The market is down four points. The Dow Jones was up 18 points at 16,717 — the market dropped on the open, and was down as much as 50 points due before recovering and ending with a late rally. The defensive sectors —  consumer staples, healthcare, telcos and utilities — all outperformed while most cyclical sectors underperformed. It was a quiet day of trading but volume was boosted by semi-annual MSCI rebalancing of indices. The market traded in a 72 point range.

US economic data was mixed — Personal income rose 0.3%, in line with forecasts, but consumption disappointed, falling 0.1% compared to expectations of a 0.2% rise. Economists said the main issue was that there was no real evidence of any pent up demand resulting from severe winter weather. The Chicago PMI was strong, rising to 65.5 against expectations of a fall. And the final reading of the Michigan consumer index rose to 81.9 from the 81.8 preliminary reading but below expectations. The current conditions index fell but consumer expectations increased.

European share markets were mixed — The German DAX rose 0.04% but the French CAC fell 0.24% and the UK FTSE was flat.

The Chinese official PMI rose to 50.8 in May from 50.4, above expectations of a rise to 50.6. The improvement was broad-based, with 9 of the 13 sub-indices improving over the previous month. There were additional stimulus measures announced on Friday, including lowering the reserve requirements for more banks, supporting small firms with greater re-lending and bond financing and also reducing business administration fees.

The Aussie dollar was little changed and is currently trading at US93.08c.

Gold fell US$10.70 or 0.85% to US$1245.60 an ounce.

Oil fell US$0.87 or 0.84% to US$102.71 a barrel.

Base metals were mostly weaker — Copper fell 0.77%, zinc fell 0.40% and lead fell 1.23%. But nickel was stronger, rising 1.78%.

Iron ore fell US$3.90 to US$91.80 a tonne. Chinese inventories are rising with weak steel prices, both for Southern and Eastern Rebar. FMG, AGO and MGX have said a further decline past the $US86.90 a tonne low of September 4, 2012, is not impossible.

Fed Speak — Sandra Pianalto made her last appearance as leader of the Cleveland Federal Reserve, saying she was proud of the Fed’s inflation-fighting performance. She noted that she had seen inflation as two-sided threat — with the problems associate with persistently low inflation as equally harmful. Philadelphia Fed President Charles Plosser said a better second quarter growth figure was expected after a weaker than expected 1Q. He said 3% growth was possible for later this year, with unemployment below 6% and inflation trending towards 2%.

US economic data —Personal Income: Actual 0.3%, consensus 0.3%, prior 0.5%,Personal Spending: Actual -0.1%, consensus 0.2%, prior 0.9% (revised 1.0%), PCE Prices – Core: Actual 0.2%, consensus 0.2%, prior 0.2%, Chicago PMI: Actual 65.5, consensus 60.3, prior 63.0, Michigan Sentiment – Final: Actual 81.9, consensus 81.4, prior 81.8

US earningswere weaker, particularly in the retail space — Express -7.48%, Guess? – 5.13%.

Australian economic data today — business indicators, building approvals, the TD inflation guage and the RP Data-Rismark Home Value Index

Ex-dividend– Aristocrat Leisure (ALL) 8c today. CSR 5c tomorrow.

FedSpeak — Chicago Fed President Charles Evans will speak on economic conditions and monetary policy while in Turkey.

Key economic events this week —Domestically, the focus will be on GDP on Wednesday. Retail sales on Tuesday will be important following some recent weak post-budget sentiment figures. In China, there are two PMIs out on Tuesday — the MSBC manufacturing PMI (the flash number was a 5 month high of 49.7) and the official services PMI. In Europe, the ECB meeting is on Thursday and expectations are that the ECB will do “whatever it takes” at this meeting to tackle falling inflation and weak growth. The meeting will follow inflation data on Tuesday, GDP on Wednesday and the services PMI. In the US, the key number is the employment report on Friday. The Fed’s Beige Book is released on Wednesday and there are a number of other important releases including factory orders (Tues) and the ISM service index (Wed).

STORIES

  • Funtastic (FUN) — Has announced the departure of its CEO and downgraded financial year earnings by 50% after flagging a write-down of around $3-6m. It expects weaker earnings from the launch of Chill Factor in North America. To add to this, there was also softer than expected sales performance in the local retail market.
  • Karoon Gas (KAR) — Shares up 60% in early trade after Origin Energy (ORG) have agreed to buy a 40% stake in the Browse Basin for $US800 million. ORG says they will launch a $1 billion capital raising to fund the deal.
  • LNG – Up 7% in early trade after the company has announced an update on their Magnolia LNG Project.
  • SAI — Announces a formal process to review its strategic their options.
  • TFS Corp (TFC) — Has released a trading update.
  • Cochlear (COH) — Has announced the launch of the Cochlear Nucleus implant in Europe.
  • Ausdrill (ASL 97.5c) — Have cut its year to June profit forecast, saying the market yet to bottom. Profit is now expected to hit $25-30 million down from $35 million. But the revised forecast does not take into account any prospective write-downs so it could be revised lower. The company said “Any recovery will be slow with challenging market and mining industry conditions continuing in fiscal 2015, with subdued activity particularly in the Australian market.”
  • REA Group (REA 4552c) –REA today announced that Tracey Fellows, the former head of Microsoft in Australia, has been appointed the new CEO of the company. She is currently Australia Post’s executive general manager of communication management services. REA closed down 0.07% last Friday after striking a deal with China’s largest property website to help grow its Chinese business. Australian property listings will now be listed on Chinese website SouFun.com which attracts some 30 million visits a month. REA currently only posts on China’s myfun.com and Hong Kong’s squarefoot.hk. It is an encouraging announcement not only for REA, but for Australian home sellers and Chinese property buyers.