Foolish Preview: Dow falls, ASX likely to follow


US markets were mixed overnight, with The Dow Jones Industrial Average down 0.4%, the S&P 500 Index closing 0.5% lower and the Nasdaq Composite Index  ending flat, despite Apple rising 1.8% to US$609.94 and Google adding 1.4% to US$595.92.

It was all about central bank action overnight, with the People’s Bank of China cutting its lending rate by 31 basis points to 6%, and the deposit rate by a quarter of a percent to 3%. The Bank of England followed, keeping the official cash rate at 0.5%, but decided to pump £50 billion into the economy.

The European Central Bank cut its benchmark rate by a quarter of a percent to a record low of 0.75%.

Despite central bank actions, European markets were disappointed. Only the UK’s FTSE 100 managed to post a positive rise of 0.1%, while the German DAX fell 0.5%, and Paris’ CAC 40 slumped by 1.2%. Spanish and Italian exchanges meanwhile suffered big losses, both falling by more than 2%.

The Australian dollar was trading slightly higher against the greenback, at 102.8 US cents, after earlier hitting a two-month high of 103.3 US cents.

Early falls likely

The ASX SPI futures was down 9 points, suggesting the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) could show an early fall.

The decision by China to stimulate its economy by dropping interest rates could have a positive impact on our resources companies.

Telstra Corporation  (ASX: TLS) yesterday announced that it was increasing the costs of its mobile phone services, with some services rising by as much as 10%. The move may have come as more people switch to using internet-based communication services such as Facebook Messenger, Skype and Apple’s iCloud. All three services compete with traditional SMS, which may place additional pressure on Telcos’ profits.

Leighton Holdings Limited (ASX:  LEI) could be in the news, as the company sacked one of its senior managers, amid a corruption investigation into its Iraq operations. And according to a report in today’s Sydney Morning Herald, Leighton’s $705m Sapphire to Woolgoolga Pacific Highway upgrade is in financial trouble. Industry sources say that Leighton set the job poorly and got hit by wet weather.

Speaking of weather, apparently the current cold snap in some parts of Australia is good news for our retailers. Consumers are flocking to buy wet weather gear and warm clothing according the Australian Financial Review. Retailers like Kathmandu Holdings Limited (ASX: KMD) will be hoping the cold snap continues. And cold weekends appear to be good news for TV sales, which should make executives at JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Ltd (ASX: HVN) pray for snow.

Foolish takeaway

Snow in Brisbane, Perth and Darwin? Perhaps not, but bring on the cold weather – if it helps our retailers, I’m all for it. Fool On!

If you’re in the market for some high yielding ASX shares, look no further than our ”Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King owns shares in JB Hi-Fi and Leightons. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Taboola Articles

OUR #1 DIVIDEND PICK FOR 2016...

Forget BHP and Woolworths. This "dirt cheap" company is growing like gangbusters, and trading on a 5.6% dividend yield, FULLY FRANKED (8% gross). With interest rates set to stay at these low levels for years to come, for hungry investors, including SMSFs, this ASX company could be the "holy grail" of dividend plays for 2016.

Enter your email below to discover the name, code and a full investment analysis in our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2016.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.