North Korea fails to shock oil
May 26th, 2009 by Bryden Elssmann
Closing Data
| current | change | % | |
|---|---|---|---|
| Dow Jones | 8277.32 | -14.81 | -0.2% |
| NASDAQ | 1692.01 | -3.24 | -0.2% |
| S P 500 | 887 | -1.33 | -0.1% |
| FTSE 100 | 4365.29 | 19.82 | 0.5% |
| Nikkei 225 | 9347 | 121.19 | 1.3% |
| SPI Futures | 3727 | -24 | -0.6% |
| All Ords | 3,735.00 | -20.1 | -0.5% |
| Oil | 60.51 | -0.64 | -1.0% |
| Gold | 958.9 | 7.7 | 0.8% |
| Silver | 14.695 | 0.25 | 1.7% |
| Aluminium | 1407 | 0 | 0.0% |
| Copper | 4586 | 0 | 0.0% |
| Lead | 1422.5 | 0 | 0.0% |
| Nickel | 12525 | 0 | 0.0% |
| Tin | 13975 | 0 | 0.0% |
| Zinc | 1467.5 | 0 | 0.0% |
The Memorial Day holiday in the US and the Spring Bank Holiday in the UK will provide the Aussie market with little direction this morning. However, North Korea was not on holiday successfully conducting, another, underground nuclear test. South Korea’s Kospi dived 2.3 percent following the test with Asian markets eagerly awaiting a response from the US Government.
Oil prices fell towards US$61 a barrel, shedding some of the previous session’s gains, on risk aversion following the North Korean nuclear test. Still, prices hovered around a six month high, on a weak US dollar and expectations the Organization of the Petroleum Exporting Countries (OPEC) would keep its official production targets unchanged when it meets on Thursday in Vienna. The negative impact on oil prices will be quite limited since the Korean Peninsula is not a supplier of oil, so there won’t be any disruptions to supply. The reality is a weak US dollar will continue to offer support to the oil price.
The Australia dollar is continuing to hover around 78 US cents following its biggest 3 month rally since it was floated in 1983. The rally against the US dollar represents a pivotal shift in sentiment for the state of the Australian economy driven largely by demand for high interest rate levels and speculation that Chinese demand for Australian commodities will increase. The RBA Governor, Glenn Stevens, announced last week that “Australia is well placed to take part in renewed international expansion”. In the short term, the Aussie dollar is currently running on momentum but its rally could prove to be short lived as uncertainty continues to surround the state of the US economy, potentially triggering a rebound in the greenback.
In company news, CSL Limited has warned that US regulators could block its $US3.1 billion acquisition of plasma company Talecris. CSL announced that the US Federal Trade Commission, FTC, has recommended the commissioner initiate legal action to block the transaction. Many analysts are still maintaining a buy recommendation on CSL citing any legal action against the takeover will be drawn out. CSL shares dropped 3 percent yesterday following the announcement but quickly bounced back to close at $30.35, down 54cents. CSL will now wait until the FTC publishes its decision on May 28 before announcing any future plans. We continue our Buy recommendation for CSL.
The Aussie market is set to open steady this morning following no clear lead from Wall Street, the selling of financial stocks is likely to ease after the surprise lifting by ASIC yesterday of its eight month ban on short selling. The SPI is currently up 3 points to 3754.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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