly positive session for the sector ended up being an opportunity for investors to take some money off the table heading into the weekend.

With European and US markets yet to react to the surprise timing of the Fed’s lifting of the discount rate we sense a real reluctance for investors to establish new positions. 

As we know markets hate surprises and today’s Fed action was clearly a surprise.  It also shows how fragile investor sentiment really is and how quickly underlying fears can resurface.

Chris Weston, from the institutional dealing desk at IG Markets, filed these comments to sum up the week’s action on local and regional equities markets:

Across Asia, regional indices are all lower after the weak session we saw on European and US markets overnight. Comments from Fitch Ratings that Chinese banks’ capital positions may be more strained than they appear due to the increasing use of off-balance sheet transactions are also weighing on the region. The Shanghai Composite is the worst performer in the region, lower by 1.4 per cent while the Hang Seng is weaker by 0.8 per cent. The Nikkei 225 is also down on the session.

In Australia the ASX 200 closed down 0.4 per cent at 4650, well off its earlier lows of 4604. Losses came predominantly from the materials, telecommunications and financial sectors while the energy and healthcare sectors offered some support.

The good news and the bad news
In overnight trading, investors welcomed comments from Federal Reserve Chairman Ben Bernanke that interest rates will stay at low levels, but equally were concerned over the weakness in the US economy that has caused the Fed to keep those rates so low.

Bernanke said the central bank will raise interest rates to keep inflation under control when the time comes, though that time could be far away. He also said the economy is growing but has a way to go.

The Dow Jones managed to just keep in the black for the day, up 3 points to 10,390. The S&P500 slipped almost 3 points to 1,103, hurt by a decline in the financial sector, while the Nasdaq dropped 5 pts to 2190.

Markets overnight were choppy, even as worries over Dubai World's debt crisis eased. However, it wasn’t all smooth traffic, as a Dubai government official said that it hasn't guaranteed the debt of its largest conglomerate. Balanced against this news was a report from the Chicago ISM which showed business activity in the US Midwest expanded more strongly than expected in November.

Mildly positive news from the US and a weaker dollar pushing up USD-denominated commodities prices saw the major offshore share markets edge up by at their respective closes.

At the close, the Dow was up 30 pts at 10464; the Nasdaq at 2176 (+7) and the S&P 500 was at 1,111 (+5).

The September Ambition Finance Jobs Index shows an improvement in positions available for the first time in twelve months; a key indicator of returning confidence to the Australian economy.

Stability is returning to the institutional finance recruitment market with the current hot areas of demand being for strong risk and compliance people, along with continued demand for project management and change management candidates.

Investors stayed on the sidelines as energy, technology and financial stocks edged downwards and the Dow Jones Industrial Average finished a streak of positive results 46 point down for the day at 10216. The S&P 500 Index fell 0.6 per cent, while the Nasdaq was off 0.4 per cent.

Among the corporate movers and shakers, tech stocks took the headlines, after Hewlett-Packard said it would buy 3Com. Chipmaker Intel announced it had settled an anti-trust dispute with rival AMD, although US regulators were reportedly less than impressed.

It seems that hedge fund managers are capitalising on market trends with managed futures strategies delivering high returns for three months in a row.

The lastest Thomson Reuters/Lipper estimates for September shows that hedge funds using a managed futures sub strategy posted a 1.41 per cent return on average for the month, taking these funds over to minus 0.44 per cent since the beginning of the year, and into positive territory – by 7.29 per cent – for the rolling 12-month window (in USD terms).

This week has seen the domestic major banks tap a variety of markets for funding.

Yesterday, CBA launched a four year domestic trade following investor enquiry for bonds of that maturity.

The deal had a targeted volume of A$1 billion but strong demand from predominantly real money investors allowed CBA to raise a total of A$1.35 billion at a margin of 89 basis points over swap/BBSW.
 

Overnight CBA was active again, this time raising US$300 million of four year bonds in the EMTN market.

US stocks snapped a four day losing streak, trading higher ahead of Friday’s key monthly unemployment report.

The S&P500 closed up 0.9 per cent driven by a 2 per cent gain in financials. Two of the markets most actively traded stocks, Citi and AIG both traded sharply higher.

Economic data was mixed. The US non-manufacturing sector still contracted but by less than forecast while August retail sales were seen as positive. Jobs data however disappointed with continuing job claims rising as laid off workers struggle to find new work.