Posts Tagged ‘FTSE’

Stock Market Analysis: China Is Looking Towards Monetary Easing

Tuesday, January 10th, 2012

* US stock markets drifted higher ahead of the start of the US earnings season.
* European stock markets ended lower overnight, as the Stoxx Europe 600 index finished -0.5% lower.
* Asian stock markets rallied yesterday. Chinese and Hong Kong stocks jumped on hopes that Beijing will soon ease its monetary policies to support economic growth.
* Commodities prices traded mixed, as Gold prices traded around $US1,607 while crude-oil closed around $US101.

The SPI Futures is trading below the key pivot level of 4180, ending up 0.3% (or 23 points) at 4,095. The key levels for our index today are 4050 to 4150.

Aussie shares are expected to open flat, after mixed leads from the US and European markets. Indications that China is looking to monetary easing should help sentiment.  Retailers are facing a tough year ahead.

See below for ASX listed companies in the news today.

US Markets

US stock markets drifted higher ahead of the start of the US earnings season.

The Dow Jones Index held around 12,400, while in the broader markets the S&P500 and the tech-heavy Nasdaq rose 0.3%.

There is a view that the US economy is starting to decouple from Europe, Asia and the emerging economies, as US data in recent months has been improving, but this earnings seasion will no doubt provide the litmus test for 2012 prospects for the US.

Alcoa was the strongest Dow Jones stock, rising 2.7% as investors bought up ahead of the aluminum company’s fourth-quarter results, which were reported after market slightly better than expected.  Auto stocks also traded higher as the Detroit auto show began, and tech stocks are in focus ahead of the annual US electronics conference.

The ten company groups that make up the S&P index traded mixed with Materials up 0.1%, Energy up 0.5%, Financials up 0.5%, Industrials up 0.7%, Technology down -0.2%, and Consumer Staples up 0.1%.

The Dow Jones closed up 0.2% (or 5 points) at 12,388, the S&P 500 index up 0.2% (or 3 points) at 1,280, the Nasdaq ended up 0.2% (or 5 points) at 2,679 and the smaller cap Russell 2000 was up 0.5%.

European Markets

European stock markets ended lower overnight, as the Stoxx Europe 600 index dropped -0.5%.

Across the region the banking sector led the falls, with Italy’s UniCredit SpA plunging another -11% and leading the banking sector lower after its recent disappointing equity raising, which consisted of a EUR7.5 billion rights issue, which had to be offered at a 43% discount.

In London the FTSE 100 index fell -0.7% as banks dragged the index lower, with Barclays down -4.5% and Lloyds down -3.4%.

Investors focused on comments from German Chancellor Angela Merkel and French President Nicolas Sarkozy, who announced that progress had been made on plans to develop a pact to tighten up budget rules across the region, but reiterated that Greece must complete its debt haircut soon or it will not receive its second aid package.

In London the FTSE 100 index closed down -0.7% (or -37 points) at 5,612, the German DAX was down -0.7% (or -40 points) at 6,017 while in France the CAC was down -0.3% (or -10 points) at 3,127. Spain was up 0.6% and Italy ended down -0.6%. 

Asian Markets

Asian stock markets rallied yesterday. Japanese markets were closed for a holiday.

Chinese and Hong Kong stocks jumped on hopes that Beijing will soon ease its monetary policies to support economic growth which triggered some bargain hunters to do some strong buying across sectors. In China the Shanghai Composite Index surged 2.9% for its biggest percentage increase since mid-October.  The gains in Chinese stocks came after Chinese Premier Wen Jiabao called for efforts to boost confidence in the share market, and for rule changes to allow private capital investment in banks and insurers.  Chinese coal and metals miners led the gains up over 5% for the session.

In China the SSE Composite closed up 2.9% (or 62 points) at 2,225, while in Hong Kong the Hang Seng Index was up 1.5% (or 273 points) at 18,866 and in Japan the Nikkei 225 Index was closed. The South Korean KOSPI was down -0.9% for the session, while the Indian market was down -0.2%.

Commodities

The Dollar Index was higher at 80.98 on a lower Euro, while the Australian Dollar last traded lower at 1.024. Commodities prices traded mixed.

For the session the benchmark crude NYMEX for January delivery was down -0.2% (or -$U0.16) to settle at $US101.40.  Copper prices are seeking a support level as Copper for January delivery was down -0.5% (or -1.9 cents) at $US3.3960.  January gold was down -0.5% (or -$U8.60) at $US1,607.80.  

ASX News Today

BPT – Coal Seam Gas has begun flowing for Beach Energy (BPT) and Origin (ORG) at the Middleton Brownlow wet gas project in South Australia’s Cooper Basin.

BNO – Bionomics has signed a $345 million deal with US company Ironwood Pharmaceuticals to develop a potential anti-anxiety drug.

MIR – Investment firm Mirrabooka expects share market volatility to continue for the next six months before a return to some normality later in 2012.

SPT – Spotless Group, the industrial services company, has requested its private equity suitor increase its takeover bid to $743 million.

RETAILERS – HVN, MYR, WOW, BBG, DJS and Woolworths are facing a tough year ahead for Australian retailers, as official data showed a slowing in consumer spending for November.

WRG – Water Resources Group, the water treatment company, says its subsidiary signed a $US95 million deal to supply water in Africa, last week.

Ex-dividend Date

None

Market Summary

ASX – to open higher
US & UK/Europe – mixed

Commodities Stock Index up 0.4%
Gold Stocks Index up 0.6%
Oil Stocks Index up 0.7% 

US ADRs – Broadly Higher

BHP up 0.3% & RIO up 0.2%; AWC down -1.1%
ANZ up 0.1% & NAB up 0.5%
NEM  down -0.7%, JHX up 0.1%, NWS down -0.1%

By Michael Hevern
Head of Research

For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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Stock Market Analysis: Markets Ease On Euro Bank Solvency Concerns

Friday, January 6th, 2012

* US stock markets finished modestly higher overnight after another early sell-off.  Weekly ADP jobs data showed an improving labour market.
* European stock markets dropped overnight, as concerns about the eurozone sovereign debt crisis and bank solvency resurfaced.
* Asian stock markets closed lower yesterday after European banks were sold off, as Italian lender UniCredit SpA sold new shares at a sharp discount.
* Commodities prices traded mixed. Gold prices rose higher to around $US1,621 and crude-oil closed around $US102.

The SPI Futures is trading below the key pivot level of 4180, ending flat (or -1 point) at 4,134. The key levels for our index today are 4080 to 4180.

Aussie traders are expected to stay on the sidelines today, after negative leads from the US and European markets, ahead of the US Non-Farm Payrolls report due out tonight.

See below for ASX listed companies in the news today.

US Markets 

US stock markets finished modestly higher overnight after another early sell-off.

Weekly ADP jobs data showed an improving labor market, as weekly jobless claims fell by 15,000 to a seasonally adjusted 372,000 in the week ended of December.

This was seen as positive ahead of the monthly Non-Farm payrolls report due out tonight. All three major indices finished flat.  The gains in the US came despite concerns in Europe, where EU bank shares fell as fears over their ability to raise capital weighed on sentiment. An Italian bank had to discount its share price by over 40% in an equity raising.

The ten company groups that make up the S&P index traded mixed with Materials up 0.3%, Energy down -0.5%, Financials up 1.3%, Industrials up 0.1%, Technology up 0.3%, while Consumer Staples were up 0.8%.

The Dow Jones closed down -0.1% (or -3 points) at 12,416, the S&P 500 index was up 0.3% (or 4 points) at 1,281, and the Nasdaq ended up 0.8% at 2,669.

European Markets

European stock markets dropped overnight, as concerns about the eurozone sovereign debt crisis and bank solvency resurfaced.  The Stoxx Europe 600 index fell -0.9%.

Across the region banks posted the steepest losses, with the Stoxx 600 Banks index down -3.2%.  Italian and Spanish banks were the worst hit, after the Italian UniCredit SpA was forced to price a share sale at a 43% discount. There were concerns over Spanish banks after the Spanish economy minister told the Financial Times that Spanish banks will have to set aside as much as EUR50 billion to accomodate extra provisions on bad property assets, which is about 4% of Spain’s GDP.  French and German banks also came under selling pressure, falling around -5%.

In London the FTSE 100 index closed down -0.8% (or -44 points) at 5,624, the German DAX was down -0.3% (or -15 points) at 6,095 while in France the CAC was down -1.6% (or -52 points) at 3,193. Spain was down -1.7% and Italy ended down -2.0%.

Asian Markets

Asian stock markets closed lower yesterday, after European banks were sold off. 

Japanese stocks also declined as investors sold due the continuing fears over the European debt situation.  In China the Shanghai Composite finished at 3-year lows, as worries about the property sector and tight liquidity conditions continued to weigh on investor sentiment. 

In China the SSE Composite closed down -1.0% (or -21 points) at 2,149, while in Hong Kong the Hang Seng Index was up 0.5% (or 86 points) at 18,813 and in Japan the Nikkei 225 Index was down -0.8% (or -71 points) at 8,489. The South Korean KOSPI was down -0.1% for the session, while the Indian market was down -0.2%.

Commodities

The Dollar Index was higher at 80.95 on a lower Euro, while the Australian Dollar last traded lower at 1.0256. Commodities prices traded mixed.

For the session the benchmark crude NYMEX for January delivery was down -1.7% (or -$U1.75) to settle at $US101.47.  Copper prices are seeking a support level as Copper for January delivery was down -0.2% (or -0.7 cents) at $US3.4175.  January gold was up 0.5% (or $U7.50) at $US1,621.

Market Summary

ASX – to open lower
US & UK/Europe – lower
Commodities Stock Index down -0.5%
Gold Stocks Index up 0.3%
Oil Stocks Index down -0.6% 

US ADRs – Broadly Lower!!…

BHP down -1.9% & RIO down -1.0%; AWC down -4.1%
ANZ down -1.7% & NAB down -2.0%
NEM  down -0.3%, JHX down -2.3%, NWS up 0.9% 

By Michael Hevern
Head of Research

For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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Weekly Market Wrap: Eurozone Credit Squeeze Triggers Coordinated Central Bank Action

Friday, December 2nd, 2011

Just when we thought Santa Claus had abandoned us, the global central banks come to the rescue. November was, for the most part, a pretty dismal month for equities, second only to September for the Asian markets, but the European and US markets were saved by surging equities prices in the final session for the month.

For the month of November global markets dropped. Asian markets were the worst performers because they ruled off their books before the coordinated central bank action. In Japan the market was down -6.4%, in Hong Kong the market plunged -9.5% and in China the market was down -5.6%. In Europe November saw the London FTSE 100 index down -1.0%, the German DAX-30 down -0.5% and in France the CAC-40 lost -3% for the month. These figures look acceptable owing to the huge surge on the last day of the trading month, however they had been down -6%, -12% and -14% respectively at the lows of the month, just a few short days before the books were ruled off.

In the US the Dow and the S&P 500 finished in the green by about 0.5% for the month, while the tech-heavy Nasdaq was down -2.4%, but again these figures hide the fact that these indices were down over -7% at the lows for the month.

This week began with Eurozone banks under selling pressure again, after Moody’s said it may downgrade the subordinated debt of 87 European banks, and news reports that the French triple-A credit rating could be under scrutiny for a potential downgrade by Standard & Poor’s. UBS also dampened sentiment when it downgraded its gross-domestic-product (GDP) forecasts for the eurozone in 2012 to a 0.7% contraction, from a previous estimate of 0.2% growth, and bringing forward its prediction that the region’s recession will likely now start in the fourth quarter of this year. Then mid-week Standard & Poor’s downgraded 15 large banks, including Goldmans, Lloyds of London, J.P. Morgan and Bank of America.

All this negativity was forgotten when the global central banks surprised traders, moving to shore up liquidity in the global financial system. This move involved a coordinated action plan by a number of central banks to provide US dollar funding more cheaply for European banks. This news came after China indicated that it too would loosen monetary policy by lowering the reserve requirement ratio for large banks. The central banks of the US, Canada, the BoE and BoJ have taken action and the move cuts the rate by 50 basis points, in an effort to give European leaders more time to resolve the ever worsening sovereign debt crisis.

This joint coordinated action to provide liquidity to the eurozone financial system highlights the severity of the crisis, however the move does not address all the fundamental problems associated with European government debt.

There is an old adage “don’t fit the Fed”. Well, this is particularly true when a number of central banks make a coordinated effort to provide support to the global financial system. This action will bolster growth-sensitive stocks and commodities as we head into the end of the year.

The US dollar eased this week and this has seen commodities prices recover. The major metals have risen, with gold breaking above the $US1,700 level and now trading down at $US1,735, crude oil recovering to above $US100 per barrel and copper bouncing to $US3.34 per pound.

Our View For Australia

Our market has once again bounced off the 4000 level and is now trading above its 50 day moving average, which is a positive sign. The line in the sand which we talked about last week, around the 4150 level, remains significant as we trade into the end of the year. The 4180 pivot level is crucial in the short term. In the Analyst’s Eye this week we talk about identifying stocks that have the potential to come back in the near-term.

Aussie shares have staged a great recovery in the past five trading sessions, as the world’s central banks have been forced to address the painful credit squeeze resulting from the eurozone debt crisis. The Aussie market has bounced off its key support level, and is now trading at the mid-point of its trading range.

Last week we highlighted that “the 61.8% retracement level … is often a level where we could see a relief rally…” – and this proved timely. The bulls have well and truly taken the upper hand this week and should be able to lead into the end of the year as long as we can hold above the 50 day moving average. The 200 day moving average, which sits around 4,410 still offers significant resistance for any positive momentum into the end of the year.

Investors should be looking to utilise options strategies to manage the gains of the past week. Those of you who held calls from into this week should be able to convert your positions into a risk free trade. Options can be used to protect your profits and manage your risk in this type of market.

Remain attuned to the news from overseas, particularly from China, Germany and the US regarding their economic growth and debt issues. Monitor the performance of the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 was down -4.3% for the month of November, but has recovered 3.5% in the past two trading sessions. The index is currently trading at 4255 and looks to be setting up to test resistance around the 4350 level near-term. Key levels for the index next week will be 4180 and 4350, with 4220 the key pivot level. Expect to see volatility ease as traders assess the ramifications of the coordinated central bank move.

By Michael Hevern
MDS Trading Desk

MDS Financial Advisory Services offers general advice on trading options to generate consistent steady income on your investment portfolio. Call 1300 610 024 for further information.

For Buy and Sell recommendations on ASX listed companies register for a free trial of MDS Financial Research.

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Stock Market Analysis: Markets Plunge On Greek Default Concerns

Tuesday, October 4th, 2011

* US stock markets have begun the final quarter of the year with yet anonther selling spree.
* European stock markets closed sharply lower again overnight, with the banks again among the worst decliners, as Greek authorities announced that the country cannot meet its deficit-reduction targets this year, raising concerns that a default could come sooner rather than later.
* Asian stock markets end sharply lower yesterday, due to rising concerns over the euro-zone debt crisis and global economic growth, while concerns that Chinese non-performing loans may rise sparked a selloff in Hong Kong shares.
* Commodities prices traded sharply lower, as Gold prices rose to $US1,650 and while crude-oil closed down around $US76.

The SPI Futures is trading around the key pivot level of 3850, ending down -1.2% (or -46 points) at 3,842. The key levels for our index today are 3800 to 3950.

Aussie stocks are expected to sell down again today, following on from the negative leads from the US and Europe. Commodities sold off again overnight, which will add to the pressure on our miners. The RBA is expected to leave rates on hold at 4.75%.

See below for ASX listed companies in the news today.

Economics News Today

* RBA Interest Rate Decision

United States Markets

US stock markets have begun the final quarter of the year with yet anonther selling spree. This latest bout of selling was triggered by news that a Greek default may be just around the corner.

The Dow Jones Index closed near its lows for the year. In the broader market the S&P 500 stock index slumped over -2% and closed at its lows for 2011, while the tech-heavy Nasdaq Composite plunged -2.5%. All 10 of the S&P index sectors sold-off led by the financials and energy sectors, but most other sectors were down over -2%.

Better-than-expected US ISM manufacturing data for September and construction spending for August did little to help sentiment, as the three major indices are now down almost 20% from their 2011 highs, below which is considered bear-market teritory. The selling was triggered as Greece announced that it would miss its deficit targets this year. Those targets were considered a prerequisite to qualify for their next round of the bailout rescue package.

All ten company groups that make up the S&P index traded generally sharply lower: Industrials were down -2.8%, Materials were down -2.8%, the Energy sector was down -3.4%, the Financials sector was down -4.5%, Consumer Staples were down -2.9%, while the Technology sector was down -2.3%.

The Dow Jones closed down -2.4% (or -258 points) at 10,655, the S&P 500 index closed down -2.9% (or -32 points) at 1,099, the Nasdaq ended down -3.3% (or -80 points) at 2,2335, and the smaller cap Russell 2000 was down -4.3%.

European Markets

European stock markets closed sharply lower again overnight, with the banks again among the worst decliners as Greek authorities announced that the country cannot meet its deficit-reduction targets this year, raising concerns that a default could come sooner rather than later. The Stoxx Europe 600 ended down -1.1%, year-to-date the index is now down -18.9%.

European finance ministers met in Luxembourg overnight to discuss the Greek reform which is considered a prerequisite for Greece to avoid a near-term default. Banks led the decliners as BNP Paribas fell -4.6% and Soc Gen slid -5.2% in France and in Germany the Commerzbank slumped -7.3% and ING Groep sank -5.2%.

In London the FTSE 100 closed down, just above 5070, while in Germany the DAX slumped -2.3%. This was despite the UK PMI manufacturing showing a surprising recovery in September, but the eurozone PMI data was weak, hitting a 25-month low of 48.5.

The FTSE 100 index finished down -1.0% (or -53 points) 5,075, the German DAX was down -2.3% (or -125 points) at 5,367, while in France the CAC was down -1.9% (or -55 points) at 2,927.

Asian Markets

Asian stock markets ended sharply lower yesterday, due to rising concerns over the euro-zone debt crisis and global economic growth, while concerns that Chinese non-performing loans may rise sparked a selloff in Hong Kong shares.

In Japan the Nikkei Stock Index fell -1.8%, as exporters sold down heavily, despite the BoJ tankan survey showing Japanese business sentiment turned positive in the third quarter as companies restored supply chains hit by the March natural distastes. In Hong Kong the Hang Seng Index shed 4.4%, to end at 28-month lows. Chinese banks led the downturn due to concerns over non-performing loans.

In China the SSE Composite closed down -0.3% (or -6 points) at 2,359, while in Hong Kong the Hang Seng Index was down -4.4% (or -770 points) at 16,822 and in Japan the Nikkei 225 Index was up 1.0% (or 86 points) at 8701. The South Korean KOSPI closed flat for the session, while the Indian market was down -1.8%.

Commodities

The Dollar Index was higher at 79.59 on a lower Euro, while the Australian Dollar last traded lower at 95.26. Commodities prices were sharply lower.

For the session the benchmark crude NYMEX for December delivery was down -3.1% (or $US2.44) to settle at $US76.69. Copper prices are finding a support level as Copper for December delivery was down -0.2% (or -0.5 cents) at $US3.0955. December gold was up 1.9% (or $US30.00) at $US1,650.40.

ASX News Today

ABY – Copper miner Aditya Birla has been fined by a Queensland court for having too much water at its Mt Gordon mine in the Mt Isa region.

ANZ – Australia’s largest class action was back in court on Monday, in what lawyers describe as a major step in the case against ANZ bank fees.

AQA – Aquila Resources has entered into a 12-month $250 million corporate facility agreement with the National Australia and the Commonwealth banks for the provision of corporate cash advance facilities totalling $250 million.

CSL – CSL the pharmaceutical company says it has addressed the majority of manufacturing flaws highlighted by the US Food and Drug Administration (FDA), and remaining concerns are currently being resolved.

ELD – Elders has started offloading its struggling forestry business, blaming weak woodfibre demand and poor prices.

FMG – Fortescue Metals Group has had its highest level of quarterly shipments in the three months since June.

LEI – Workers have been sent home from Brisbane’s Airport Link tunnel project after construction was stopped as a mark of respect to an employee who died following an on-site accident.

NAB – National Bank insists it remains focussed on growing its UK business after Moody’s downgraded the ratings on NAB’s Clydesdale Bank due to speculation it would be sold off.

NEC – Northern Energy say a financing package for the first stage of the Wiggins Island coal export terminal in Queensland has been completed, project participant Northern Energy Corporation says.

NUF – Nufarm the agricultural chemicals supplier is well placed to grow its operating profit in fiscal 2012 as it continues to diversify its product portfolio away from the weedkiller glyphosate.

NWS – The Australian Council of Superannuation Investors (ACSI) calls on member superannuation funds invested in News Corporation to recommend against the re-election of a number of executive directors in the upcoming annual meeting.

PDN – Paladin Energy, which owns the producing Langer Heinrich uranium mine in Namibia, has completed a $68.2 million placement of shares with institutional and accredited investors at $1.20/share, or an 8.4% discount.

QAN – Qantas faced delays at airports around the country over the weekend as Qantas baggage handlers and ground staff walked off the job for an hour.

RIO – The Foreign Investment Review Board (FIRB) has approved a plan by Rio Tinto and Japan’s Mitsubishi to mop up the shares in coal miner Coal & Allied Industries that they don’t already own.

SDL – Sundance Resources has accepted an improved takeover bid by the Chinese Hanlong Mining, valuing the iron ore explorer at $1.65 billion, according to people familiar with the deal.

WES – Wesfarmers announced it will sell its Premier Coal business to Chinese-owned Yancoal Australia for $296.8 million.

Local Corporate Reporting

Range Resources (RRS) Full year 2011 Results
Gryphon Minerals (GRY) Full year 2011 Results
Sundance Resources (SDL ) Full year 2011 Results

Ex-dividend Date

DJS – David Jones Limited
PMV – Premier Investments
WBA – Webster Ltd

Market Summary

ASX – to open lower
US & UK/Europe – lower
Commodities Stock Index down -3.3%
Gold Stocks Index down -1.4%
Oil Stocks Index down -3.7%

US ADRs – Broadly Lower

BHP down -3.0% & RIO down -4.0%; AWC down -3.2%
ANZ down -3.4% & NAB down -3.8%
NEM up 0.5%, JHX down -5.3%, NWS down -2.5%

By Michael Hevern
Head of Research

For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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Weekly Market Wrap: European Banks Spark Global Market Selloff Again

Friday, August 19th, 2011

What a difference a day makes. Up until last night the bulls appeared to be in control, although the buying pressure had subsided from last week’s monumental run. Investors are still coming to terms with the downgrade of the U.S. credit rating from AAA to AA+, and rumours persist that other AAA rated European economies may be subject to downgrades.

A number of European countries, namely France, Spain, Italy and Belgium all introduced some short-selling bans to try to stem the recent selling pressure. The crisis is far from over in Europe and obviously the selling ban has not worked, with European banks down around 10% overnight. Note that last time there was a selling ban markets fell another 20%.

Investors continue to be concerned over the euro zone sovereign debt crisis and were disappointed by the comments coming out of the meeting of European leaders. Germany and France failed to alleviate investor concerns about the economic state of the region at the meeting. The euro zone economic council said that it would help strengthen national fiscal solvency, but Germany and France opposed the issuance of euro zone bonds, which had been hoped for prior to the meeting.

The market volatility is likely to continue as investors battle against the machines using algorithmic trading programs (algo trading). Algo trading has become dominant since the US removed the “up tick” rule back in 2008, and until the regulators reinstate the rule the markets will be subject to free fall, which has happened regularly over the past week.

The key US markets are now down over 15% from their April peaks and are perilously close to the flash crash of last week. Note that last time we had conditions like this the market collapsed 40% before finding a floor.

Commodities prices have been volatile this week, and are generally finishing lower, with the exception of gold which is at record levels above $US1,824 per ounce. Crude oil is pulling back to the $US80 level and copper prices are below the $US4.00 per pound level again. The yield on the benchmark 10-year Treasury note briefly dipped below 2% for the first time in nearly 60 years.

US Markets

US stock markets were crushed overnight as investors fear a recession, and following on from the steep losses in European and Asian markets. Sentiment was also dampened as US investment banks lowered their global growth estimates; investors are reassessing their expectations for stock prices going forward.

The Dow Jones Index fell below 11,000, while the S&P 500 and tech-heavy Nasdaq slumped 4.5%. After eking out modest gains earlier this week the US markets have been slammed and look set to test the lows of last week near term. Overnight no sector was spared but investors dumped energy and materials stocks, as commodities prices plunged and the financials joined their Euro counterparts in the rout.

Sentiment has been hurt by poor economic news regarding manufacturing figures and some downgrades to global growth into 2012 from investment banks. This has undermined the tech stock projections and once again the financials have been lagging the market. That changed overnight though when the financials led the falls.

Overnight the Dow Jones closed sharply down -3.7% at 10,990, the S&P 500 index closed down -4.5% at 1,140, the Nasdaq ended down -4.5% at 2,380, and the smaller cap Russell 2000 was down -5.9%. Look for US markets to test recent lows in the coming days.

European Markets

European stock markets held on to recent gains earlier this week, but last night investors rushed for the exits, dumping banking, mining and energy shares due to fears over the euro zone debt crisis and fears of a possible double dip recession as global growth falters. The rout on European markets extended after the disappointing US economic data and global growth downgrades from some investment banks. Bank stocks were decimated after a Wall Street Journal article reported that US regulators are stepping up their surveillance of European banks due to worries that they could face funding difficulties.

Overnight the Stoxx Europe 600 index slumped -4.8% and European losses were spread across all countries and all market sectors, though banks felt the brunt of the falls, with most down over 10% in the session. In London the FTSE 100 index was down -4.5% at 5,092, the German DAX was down -5.8% at 5,602, while in France the CAC was down -5.5% at 3,076.

European stock markets are expected to remain weak until they get some action that addresses the region’s debt crisis situation and investors come to terms with the slowing economic growth, as evidenced in the German GDP figures which came in below expectations.

Asian Markets

Asian stock markets have continued to be weak and many markets are either at their March lows or look set to test these levels near term, as the worries about the global economic outlook continue to weigh on sentiment.

In Japan the Nikkei Stock Index has again fallen below 9,000 and is at its lowest finish since mid-March, as exporters were again hit from concerns over the yen’s strength and fears of declining global demand. In Hong Kong the Hang Seng Index closed around the 20,000 level again, while in China the Shanghai Composite also declined. Asian investor sentiment has been plagued by concerns that debt problems in the key US and European markets will hurt demand for manufactured goods and commodities.

Overnight in China the SSE Composite was down -1.6% at 2,559, while in Hong Kong the Hang Seng Index was down -1.3% at 20,016 and in Japan the Nikkei 225 Index was down -1.3% at 8,943. The South Korean KOSPI was down -1.7% for the session, while the Indian market was down -2.2%.

Our View for the Australian Market

The Australian share markets continue to be driven by overseas sentiment, so expect the volatility to continue near-term, particularly in Europe and the US.

The S&P/ASX 200 index looks set to test its key support level around 3900 near term, and if that fails the next support level would be 3750, which was a pivotal level back in the 2008 GFC recovery phase and held last week.

Expect stock prices to continue to experience volatility near term. Last week we had blue chip stocks down over 30 percent from their April peaks and that was when bargain hunters stepped in. Gold stocks have weathered the storm, supported by the surge in the gold price which is again at record levels above $US1,824 in a “flight to safety”.

There are still concerns that the sovereign debt situation in Europe is out of control and the likes of France may see credit ratings downgrades near term. The euro zone leaders failed to address the concerns over the sovereign debt crisis this week.

The S&P/ASX 200 has traded in a 16 percent range in the past few weeks. The line in the sand was drawn last week around 3750 and the 4000 level remains a pivot key in the short term.

Investors need to be attuned to this resumption in selling pressure, from the negative leads in the U.S. and Europe, as investors plot a path from here, in an environment where there are concerns over faltering global growth and European debt contagion fears, which is sparking the spectre of a double-dip recession.

Our reporting season continued this week with mixed results. The RBA looks set to leave rates on hold near-term, the dividend season is underway, and the Aussie dollar has strengthened this week which is providing additional headwinds for corporations with US earnings.

Banks are attractive on a yield basis, but they are retesting key support levels which would need to hold. Many blue chip stocks are even cheaper on a valuation basis but investors are still fearful, plus fund managers and investors alike are still underweight equities.

The markets need to stabilise near-term and sentiment from overseas needs to improve before we fully commit to the view of a turnaround. On an earnings basis there is reason to start accumulating when all others are most fearful. The S&P/ASX 200 is currently trading at 4140 having pulled back from key resistance around 4325. Key levels for the index next week will be 4325 and 3900.

Keep that shopping list close at hand and be prepared to start accumulating when others are most cautious, you can use options to limit your risks. Expect to see further volatility going forward as the market participants look for some guidance for the direction of the market.

Use options strategies to reduce your risk in these volatile times. MDS Financial Advisory Services offers general advice on trading options to generate consistent steady income on your investment portfolio. Call me on 1300 610 024 for further information.

For buy and sell recommendations on ASX listed companies register for a free trial of MDS Financial Research.

By Michael Hevern
Head of Research

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Stock Market Analysis: Weekly Market Wrap

Friday, May 13th, 2011

Commodity Volatility Creeps Into Equities

The markets have continued to be dragged down this week by the increasingly volatile commodities markets. Yesterday the Australian share market closed at a 7-week low after a slump in commodities prices, particularly oil and copper, weighed on the resources sector.

European investors have been plagued by the resurfacing concerns over the Greek debt crisis, which have added to the selling pressure.

The US stock markets are still trading around their multi-year highs, but the US dollar has been the big story of the past week, finding support at current levels and adding to the havoc in the commodities market.

Investors need to exercise caution near-term as discussed in last week’s Analyst’s Eye, Leading Indicators – Divergence.

Australian Market

The ASX All Ordinaries and the S&P/ASX 200 continued to sell-off this week as commodities pulled back sharply, led by silver. Mining and energy stocks have driven the indices lower with the strong Aussie dollar weighing on company profits and forecasts. Banks have also contributed to the weakness.

US Markets

Volatility is picking up as US stock markets have managed to hold around their multi-year highs. The market was buoyed by a larger-than-expected increase in monthly non-farm payrolls, with the employment report showing that the private sector has posted the strongest employment gain in 5years. We also had the anniversary of the “flash crash” and losses in commodities-related stocks have been offset by a rebound in defensive stocks. These are now finding some support, as they are seen to be independent of broader economic activity.

Overnight the Dow Jones closed up 0.5% at 12,696, the S&P 500 index closed up 0.5% at 1,349, the Nasdaq ended up 0.6% at 2,863, and the smaller cap Russell 2000 was up 0.8%.

European Markets

European markets are finishing lower for a second week following a broad sell-off in energy, commodities and financials, while concerns over the Greek debt crisis and ratings downgrade added to the selling pressure. Crude oil prices slumped further overnight after the International Energy Agency cut its global demand outlook. Investor sentiment was hit further after China announced it would raise its bank reserve requirement ratio, stoking concerns about slower economic growth in the world’s second largest economy.

The Euro has fallen sharply following last week’s report indicating Greece was considering bailing out of the euro zone. It has now plunged from above $1.49 last Thursday, its highest level since December 2009, to finish below $1.42.

Overnight in London the FTSE 100 index closed down -0.5% at 5,944, the German DAX was down -0.7% at 7,444, while in France the CAC was down -0.8% at 4,023.

Asian Markets

Asian markets are generally lower this week, led by China. Japanese stocks have suffered as the government demanded more nuclear power reactors shut down until safety concerns were addressed. The market fell sharply for its biggest 1-day fall in a month with economic data showing that the Japanese current account surplus in March shrank 34.3 percent year on year because of the impact of the devastating March 11 quake and tsunami.

China has been the focus and investors initially were buoyed when Chinese trade data showed the export sector was powering ahead, despite government efforts to cool overall growth. This sentiment did however turn around when the Chinese decided to lift the ratio of funds domestic banks must set aside as reserves for the fifth time this year, as the country continues to battle against inflation.

Yesterday in China the SSE Composite was down -1.4% at 2,844, while in Hong Kong the Hang Seng Index closed down -0.7% at 23,073 and in Japan the Nikkei 225 Index was down -1.5% at 9,716. The South Korean KOSPI gained 2.1%, while the Indian market was down -1.3%.

Our View

The S&P/ASX 200 index has again been sold off heavily in the past week, and is down 6% from its April peak. The market has been weighed down by the strong Aussie dollar, weakening economic data from the eurozone and the US and the sharp sell-off in commodities.

The S&P/ASX 200 is currently trading at 4690 having again found resistance at the 4,800. The focus near-term will continue to be on corporate earnings reports, the Aussie dollar and commodities prices, particularly copper, gold and crude-oil. Key levels for the index next week will be 4800 to 4600.

Investors who have taken the opportunity to buy protection through options to hedge their long positions near-term should be comfortable with the current pullback.

By Michael Hevern
Head of Research

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Stock Market Analysis: Weekly Market Wrap 15 April 2011

Friday, April 15th, 2011

Markets Back Off Key Resistance Levels

Investor nerves were shaken again this week due to a number of large aftershocks in Japan, and several global markets sold-off from key levels. The drivers this week have been inflation, global growth rates, interest rates, geopolitical unrest in the Middle East and North Africa and continued European sovereign debt concerns. In addition, Asian investors are wary of China taking further monetary tightening action in the near term in order to address their domestic inflation issues.

Commodities prices were again in focus this week, selling off from their record levels. Copper backed off 2-year highs, while the price of crude oil retreated sharply after hitting $US113 a barrel in New York for the first time in two and a half years, as investors start factoring in the detrimental impact of elevated energy prices on global growth. Silver sold off from its 31-year peak, but gold remains around its all-time high. The US dollar continues its decline, falling further from its 14-month low against the euro.

Investors need to exercise caution near-term and at the very least take out protection through options, otherwise lighten positions until markets trade above their key resistance levels.

The Australian Market

The ASX All Ordinaries and the S&P/ASX 200 have backed off 12-month highs and are still searching for some catalyst to push through these levels.

M&A activity continues to be in focus. Woodside was rumored to be in talks with BHP regarding a potential takeover, which BHP later denied. Copper miner Equinox Minerals received an “opportunistic” unsolicited $6.3 billion all-cash takeover offer from Minmetals Resources Ltd, and Rio Tinto’s takeover bid for Riversdale has gone unconditional as their stake is now over 50%.

Goldman Sachs called for a pull-back in commodity prices at the start of this week, and these prices will again be a focus next week, regrouping after backing off record levels. The Aussie dollar remains at record levels.

US Markets

U.S. stock markets have drifted modestly lower this week, with the primary focus being on the start of the corporate earnings season and government budgets. Markets have been weighed down by the banks and energy stocks.

Corporate earnings have been mixed but the news from President Obama that the government plans to slash the U.S. budget deficit by $4 trillion over the next 12 years through a combination of spending cuts and tax increases was well received.

The U.S. House of Representatives voted to approve a budget bill that will fund the government through the remaining months of fiscal year 2011. Financial stocks weighed on markets again after news that U.S. investigators are examining whether some of the world’s biggest banks colluded to manipulate a key interest rate before and during the financial crisis. In economic news an index of U.S. producer prices rose a seasonally adjusted 0.7% in March due to rising energy costs, and inline with expectations.

Crude oil remains around $US108 per barrel in New York, and if energy prices remain at these elevated levels the global economic recovery will be in jeopardy. The reporting season continues next week and will give a further insight to the impact of higher input costs due to higher commodities prices. Gold prices are back at record levels above $US1,470 as the US dollar remains weak.

Overnight the Dow closed up 0.1% at 12,285, the S&P 500 index was flat at 1,314 and the tech-heavy Nasdaq ended down -0.1% at 2,760.

European Markets

European markets have traded lower this week. The European banks have again been in focus, with investors reacting nervously to German comments on Greece’s debt, stoking fresh fears in the eurozone. The German economy is now expected to grow 2.6% this year and 1.8% in 2012, while inflation is set to remain low at 2.4% and fall to 1.9% in 2012, according to government forecasts. Greek money market rates jumped sharply after the German Finance Minister suggested that Athens might have to restructure its debt, meaning investors would lose out. In London the market fell, with mining and energy stocks ranking as the biggest decliners as commodities prices pulled back from their record levels.

Overnight the FTSE 100 index closed down -0.8% at 5,964, the German DAX was down -0.4% at 7,146, and the French CAC was down -0.9% at 3,989.

Asian Markets

Asian markets generally ended lower this week. Nerves have been tested again by a number of large aftershocks in Japan, and fortunately the damage has been limited.

China has also been the major driver of sentiment in the region, posting its first quarterly trade deficit in seven years ($US1.02 billion) as rising commodity prices pushed manufacturing costs higher. However analysts expect a large trade surplus for the full year as its exports tend to grow later in the year. Elsewhere the Chinese State Council declared it will take all required measures to maintain price stability and relax controls on the property sector. China will release March inflation data today, expected to rise to 5.3% (up from 4.9%) and there are concerns that the government may need to tighten its monetary policy further, which could weigh on global demand for commodities in particular.

Yesterday the SSE Composite was down -0.3% at 3,043, while in Hong Kong the Hang Seng Index was down -0.5% at 24,014 and in Japan the Nikkei 225 Index was up 0.1% at 9,653. The South Korean Kospi Composite gained 0.9%, while markets in India and Thailand were closed for a public holiday.

Our View

The S&P/ASX 200 index looks set to continue its retreat from key resistance levels next week, currently trading at 4884, having backed off the 5,000 level. The key levels for next week will be 4750 and 5000.

The focus near-term will continue to be on the Chinese measures to address inflation, U.S. earnings reports, the Aussie dollar and commodities prices, particularly crude oil.

Investors should use protection through options to hedge their long positions near-term.

By Michael Hevern
Head of Research

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Stock Market Analysis: Weekly Market Wrap

Friday, February 25th, 2011

Spike in Oil Price Drives Global Markets Lower

Globally stock markets have sold-off this week as geopolitical unrest spreads in the Middle East with violence increasing in Libya, a major oil-producing state. The broad losses came after April Nymex crude oil futures rose past $US100 a barrel for the first time in over 2 years, due to the potential of disruptions to supplies. Brent Crude rose to over $US120 a barrel. Overnight the crude oil futures price spiked above $US103 as the Libyan rebels that are controlling large areas within the country promised an offensive against the capital, Tripoli.

Investors are concerned that the rising crude prices will hurt consumer spending and ultimately slow down the global economic recovery, and that the turmoil could spread to other oil exporters in the region.

Australian Market

Trading in the Australian market has been dominated by investor sentiment from overseas. The earthquake in Christchurch has again put the spotlight back on the insurers. Stocks sensitive to higher oil prices weighed on the market, and even the local energy sector sold off. Small and mid cap resource stocks have seen profit-taking recently as oil is a major input cost for these mining operations. The federal government is revisiting the imposition of a carbon tax and this has added to the negative investor sentiment. Traders have used this week’s corporate earnings reports as an excuse to take profits, resulting in a number of “bull traps” being triggered, as discussed in the Analyst’s Eye this week.

The ASX All Ordinaries has backed off the 5000 level, while the S&P ASX 200 failed to reach the key psychological level of 5000.

US Markets

The US markets traded lower in a week shortened by the Presidents’ Day holiday. These markets have seen their biggest falls since last August. The three major markets are testing their 50 day moving averages where we would normally expect to see some short-term support. However, if oil prices remain at these elevated levels then this support is likely to give way near-term.

Overnight the Dow closed down -0.3% at 12,068, while in the broader market the S&P 500 index was down -0.1% at 1,306 and the tech-heavy Nasdaq ended up 0.6% at 2,738. The S&P 500 held below key support at 1324. The next target is 1275.

European Markets

European stock markets are backing off two and a half year highs, having sold-off sharply this week, due to the Middle East unrest, the oil price spike and concerns over the global economic recovery. The Stoxx Europe 600 index has fallen for a fifth straight session.

Libya is the first major oil exporter to be engulfed by the crisis and there are fears that the unrest will continue to spread in the Middle East, seriously impacting oil production in the medium term. Libya exports around 1.2 million barrels of oil a day – Saudi Arabia, on the other hand, exports 6.5 million barrels a day.

The 3 major European markets (U.K., France, and Germany) are testing their 50 day moving averages, where we would expect to see some short-term support, but again if oil prices remain at these elevated levels then this support is likely to give way near-term.

Overnight in London, the FTSE 100 index closed down -0.1% at 5,920, the German DAX was down -0.9% at 7,130, while in France the CAC was down -0.1% at 4,009.

Asian Markets

Asian markets have generally sold-off heavily this week, with the exception of China. The Japanese and Hong Kong markets have sold-off due to the geopolitical tensions in the Middle East and the rise in the price of oil, as well as Moody’s downgrade of Japan and China’s hike in interest rates. In Hong Kong the Financial Secretary reported the economy grew 6.8% in 2010, (exceeding forecasts of 6.5%) and expects the economy to grow 4%-5% in 2011.

In China the market has traded flat, despite the Chinese consumer confidence index falling in the fourth quarter to the lowest since 2009, indicating concern over inflation is weighing on sentiment and has been running above the government’s 4 percent target for the past four months, despite a number of recent interest rate rises.

Yesterday in China the SSE Composite closed up 0.6% at 2,878, while in Hong Kong the Hang Seng Index was down -1.3% at 23,906 and in Japan the Nikkei 225 Index was down -1.2% at 10,452.

Our View

Next week we should see the S&P ASX 200 index find support around 4800, its 50 day moving average, but selling pressure will likely resume if the oil price remains at these elevated levels and unrest in the Middle East is not resolved soon.

The focus for next week will again be on the unrest in the Middle East, Asian concerns over inflation, European debt concerns and locally the continuing earning reporting season. Key levels for next week will be 4880 to 4730.

Investors need to monitor the tensions in the Middle East and North Africa, with unrest in Libya and Bahrain and tensions between Iran and Israel over the Suez Canal. Be prepared to hedge your positions, as the current low options volatility provides investors with long term portfolios opportunity to hedge their positions cheaply.

By Michael Hevern
Head of Research

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Stock Market Analysis: Market Sell-Off Continues

Friday, February 25th, 2011

*  Globally stock markets extended declines as violence increased in Libya, a major oil-producing state.
*  U.S. markets fell for a third straight day overnight, as investors sold stocks in the wake of the Libyan unrest; but the Nasdaq bucked the trend.
*  European stocks fell again overnight, as crude oil prices continued to surge, weighing on the markets.
*  Asian markets generally sold-off again yesterday. China bucked the trend ending slightly higher.
*  Commodities were generally lower. Crude oil prices continue to rise on Middle East unrest.

The SPI Futures is trading below the key level of 4850, and closed down -0.3% (or -14 pts) at 4,778.  The key levels for our index today are 4830 and 4730. M&A activity continues to drive specific stocks. 

The ASX is set to trade lower today, but there may be some added volatilty early as we settle options positions.  We will continue to focus on local earnings reporting this week, and we had generally negative leads from overseas markets.   

Investors need continue to monitor the escalating tensions simmering in the Middle East and North Africa with unrest in Libya and Bahrain, and tensions between Iran and Israel over the Suez Canal.

See below for stocks in the news today.

U.S. Markets

With the exception of the Nasdaq, U.S. markets fell for a third straight day overnight, as investors worried over the surge in oil prices resulting from the violence and unrest in the Middle East. Investors are concerned that the rising crude prices will hurt consumer spending and ultimately slow down the global economic recovery and that the turmoil could spread to other oil exporters in the region. 

The S&P 500 index saw selling in every sector, though some sectors finished in the green.  The Dow Jones has experienced its biggest 3-day drop since mid-August.  The energy sector posted a sharp drop, weighed down by refiners, as oil is a refinery’s largest input cost.  The declines came as the crude oil futures price spiked above $US103 as Libyan rebels controlling large areas within the country promised an offensive against the capital, Tripoli.

In economic news the data was mixed with initial jobless claims falling more than expected; while durable goods orders rose higher than expected up 2.7% in January, driven by a surge in demand for airplanes and after three straight declines. New orders for non-defense capital goods excluding aircraft declined 6.9% last month, while the monthly sales of new homes was weak and has reversed most of the previous month’s gains.

Corporate earnings reports were mixed:
* Priceline.com posted a 73% jump in 4Q profit as a jump in international bookings drove top-line growth and margins surged
* Target the retailer reported 4Q earnings up 11% as revenue improved, benefiting from sharply lower bad-debt expense at its credit-card arm
* GM reported $510 million in 4Q net income, below expectations.

The Dow closed down -0.3% (or -37 points) at 12,068, while in the broader market the S&P 500 index was down -0.1% (or -1 points) at 1,306 and the tech-heavy Nasdaq ended up 0.6% (or 15 points) at 2,738. The S&P500 held below key support at 1324; 1275 is the next target.

Sectors that make up the S&P index delivered mixed performances, with underperformers including Energy down -1.4%, Materials down -0.5%, Consumer Discretionary down -0.4%, and Financials down -0.2%, while Industrials and Consumer Staples both rose 0.6%.

European Markets

European stocks fell again overnight, and crude oil prices continued to rise as investors anxious over the political turmoil in Libya.  The Stoxx Europe 600 index was down for a fifth straight day of declines, slipping 0.6%. 

Higher crude oil prices, especially if they persist, will cause slower global economic growth, reduced consumer spending and a higher inflation rate. 

In London, the FTSE 100 index was flat, as banks traded lower, including the Royal Bank of Scotland Group (RBS) reporting results below market expectations. Energy stocks generally climbed around 3% for the session. 

In Germany stocks fell again, led by auto and insurance stocks.  Weakness in the utility sector also weighed, as RWE the utility company reported its 2010 net income fell 7.4% and warned 2011 operating profit will decline by around 20%.

The FTSE 100 index closed down -0.1% (or -3 points) at 5,920, the German DAX was down -0.9% (or -64 points) at 7,130, while in France the CAC was down -0.1% (or -3 points) at 4,009.

Asian Markets

Asian markets generally sold-off again yesterday, as investors continued to worry over the escalating political tensions in the Mideast and North Africa, with no sign of an end to the Libyan crisis. 

The broad losses came after April Nymex crude oil futures rose to over $100 a barrel for the first time in over 2 years, due to the potential disruptions to supplies. Brent Crude rose to over $US120 a barrel.  If high oil prices persist then this will result in a rise in global inflation, pressure on the global economic recovery, increasing interest rates and pressure on consumer spending. 

In Japan, the market continued to trade lower, weighed down by the Middle East crisis and a stronger yen.  China again bucked the trend with the Shanghai Composite index rising on the back of oil and coal shares, and bargain buying in some beaten down technology stocks.  Energy stocks again supported the market in China, gaining on the expectation of higher energy prices, while airline stocks continued to drop across the region.

In China the SSE Composite closed up 0.6% (or 16 points) at 2,878, while in Hong Kong the Hang Seng Index was down -1.3% (or -305 points) at 23,906 and in Japan the Nikkei 225 Index was down -1.2% (or -126 points) at 10,452.

Commodities

The Dollar Index was lower at 77.08 on a higher Euro, while the Australian Dollar last traded above parity at 100.91. Commodities were general lower.

For the session the Benchmark crude NYMEX for December delivery was down -1.5% (or -$US1.46) to settle at $US96.64.  Copper prices are back at 2-year highs. Copper for December delivery was up 1.2% (or 0.5 cents) at $US4.2950.  April gold was up 0.1% (or $US1.90) at $US1,412.50.

ASX Market News

AGK - AGL Energy Ltd reported a 30.4 percent rise in 1H11 net profit and will ramp up its marketing spend in NSW as the retail margins in the state are strong.

AGO – Atlas Iron Ltd has posted a maiden profit and says BC Iron Ltd has made its first shipment of iron ore from the Pilbara.

ALL – Aristocrat Leisure Ltd, the Gaming machine supplier, has turned its previous losses to profit for calendar year 2010.

BHP – Japan’s JFE Steel has rejected BHP Billiton Ltd’s proposal for monthly pricing for coking coal, rather than the quarterly pricing arrangement that was introduced last year.

CAB – Cabcharge Australia Ltd’s 1H11 profit declined 44.7 percent as the company had to pay $15 million as a penalty for anti-competitive behaviour.

CCL – Coca-Cola Amatil Ltd increased FY11 profit 10.8 percent as the local bottler of Coke has made a solid start to calendar 2011.

CHC – Charter Hall Group posted an interim statutory net profit of $47 million and said it expects full year distribution to be 25 percent higher than for last year.

CNP – Centro Properties Group’s 1H11 net profit surged to $553 million thanks to the strong Aussie dollar, but underlying profit plunged 42 percent and the company will now restructure due to its debt burden.

FXJ – Fairfax Media Ltd expressed uncertainty on the pickup in retail advertising in a subdued consumer environment and issued earnings guidance in a wide band.

IAG – Insurance Australia Group has cut its FY11 guidance due to the expected cost of the earthquake in Christchurch.

IFL – IOOF Holdings Ltd reported a 25 percent jump in 1H11 net profit and expects full year performance to mirror this result.

GMG – Goodman Group, the real estate investment company, has returned to net profit and says its FY11 operating profit will rise 23 percent on stronger Asian and European businesses.

MAP – MAp Group says its full year profit rose as traffic increased at all its airports and the company started 2011 in an “excellent position”.

ORG – Origin Energy Ltd, NSW’s largest electricity retailer, says a price on carbon, to be introduced next July, will only be effective if the price is set above $25 a tonne.

PPX – PaperlinX Ltd, the paper merchant, still has work to do to regain relevance as a company, after reducing its 1H11 net loss to $10.2 million.

RHC – Ramsay Health Care increased its 1H11 profit and reaffirmed its full year guidance as it looks to expand via brownfield developments and acquisitions.

RIO – Rio Tinto Ltd has been granted a 3-month extension of its exploration tenure at the Simandou iron ore project in Guinea while it negotiates a development plan with the West Africa Guinea government.

RIV – Riversdale Mining Ltd has posted a 1H11 net loss of $11.5 million due to exploration expenditure, FX losses and the cost of share options and rights.

SUN – Suncorp Group Ltd has reported a 39 percent fall in 1H11 net profit and forecast higher insurance premiums due to the recent extreme weather events.

TOL – Toll Holdings Ltd the logistics and freight services provider, increased 1H11 profit 53 percent as it benefited from both internally generated growth and takeovers.

TTS – Tatts Group Ltd has posted a 3.4 percent lift in 1H11 net profit as the gambling and gaming company sees signs of growth reemerging after disruptions due to recent natural disasters.


Local Corporate Reporting 
 
APN – APN News & Media Ltd    Full year 2010 Results
CWN – Crown Ltd                          Interim 2011 Results
EDT – EDT Retail Trust                Interim 2011 Results
IFG – Infigen Energy                     Interim 2011 Results
ILU – Iluka Resources Ltd           Full year 2010 Results
GPT – GPT Group                         Full year 2010 Results
MAQ – Macquarie Atlas Roads    Full year 2010 Results
NRT – Novogen Ltd                       Interim 2011 Results
PLA – Platinum Australia Ltd      Interim 2011 Results
PPC – Peet Ltd                               Interim 2011 Results
ROC – Roc Oil Ltd                          Full year 2010 Preliminary results
WOW – Woolworths Ltd               Interim 2011 Results
 
Ex-dividend Date
 
ANG   - Austin Engineering
CNA   - Coal & Allied
EHL    - Emeco Holdings
IRI      - Integrated Research
LMW  - Landmark White Ltd
OST    - OneSteel Limited
SND   – Saunders International Ltd

 

Market Summary    

ASX – to open lower
US & UK/Europe – lower
 
US ADRs –  Mixed
 
BHP down -0.5% & RIO down ; AWC up 1.8%
ANZ up 0.9% & NAB up 1.4%
NEM  down -7.5%, JHX down, NWS up 1.1%
 
Commodities Stock Index down -0.9%
Gold Stocks Index down -2.3%
Oil Stocks Index down -0.7%

 

By Michael Hevern
Head of Research
 

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Stock Market Analysis: Weekly Market Wrap – February 18 2011

Friday, February 18th, 2011

The Australian Market Tracks Higher on a Robust Earnings Season

Global markets continued to trade higher this week following a positive start after the resignation of Egyptian President, Hosni Mubarak. Investors have chosen to ignore the tensions simmering in the Middle East and North Africa, and the crude oil price has held steady around $US86.

Trading in the Australian market has been dominated by the corporate earnings season, which has generally produced robust results. The ASX All Ordinaries held above the 5000 level, while the S&P ASX200 looks set to test 5000 in the near-term.

US Markets

The US markets continued their melt-up this week, with the Dow Jones and the S&P500 continuing to trade above the key threshold levels of 12000 and 1300. The S&P500 stock index has now doubled from its GFC low, with the market capitalisation of the S&P 500 now about $US12 trillion, compared to the $US6.9 trillion during the sell-off in early 2009. M&A activity has again been a key driver for the US markets.

Overnight, the Dow closed up 0.2% at 12,318, while in the broader market the S&P 500 index rose 0.3% to 1,340 and the tech-heavy Nasdaq ended up 0.2% at 2,832.

European Markets

European stock markets rose this week to a two-and-a-half year high, led by the financials. Investor sentiment was boosted by some solid earnings news as the French and German markets rose to levels unseen since 2008.

The Stoxx Europe 600 index has rallied nearly 6% in 2011 (YTD), rising 0.2% overnight and is up for a fifth straight session to its highest close since at least August 2008. The Bank of England (BoE) has forecast that the British economy will likely avoid a double-dip recession, despite suffering contraction in the final quarter of last year. The FTSE is up 3.2 percent for 2011 (YTD), and up 73 percent since March 2009. The French CAC is testing multi-year highs and in Germany the market has now doubled from its GFC low and is at 2-year highs.

Overnight in London the FTSE 100 index closed flat at 6,087, the German DAX was down -0.1% at 7,406, and in France the CAC was flat at 4,171.

Asian Markets

Asian markets have been trading higher this week. The Chinese and Hong Kong markets have bounced off key support levels following China’s release of January inflation data which rose less than expected. The consumer price index (CPI) rose 4.9% (vs expectations of 5.4%), while wholesale inflation rose at a faster-than-expected annual rate of 6.6%. The Japanese market has hit a 9-month high with some sector rotation from the high-flying tech stocks into exporters that have lagged in performance for the year-to-date.

Yesterday in China the SSE Composite closed down marginally -0.1% at 2,927, while in Hong Kong the Hang Seng Index was up 0.6% at 23,302 and in Japan the Nikkei 225 Index was up 0.3% at 10,837.

Australian Earnings Snapshot

Some general themes that have come from this week’s earnings report are:

* Resource companies are confident of the outlook for commodities as emerging markets continue to drive growth.
* Energy stocks will continue to benefit from the high crude oil prices.
* Airlines are seeing improvement in global aviation markets.
* Real estate trusts look to be turning the corner.

Among the upbeat results:

* BHP Billiton reported a 71.5 percent rise in 1H11 net profit.
* Qantas delivered stronger-than-expected 1H11 results.
* Santos, the oil and gas producer, reported a 15.2 percent increase in FY net profit.
* Westfield Group has returned to profitability with more than $1 billion in profit.
* Wesfarmers increased 1H11 profit by 33 percent.

On a negative note, we saw biotech disappoint and uranium producers struggle:

* Biota Holdings, the influenza vaccine developer, slumped 28% after reporting a 1H11 loss.
* CSL, the global blood products and vaccines maker, reported a 19 percent fall in 1H11 profit, and expects FY11 profit to decline.
* Paladin Energy has increased its 1H11 net loss by 55 percent.

Our View

Next week we should see the S&P ASX200 continue to track towards 5000, though we are due for some consolidation. Currently trading at 4925, it’s above its key weekly resistance level around 4860. The focus for next week will be on the unrest in the Middle East, Asian concerns over inflation, European debt concerns and, locally, the continuing earnings reporting season. Key levels for next week will be 5000 to 4800.

Investors need to monitor the tensions simmering in the Middle East and North Africa, with unrest in Libya and Bahrain, and tensions between Iran and Israel over the Suez Canal. Be prepared to hedge your positions, as the current low options volatility provides investors holding long term portfolios an opportunity to hedge their positions cheaply.

By Michael Hevern
Head of Research

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