Stocks Rally Despite Worrying Signs
The Age
Saturday November 18, 2006
INCREASINGLY gloomy global forecasts on commodity prices and the biggest one-day fall in crude oil prices for a year did not dent investor confidence.
The S&P/ASX 200 Index closed at 5419.7 for a gain of 27.1 points - though this was a loss for the week of 17 points after seven weeks of consecutive rises.AMP Capital chief economist Shane Oliver said fears of a global slowdown had created short-term downward momentum in the market."The Australian sharemarket is taking a well-earned breather after surging 10 per cent from late September," Dr Oliver said."However, any correction should prove to be mild and we continue to see the outlook for shares generally over the next six to 12 months as being positive. The correction may have further to run, particularly with slowing global growth resulting in uncertainty about the outlook for commodity prices and the Telstra capital raising resulting in some short-term market indigestion."This week, hedge funds and institutional investors ganged up on Telstra to send the price down 19?, or 4.8 per cent, to $3.75 ahead of Monday's T3 float. The institutional book-build is believed to have attracted more than $6 billion and the Government is expected to set the offer at $3.70.Speculation that OPEC would exceed its production targets and that US demand would lessen with warmer than expected weather drove the spot price of West Texas crude oil down $US2.50, or 4.2 per cent, to $US56.26 on Thursday night in New York. That took the fall in benchmark crude to 8 per cent for the week. In the past 41/2 months it has dropped 22 per cent from a high of $US72.19.BHP Billiton withstood the sagging oil prices and a general slide in commodity prices, losing just 3? to $26.49.And Woodside Petroleum, the country's second-biggest oil producer, moved up 8? to $36.36 after Deutsche Bank analysts gave it a "buy" tag and a 12-month price target of $47. The stock's rise came despite Woodside downgrading its production forecast on Thursday. It lost $2.26, or 5.8 per cent, in the week.The weakness in the commodity sector weighed on Rio Tinto, which continued its downward track with a loss of 18? to $74.82.The Australian dollar moved within a small band this week as foreign exchange traders all but ruled out the prospect that capacity constraints would force the Reserve Bank to lift rates again. Only three out 22 market forecasters expect another 25-basis-point rate hike in the current cycle.The head of market economics and strategy at ANZ, Warren Hogan, is among the minority that thinks it is too early to conclude that the RBA's tightening cycle is over. "Our central forecast is for no change in rates for the coming six to nine months," he said. "But we acknowledge that risks to our forecasts are towards a further tightening."In the latest trading session, the Aussie edged up to US76.62? from Thursday's US76.60?. It was down slightly from last week's close of US76.72?.Optimism that last week's interest rate increase to the highest levels in a decade would not hold back shoppers in the vital Christmas period sent Westfield up 23? to $19.08. This bullish attitude also helped Woolworths to a record close of $21.88, up 18?.National Australia Bank led yesterday's market rally after the bank bought back $100 million of its own stock as part of its dividend reinvestment plan. The shares rose 45? to $39.25.Publishing and Broadcasting Ltd put on 43? to $20.70 on reports that it is planning a $1.3 billion listing of its Macau gaming business on the Nasdaq market in the US as early as next month.John Fairfax Holdings, owner of The Age, firmed 5? to $4.82 after Perpetual Investments lifted its stake to 6.8 per cent. This followed Perpetual's decision on Thursday to sell most of its stake in Southern Cross Broadcasting to Macquarie Media for about $90 million.ONLINE? For a free share portfolio tracker and news alerts, go to tradingroom.com.au
© 2006 The Age