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need2know: Investors on the defensive still

Local stocks are poised to open lower after extended losses on Wall Street.

What you need2know:

• SPI futures down 14 points to 5406 on Saturday morning

• AUD at 93.81 US cents, 95.35 Japanese yen, 67.81 Euro cents and 56.15 British pence at 6am AEST

• On Wall St (on Friday), S&P500 -1%, Dow Jones -0.9%, Nasdaq -1.3% 

• In Europe, Euro Stoxx 50 -1.2%, FTSE100 -1.2%, CAC -1.1%, DAX -1.5%


• Spot gold inches higher to $US1318.42 an ounce.

• Brent oil down 0.1% to $US107.33 per barrel.

• Iron ore falls 1.8% to $US116.90 per metric tonne.

• LME three-month copper up 0.2% to $US6670 a tonne.

What’s on today

Australia credit and debit card lending; US retail sales, business inventories

Stocks to watch

RBC Capital Markets has maintained an “outperform speculative risk” call on Senex Energy with a $1.15 price target.

Deutsche Bank has a sell recommendation on Treasury Wine Estates and a 12-month price target of $3.20 a share after a read-through of Constellation’s results.

Morningstar has a “hold” recommendation on no-moat rating Seven Group Holdings. “Our fair value remains at $9.00. Seven Group’s shares are undervalued with the market becoming increasingly concerned about the dissimilar nature of the businesses and investments.”


The Australian dollar was trading at US93.92¢ at about 7am AEST on Saturday. At Friday’s local close, the currency was trading at US93.75¢.

The safe-haven US dollar edged higher on Friday, garnering support from a selloff in equities around the world, as investors fretted about overstretched valuations.

In late New York trading, the dollar index was up 0.1 per cent at 79.470, but on the week it was down 1.2 per cent, its worst weekly showing in nearly seven months.

The dollar was flat against the yen at 101.52 yen.


Copper closed up 0.2 per cent to $US6670 a tonne. It is up nearly 6 per cent since hitting a 3-1/2 year low of $US6321 a tonne in March.

Palladium prices have shot through $US800 an ounce for the first time in almost three years as investors bet on tightening supplies. Spot prices rose 2.4 per cent to their highest since August 2011 at $US810.00 an ounce. The most-active June futures settled at $US806.8 an ounce, up 1.8 per cent from Thursday.

RBC Capital Markets said Q2 semi-soft coking coal prices were settled at $US90/tonne FOB Australia between Nippon Steel and Rio Tinto: down from Q1 settlement price of $US103.5/tonne.

United States

US stocks slid in a volatile session on Friday, with the Nasdaq closing below the 4000 mark for the first time since early February.

"The weakness in the biotech and momentum names is getting investors worried about where the market is headed in the near-term, eventually triggering a selloff in everything," said Robert Pavlik, chief market strategist at Banyan Partners in New York. "Our long-term outlook on the market hasn't changed because if you understand why the market is selling off, you know it's not rational, that it doesn't make sense," he added.

The Global X social media index, which includes Facebook and LinkedIn , slid 2.3 per cent. Facebook shares fell 1.1 per cent to $US58.53. LinkedIn shares lost 2.5 per cent to end at $US165.78

JPMorgan Chase & Co shares fell 3.7 per cent to close at $US55.30. The stock was the biggest drag on the S&P 500 after the bank reported a far weaker-than-expected quarterly profit as revenue from securities trading fell.

Shares of Herbalife sold off late in the day after the Financial Times reported that the Department of Justice and the FBI had launched a probe into the company.


Europe’s stock markets ended the week with sharp declines, part of a global equities sell-off sparked by poor results from the banking sector and fears of over-valuation in tech.

European tech stocks were especially badly hit, with shares in German semiconductor giant Infineon diving 1.56 per cent to 8.14 euros in Frankfurt. British chipmaker ARM Holdings plunged 4.58 per cent to 958 pence in London.

Fitch raised its outlook on Portugal’s debt rating to “positive” from “negative” on Friday, citing the country’s strong progress in cutting its budget deficit, regaining market access and improving economic growth

What happened on Friday

On Friday, the benchmark S&P/ASX 200 Index fell 52.2 points, or 0.95 per cent, to 5428.6.

For the week, the index edged up just 0.1 per cent, while the broader All Ordinaries Index dipped 0.1 per cent to 5423.5 as defensive stocks, like banks and utilities, led the pack.

On balance, domestic economic data released last week indicated the economy is improving, firming consensus expectations the Reserve Bank of Australia’s next move will be to raise interest rates.