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Morning update


27 May 2010


US stocks reversed strong gains to close lower on Wednesday as investors fretted over the decline of the euro and a mounting European debt crisis. Sentiment turned negative in the last hour of trade after a day-long surge. The Dow was up 135 points at one stage thanks to a positive OECD report that raised the growth forecast and other upbeat US economic data. German Chancellor Angela Merkel said on Wednesday her country would push "with all our strength" for a strong euro, saying Germany had been a prime beneficiary of the single European currency. The bearish sentiment on the euro overshadowed the positive news that fuelled stock buying early on Wednesday. The OECD's six-monthly review upgraded the global growth forecast for this year to about 4.75 per cent after a shrinkage of 0.9 per cent in 2009. Data also showed the US recovery firming, with an unexpected rise in sales of new homes and new orders for big-ticket US manufactured goods in April. At the close, the Dow Jones Industrial Average was down 69.30 points, or 0.69 per cent, at 9,974.45 points. It was the first time the blue-chip index closed below the sensitive 10,000 level since February 8. The broad-market Standard & Poor's 500 was down 6.08 points, or 0.57 per cent, at 1,067.95 points. The Nasdaq composite was down 15.07 points, or 0.68 per cent, at 2,195.88. 

European stock markets closed higher on Wednesday on brighter global growth prospects. The FTSE 100 index ended up 97.4 points, or 1.97 per cent, at 5,038.08 points. 

Japanese stocks closed higher. Although worries persisted regarding the European debt crisis and tensions over Korea, investors took comfort in a rise in Korean stocks as domestic investors picked up bargains after sharp falls the previous day. The benchmark Nikkei ended up 62.77 points, or 0.7 per cent, at 9,522.66 points. 

The Australian stock market has received mixed leads from offshore markets, with Wall Street closing weaker but contract prices for oil, gold, silver and copper ending firmer. At 0728 AEST on the Sydney Futures Exchange, the June share price index contract was six points lower at 4,294 points, with 5,027 contracts traded. In economics news on Thursday, Treasury secretary Ken Henry is to appear before a Senate committee. The Australian Bureau of Statistics is to publish data on private new capital expenditure and expected expenditure for the March quarter. The Australian Office of Financial Management is to conduct a tender for $400 million of Treasury notes. In companies news, Tower Australia Ltd releases first half results, and Austar United Communications Ltd, Westfield Group, MAp Group and Mirabela Nickel Ltd are to hold annual general meetings. Brockman Resources Ltd is holding a general meeting. Woolworths chief executive Michael Luscombe and Brambles chief executive Tom Gorman are to speak at business lunches in Sydney and Melbourne, respectively. On Wednesday, the Australian share market closed almost one per cent higher after shrugging off worries over Europe's deepening debt crisis, taking its lead instead from a recovery on Wall Street. The benchmark S&P/ASX200 index ended up 41.9 points, or 0.98 per cent, at 4,307.2 points, while the broader All Ordinaries index rose 44.1 points, or 1.03 per cent, to 4,330.4 points. 

Oil prices rebounded sharply on Wednesday after weeks of being knocked down by economic uncertainty. After dropping more than 20 per cent in the past three weeks, oil rallied four per cent, the best one-day percentage gain since September 30. Investors chose to focus on positive US economic news instead of troubles in Europe. Oil rallied in line with a positive start on Wall Street, and managed to hold its gains even as US stocks turned lower. Benchmark crude for July delivery rose $US2.76 to settle at $71.51 a barrel on the New York Mercantile Exchange. The price was $US86.84 on April 6. In London, Brent crude rose $US2.19 to settle at $US71.74 a barrel on the ICE futures exchange. 

Gold for June delivery rose $US15.40 to settle at $US1,213.40 an ounce. July silver rose 52.5 US cents to settle at $US18.306 an ounce, and July copper settled up 3.85 US cents at $US3.0805 a pound. 


Source: AAP News


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This information is provided for the use of licensed financial advisers only. In no circumstances is it to be used by a potential investor for the purposes of making a decision about a financial product or class of products. This advice is not personal advice. This advice has been prepared without taking account of investors objectives, financial situation or needs.