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Market Opener - 21 Jun 2017

Local Markets Commentary

Australian shares look set to fall at the open, weighed by a plunge in the oil price.

Oil prices fell nearly 3 per cent to seven-month lows overnight after increases in supply by several key producers overshadowed high compliance by OPEC and non-OPEC oil producers with a deal to cut global output amid a continued sell-off driven by funds.

Investors took profits in the big banks and sold off property stocks.

In mergers and acquisitions news yesterday, the Australian Competition Tribunal approved the $11.3b merger of Australia’s two dominant wagering and gaming businesses, Tabcorp and Tatts.

Tabcorp's board has said the deal will return $1.4 billion in business improvements and cost savings. In other overnight commodities trade, the seaborne iron ore market continued to see moderate trading activity on Tuesday, Metal Bulletin reported, despite retreating ferrous futures in China, which kept buying subdued at Chinese ports.

Meanwhile the world’s second largest supplier to the world’s iron ore trade, Rio Tinto, yesterday used Glencore’s late entrance to the Coal & Allied auction to extract a $400m better deal from Yancoal.

Gold prices marked their lowest settlement in five weeks, as comments from Federal Reserve officials raised expectations for further increases in interest rates this year. The US dollar strengthened against that backdrop, dulling appeal for the yellow metal.

The $A is trading at US75.78c at 9.20am AEST.

Overseas Market Commentary

Major European and US equities markets fell yesterday as investors dumped energy and mining shares after crude-oil prices sank.

The US-listed shares of BHP Billiton and Rio Tinto were more than 3% lower.

Sentiment also took a hit as the previous session's rebound in tech stocks faded. \The US dollar strengthened for a second day, hitting a one-month high of 97.871 against a basket of major currencies after Chicago Federal Reserve Bank president Charles Evans said he was increasingly concerned that a recent softness in inflation was a sign the Fed would struggle to reach its 2% objective.

The central bank could wait until December before deciding whether to raise rates again, Evans said, adding the Fed was “pretty close’’ to reducing its balance sheet. The Stoxx Europe 600 Index fell 0.7%, the most in a week.

Energy stocks extended a decline after oil dropped to $US43 a barrel after a revival in output from Libya and rising volumes of fuel held in tankers. Mining and energy shares closed at the lowest levels since November. Hong Kong stocks dropped, the banks among the biggest weight on the city's benchmark.

Link REIT, which traded ex-dividend Tuesday, pulled the benchmark down the most.

Japan's Nikkei share average pared gains after probing its highest levels since August 2015.

21/06/2017 7:50:36 AM

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