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Monday 22

January, 2018 1:31 PM



CommSec Daily Report Friday

CommSec Daily Report Friday

Local shares recovered from two days of losses to start the last session of the week with modest gains.

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12.01.2018 12:48 PM

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Local shares recovered from two days of losses to start the last session of the week with modest gains. The ASX 200 started the session 10 points higher and was up 19 points at the best levels of the morning. Local optimism was powered by an encouraging session on Wall Street overnight, which saw solid gains for the major indices. Central to the improved tone for US markets was the news that China's foreign-exchange regulator had rejected news reports suggesting that Beijing was considering a scale back in US bond purchases. In recent days long terms US interest rates (10 year treasury notes) had risen to within sight of their highest levels in 3 years. Overnight US Treasury yields erased their climb helped by better-than-expected 30-year bond auction.

ASX sector gains over the morning were led by Materials names, while Industrials saw a solid advance. Consumer Discretionary & Staples along with Utilities were the leading decliners, while Financials flirted with negative territory.

Energy stocks were flat as a group despite global oil prices rising to their highest level in 3 years in response to further evidence of tightening global crude stocks. Additionally, OPEC members have indicated an intention to stick with output cuts despite the recent gains gains in the Brent price to nearly US$70 per barrel. Santos (STO) shares were at $5.48 down 8 cents or 1.4%, Oilsearch (OSH) shares were at $7.88 for a gain of 3 cents or 0.4%.

The Materials sector recovered from the weakness of recent days, posting the best sector gain for the morning. The sub-index is the most improved for the year so far with a gain of 3.5%, driven by improving growth prospects for the global economy. Iron ore miners rose as prices for the commodity gained US85 cents or 1.1% to US$79.35 a tonne on weather-related supply disruption concerns as Cyclone Joyce intensified off Western Australia. Fortescue Metals Group (FMG) shares were at $5.32 for a gain of 7 cents or 1.4%. Lithium names recovers from the heavy selling that featured on Thursday, Galaxy Resources (GXY) shares were at $4.25 for a gain of 27cents or 6%, having fallen 10% yesterday.

Shares in Incitec Pivot (IPL) announced after market close yesterday that its current contract with Roy Hill Iron Ore will terminate on 9 February 2018. As a result IPL will cease to be Roy Hill’s contracted supplier of explosives products and services. The loss of the Roy Hill contract is currently estimated to have a one off impact on Net Profit After Tax (NPAT) of approximately $5m in FY18, $16m in FY19, $22m in FY20, $18m in FY21, and $20m in FY22, and minimal impact beyond FY22. IPL said that despite the contract loss, the NPAT impact may be mitigated to some extent by new commercial arrangements. IPL share were 3% or 15 cents lower at $3.70 

Originally published by CommSec
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