Posts Tagged ‘Nasdaq’

Stock Market Analysis: Markets Drifting Up Into Key Levels

Friday, February 3rd, 2012

* US stock markets eased overnight, as traders digested mixed earnings reports and showed caution ahead of the US Non-Farm payolls report due out tonight. 
* European stock markets edged higher overnight, as the European Stoxx 600 index held at 6-month highs.
* Asian stock markets were broadly higher yesterday, led by commodity and financial stocks.
* Commodities prices traded mixed, as Gold prices higher to around $US1,760  and while crude-oil closed down around $US96.

The SPI Futures is trading above the key pivot level of 4180, ending flat at 4,240. The key levels for our index today are 4180 to 4230.

Yesterday Aussie shares played catchup with their overseas counterparts, but today traders should be looking to protect recent profits, as investors wait for some conclusive news on the Greek debt talks and the US monthly employment figures due out tonight.  We had generally positive leads from the US and European markets overnight.

See below for ASX listed companies in the news today.

US Markets

US stock markets eased overnight, as traders digested mixed earnings reports and showed caution ahead of the US Non-Farm payolls report due out tonight.  

The Dow industrials finished down for the seventh time in past 9 sessions.  In the broader markets the S&P 500 ended flat, while the tech-heavy Nasdaq edged higher and continues to outperform, jumping 9.8% this year, trading at six-month highs.  

Federal Reserve Chairman Ben Bernanke addressed US lawmakers overnight, describing the pace of the US economic recovery as “frustratingly slow” and warned of the importance of addressing the US’s fiscal challenges highlighting the eurozone sovereign-debt crisis as an example of out-of-control fiscal policies. Bernanke fell short of reaffirming a QE3 package.  

In corporate news big-pharma sold down after Merck reported 4Q revenue that were below expectations.  A number of retailers were hammered after Abercrombie & Fitch plunged -11%, after the apparel retailer said that fiscal 4Q earnings would fall well short of expectations. Another retailer, Ann, plunged -8.5% after saying its fiscal 4Q results would be below expectations as well. On the flip side, MasterCard rose 6.7% after increased card spending helped the company turn in core earnings ahead of expectations.  

Commodities were generally weak with crude-oil down on falling US demand and increases in supplies and copper retraced, but gold continues its rise on the back of eurozone debt concerns.

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

The Dow Jones closed down -0.1 % (or -11 points) at 12,705, the S&P 500 index was up 0.1% (or 1 point) at 1,325, the Nasdaq ended up 0.4% (or 11 points) at 2,860 and the smaller cap Russell 2000 was up 0.4%.

European Markets

European stock markets edged higher overnight, as the European Stoxx 600 index closed 0.2% higher, holding at 6-month highs.  

Traders pushed share prices higher after US data showed productivity was up 0.7% in the fourth quarter of 2011 and initial jobless claims were down 12,000. Sentiment was also helped by successful bond auctions with the Spanish Treasury selling nearly EUR4.6 billion of government debt with borrowing costs declining, while France successfully sold EUR7.96 billion of government debt.  However investors continued to await a conclusion to talks between Greece and its private-sector creditors.

Mining stocks were in focus after Xstrata PLC (up 10%) confirmed it is in merger talks with Glencore International PLC (up 7%), while Vedanta Resources PLC gained 5.8% and Rio Tinto PLC rose 1.8%. Energy stocks weighed on the back of lower crude-oil prices.

In London the FTSE 100 index closed up 0.1% (or 5 points) at 5,796, the German DAX was up 0.6% (or 39 points) at 6,655 while in France the CAC was up 0.3% (or 9 points) at 3,376. Spain was up 0.8% and Italy ended up 0.1%.

Asian Markets

Asian stock markets were broadly higher yesterday, led by commodity and financial stocks after an improvement in manufacturing data buoyed global sentiment.  

Across the region commodity stocks were higher as positive manufacturing data is seen as a positive for global growth.  Financials also pushed markets higher.  It was “risk on” and the Chinese and Hong Kong markets surged 2% for the session. 

In China the SSE Composite was closed up 1.9% at 2,313, while in Hong Kong the Hang Seng Index was up 2.0% at 20,739 and in Japan the Nikkei 225 Index closed up 0.8% (or 67 points) at 8,877. The South Korean KOSPI was up 1.3% for the session, while the Indian market up 0.8%.

Commodities

The Dollar Index was higher at 78.99 on a higher Euro, while the Australian Dollar last traded higher at 1.0713. Commodities prices traded generally lower.

For the session the benchmark crude NYMEX was down -1.1% (or -$US1.03) settle at $US96.58.  Copper prices are seeking a support level as Copper was down -1.4% (or -5.3 cents) at $US3.7855.  Gold was up 0.6% (or $US9.70) at $US1,759. 

ASX News Today

BHP – BHP Billiton has committed $US779 million to a port project that could increase its WA iron ore exports by 100 million tonnes each year.

BLD – Boral the building materials maker has sold its Indonesian business for $US135 million ($A127.87 million) and confirmed its previous expectations for its half-year profit.

ERA – Energy Resources Australia has posted a $153.6 million loss for 2011 and says production is still having problems with wet weather.

FXJ – Australia’s richest person Gina Rinehart has increased her stake in Fairfax by an estimated 10 percent, at a 10% premium.

LYC – Lynas, the rare earths miner, received a temporary license for its rare earths refinery in Malaysia and says it has a responsibility to the Malaysian community to operate a newly-approved plant in a safe manner.

PMP – PMP, the publisher and direct marketer, has cut its earnings guidance and implemented further restructuring due to poor trading conditions and weaker printing orders.

RIO – Rio Tinto has reported its 40-year-old aluminium smelter at Tiwai Point, near Bluff, had its biggest production year ever in 2011.

STO – Santos says its Wortel operation in Indonesia has produced its first gas, the fourth project in the company’s base business to begin output in the past eight months.

WES – Wesfarmers says Coles had its best ever Christmas sales in 2011, which contributed to a 7.3 percent rise in first half sales to $17.5 billion.

Ex-dividend Date

None

Market Summary 

ASX – to open higher
US & UK/Europe – higher
Commodities Stock Index  up 0.8%
Gold Stocks Index up 1.3%
Oil Stocks Index up 0.4% 

US ADRs – Broadly Higher

BHP up 0.6%,  RIO up 1.5%; AWC up 0.4%
ANZ up 2.1% & NAB up 0.5%
NEM   down -1.9%, JHX up 2.4%, NWS  down -1.2%

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: Traders Cheer Improving Global Manufacturing Figures

Thursday, February 2nd, 2012

* US stock markets jumped overnight and are approaching multi-year highs, as traders cheered improving worldwide manufacturing reports.
* European stock markets jumped higher overnight, as financials and energy stocks pushed indices higher on the back of improving manufacturing data.
* Asian stock markets ended mixed yesterday, but are likely to play catch-up today.
* Commodities prices traded mixed, as Gold prices rose higher to around $US1,744. Crude-oil closed down around $US97.

The SPI Futures is trading above the key pivot level of 4180, ending up 1.3% (or 55 points) at 4,248. The key levels for our index today are 4200 to 4280.

Yesterday Aussie shares sold down, led by the miners and financials, as investors waited for news on European debt talks, and stocks traded cautiously ahead of the Chinese PMI figures, which beat expectations.

Aussie shares are expected to jump today and traders will be looking to play catch up with positive leads from the US and European markets.

See below for ASX listed companies in the news today.

Economics News Today

* Dec     Building Approvals
* Dec     International Trade in Goods & Services

US Markets

US stock markets jumped overnight, approaching multi-year highs, as traders cheered improving worldwide manufacturing reports.  

The three major indices continued to rise after posting their best January performance in 15 years. All 10 S&P 500 sectors traded in the green, with the gains led by financial and industrial stocks, while technology stocks shook off the disappointing results from Amazon.  

Economic news buoyed sentiment after weekly jobs data showed US employment ahead of the monthly Non-farms employment report due out Friday.  Manufacturing figures improved globally, and a reading on US manufacturing came in at 54.1 for January (up from 53.1).

Facebook has announced its IPO to the tune of $5 billion through Morgan Stanley; the company made $1 billion in profit with revenue of $3.7 billion last year.

All ten company groups that make up the S&P index traded mixed with Materials up 1.0%, Energy up 0.4%, Financials up 1.6%,  Industrials up 1.1%, Technology up 1.0%, while Consumer Staples were up 0.4%.

The Dow Jones closed up 1.0% (or 125 points) at 12,757, the S&P 500 index up 1.2% (or 16 points) at 1,327, the Nasdaq ended up 1.2% (or 34 points) at 2,848 and the smaller cap Russell 2000 was up 1.9%.

European Markets

European stock markets jumped higher overnight, as financials and energy stocks pushed indices higher on the back of improving manufacturing data.  The Stoxx 600 index closed at a six-month high, up 2%.  

Investors cheered improving manufacturing data from China, Germany, the U.K. and the eurozone which came in slightly better than expected (but with the exception of London and China the figures were below the key 50 level which signifies expansion).

Financials performed well, with Italian banks surging after yields on 10-year Italian government bonds fell 22 basis points to 5.64%.  Growth-sensitive stocks performed well as commodities prices rose with gold, silver, copper and aluminium prices all higher, boosting the mining sector to solid gains.  The news on manufacturing figures sparked buying.  

European shares continued higher after data showed that the ISM manufacturing index climbed to 54.1% in January.  Additionally manufacturing data from Germany, the U.K. and the eurozone all boosted sentiment as the German PMI rose to 51.0 in January (up from 48.4), while eurozone PMI rose to 48.8 in January (above estimates of 48.7), while in London the UK PMI hit an eight-month high of 52.1 in January (up from 49.7).

In London the FTSE 100 index closed up 1.9% (or 109 points) at 5,790, the German DAX was up 2.4% (or 158 points) at 6,616, while in France the CAC was  up 2.1% (or 69 points) at 3,368. Spain was up 2.2% and Italy ended up 2.7%.

Asian Markets

Asian stock markets ended mixed yesterday, but are likely to play catch-up today.  

In China the Shanghai Composite Index underperformed down over 1%, despite Chinese manufacturing activity figures coming in better-than-expected, as this raised concerns that the government may not need to immediately ease its monetary policy. The Chinese official Purchasing Managers Index (PMI) was reported at 50.5 in January, up from 50.3 in December (above expectations of a drop to 49.5). The 50 level that delineates expansion and contraction.

The news prompted traders to sell-down resource and property stocks which finished broadly lower.  Elsewhere Japan, South Korea and Hong Kong finished flat.

In China the SSE Composite was down -1.1% at 2,268, while in Hong Kong the Hang Seng Index was down -0.3% at 20,333 and in Japan the Nikkei 225 Index closed up 0.1% (or 7 points) at 8,809. The South Korean KOSPI was up 0.2% for the session, while the Indian market up 0.6%.

Commodities

The Dollar Index was higher at 78.91 on a higher Euro, while the Australian Dollar last traded higher at 1.0711. Commodities prices traded generally higher.

For the session the benchmark crude NYMEX was down -1.2% (or -$US1.13) settle at $US97.35. Copper prices are seeking a support level as Copper was up 1.4% (or 5.1 cents) at $US3.8300.  Gold was up 0.4% (or $US6.40) at $US1,744.

ASX News Today

BLD – Boral, the building materials maker, has sold its Indonesian business for $US135 million ($A127.87 million) and confirmed its previous expectations for its half-year profit.

ERA – Energy Resources Australia has posted a $153.6 million loss for 2011 and says production is still having problems with wet weather.

FXJ – Australia’s richest person Gina Rinehart has increased her stake in Fairfax by an estimated 10 percent, at a 10% premium.

QAN – Qantas says it is in a strong financial position despite having its credit rating downgraded by Moody’s ratings agency.

STO – Santos says its Wortel operation in Indonesia has produced its first gas, the fourth project in the company’s base business to begin output in the past eight months.

WES – Wesfarmers says Coles had its best ever Christmas sales in 2011, which contributed to a 7.3 percent rise in first half sales to $17.5 billion.

Market Summary 

ASX – to open higher
US & UK/Europe – higher
Commodities Stock Index  up 0.6%
Gold Stocks Index up 0.1%
Oil Stocks Index up 0.3% 

US ADRs – Broadly Higher

BHP up 1.3%,  RIO up 2.0%; AWC up 0.7%
ANZ up 1.4% & NAB up 1.1%
NEM   down -0.6%, JHX up 0.5%, NWS  up 1.9%

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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Stock Market Analysis: Aussie Market To Play Catch-up

Friday, January 27th, 2012

* US stock markets drift higher to levels not seen since mid last year.
* European stock markets climbed to 5-month highs overnight, as the US Federal Reserve said it would keep U.S. interest rates low until at least 2014.
* Many Asian stock markets are closed for the Lunar New Year holidays.
* Commodities prices traded mostly lower, as Gold prices lower to around $US1,668 and while crude-oil closed up around $US100.

The SPI Futures is trading above the key pivot level of 4180, ended down -0.3% (or -11 points) at 4,240. The key levels for our index today are 4150 to 4230.

The Australian share market continued to melt-up Wednesday, led by strong moves in the financials sector.  Investors remain optimistic, even though the negotiations over the Greek bailout have not been concluded and the US Fed reserve meet tonight.  Locally the case for a rate cut when the RBA board meets on 7th February, has been boosted by today’s CPI reading and some internet jobs figures.  The ABS reported that inflation was unchanged for the December quarter, following a 0.6 per cent rise in the third quarter of 2011. Seasonally adjusted CPI rose 0.2 per cent in the December quarter, and was up 3.0 per cent in the 12 months to December.  This is the reading is the lowest since the final three months of 2008 at the height of the GFC. In other news the Westpac-Melbourne Institute Leading Indexes of Economic Activity forecast a modestly lower pace of economic activity in the next 3 to 9 months, as the index fell -0.2 percent in November, following a rise of 0.1 percent in October.  The Department of Education, Employment and Workplace Relations internet vacancy index fell by 3 per cent in December, was 84.1 points, 8.7 percent, lower in seasonally adjusted terms than in December 2010.  Shares in the All Ordinaries (XAO) traded higher today, closing up 1.0% at 4329, as the S&P/ASX 200 (XJO) closed up 1.1% at 4271.

Aussie shares are expected to play catch up today and traders are expected to continue to look for bargains today, after positive leads from the US and European markets.�

See below for ASX listed companies in the news today.

US Markets

US stock markats eased after an initial surge.  Investors had cheered the Federal Reserve’s pledge to hold down interest rates till 2014. 
 
The Dow Jones Industrial Average reached its highest level since May 2008 holding around 12,700, while in the broader market the S&P 500 held above 1300 and the Nasdaq outperformed aroud 2800. 
 
Profit takers stepped in after some disappointing economic data and corporate earnings reports.  Selling began after data showed sales of new homes unexpectedly fell 2.2% in December (versus expectation of a rise of 1.9%) and also the Conference Board’s leading economic index rose 0.4% in December (below estimates of a 0.7% rise).   In corporate news AT&T, E*Trade Financial, SanDisk, Logitech International and Colgate-Palmolive earnings disappointed.
 
However there was positive news with weekly jobless claims coming in-line with expectations, rising 21,000 to 377,000 and orders for long-lasting goods surging 3% in December (above estimates of 2%).  
 
All ten company groups that make up the S&P index traded down with the Materials down -0.2% , Financials sector down -1.0%, Energy sector was down -1.3%, Industrials sector was down -0.2%, Technology was down -0.8%,  while  Consumer Staples were down -0.6%.
 
The Dow Jones closed down -0.2% (or -22 points) at 12,734, the S&P 500 index down -0.6%  (or -8 points) at 1,318, the Nasdaq ended down -0.5% (or -13 points) at 2,805 and the smaller cap Russell 2000 was down -0.3%.

European Markets

European stock markets climbed to 5-month highs overnight, as the US Federal Reserve said it would keep U.S. interest rates low until at least 2014.  The Stoxx 600 index gained 1.1%. 
 
Across the region banking and mining shares performed well in the back of the news from th US Fed.  Italian banck jumped over 5% and in  London banks rose around the same.  Resource stock surged with Kazakhmys up 7.8%, Rio Tinto rose 4.8% and Fresnillo was up 3.1%. 
 
Investors are still awaiting for news of progress in negotiations between Greece and its private creditors, as the parties resumed talks over the det crisis.  The Greek market jumped 4.4%, outperforming the rest of the eurozone, while the Italian market rose as the government sold EUR5 billion of 2-year debt at lower borrowing costs.
 
In London the FTSE 100 index closed up 1.2% (or 70 points) at 5793, the German DAX was up 1.8% (or 118 points) at 6,539 while in France the CAC was  up 1.5% (or 50 points)  at 3,363, Spain was up 1.2% and Italy ended up 1.2%.

Asian Markets

Many Asian stock markets are closed for the Lunar New Year holidays. 

Hong Kong stocks jumped though, as traders returned from a long Lunar New Year holiday to celebrate the Federal Reserve’s projection of ultra-low interest rates through late 2014. Japanese shares eased from a near three-month high as investors did some profit-taking, paricularly in the exporters, while in South Korea the Kospi eased on weaker-than-expected economic growth data.

In China the SSE Composite was closed at 2,319, while in Hong Kong the Hang Seng Index was up 1.6% at 20,439 and in Japan the Nikkei 225 Index closed down -0.4% (or -34 points) at 8,850, South Korean KOSPI was up 0.2% for the session, while the Indian market up 0.5%.

Commodities

The Dollar Index was lower  at 79.41 on a higher Euro, while the Australian Dollar last traded higher at 1.0622. Commodities prices traded lhigher.

For the session the Benchmark crude NYMEX for January delivery was up 0.3% (or $US0.39) settle at $US99.79.  Copper prices are seeking a support level as Copper for January delivery was up 1.5% (or 6 cents) at $US3.8805.  January gold was dowup 1.6% (or $US26.50) at $US1,729.

ASX News Today

 
AIO – Asciano has restructured its Patrick ports division, resulting in a significant reshuffle of its executive team.
AGO – Atlas Iron managing director David Flanagan delivered downgraded production and export results for the December quarter and has cut its production targets for the financial year because of the impact of Tropical Cyclone Heidi, the MD Mr Flanagan says he is committed to building Atlas into an iron ore force in its own right.
ALS – Alesco Corporation  the building products distributor has more than tripled its first half profit but says trading conditions are tough and will continue to be so.
CPA – Commonwealth Property Office Fund expects its first-half profit to grow and has boosted its forecasts for distributions.
EPW – ERM Power has received the go-ahead to build a $500 million gas-fired power station west of Brisbane.
 
LYC – Lynas Corp is back, surging another 5% after reporting it has secured enough funds ($US225 million in unsecured convertible bonds) to complete construction and start-up of its delayed rare earths processing plant in Malaysia.    
WHC – Whitehaven Coal has increased production by two per cent in the December quarter, but sales have fallen.

 

Market Summary
ASX – to open higher
US & UK/Europe -mixed

Commodities Stock Index  down -0.6%
Gold Stocks Index up 0.7%
Oil Stocks Index down -1.6% 

US ADRs – Broadly Lower!!… 

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 Lower On S&P Eurozone Downgrades

Monday, January 16th, 2012

* US stock markets fell on Friday, but managed to finish off their lows again and had modest gains for the week. The US earnings reporting season continues.
* European stock markets mostly eased Friday night, as Standard and Poors threatened downgrades. The Stoxx Europe 600 index closed down 0.2%, but is up 1.9% YTD.
* Asian shares finished mostly higher on Friday, but China still hovers around 34-month lows.
* Commodities prices traded lower, although Gold prices traded higher to around $US1,630. Crude-oil closed around $US99.

The SPI Futures is trading below the key pivot level of 4180, ending down -0.4% (or -17 points) at 4,163. The key levels for our index this week are 4080 to 4280.

Aussie shares are expected to open lower as traders digest the news of the S&P eurozone downgrades and the negative leads from the US and European markets.

See below for ASX listed companies in the news today.

US Markets

US stock markets fell on Friday, but managed to finish off their lows again and had modest gains for the week.

Stocks eased due to fears of credit downgrades of several eurozone countries (which did materialise after market), and disappointing results from J.P.Morgan.

For the year-to-date the markets are higher, with the Dow Jones Index up 1.7%, the S&P500 up 2.5% and the tech-heavy Nasdaq has jumped 4.1%.

The rumours over eurozone downgrades by the S&P proved correct but did not get confirmed until after market.  Among the largest economies to be downgraded were France, Italy and Spain.

The downgrade concerns compounded investor caution after J.P. Morgan said its investment banking unit posted a profit slide of 52% from last year and a revenue decline of 30%.  The VIX has remain subdued YTD as the US earnings season continues in earnest next week.

All ten company groups that make up the S&P index traded lower. The Energy sector was down -0.5%, Materials were down -0.7%, Financials down -0.8%, Industrials down -0.8%, Technology down -0.6%, while Consumer Staples were down -0.1%.

The Dow Jones closed down -0.4% (or -49 points) at 12,422, the S&P 500 index down -0.5%  (or -6 points) at 1,289, the Nasdaq ended down -0.5% (or -14 points) at 2,710 and the smaller cap Russell 2000 was down -0.8%.

European Markets

European stock markets mostly eased Friday night, as Standard and Poors threatened downgrades. The Stoxx Europe 600 index closed down 0.2%, but is up 1.9% YTD.

Investors were on edge due to concerns over threatened downgrades and news that the talks to restructure privately held Greek debt did not reach a conclusion Friday and are suspended.  Concerns about a French downgrade have largely been expected by the market, but investors still sold stocks on the news.  However afer market the S&P Ratings Agency downgraded 9 of the 17 eurozone nations, with the biggest being France, Italy and Spain.

Investors had been on edge for the past month, ever since S&P announced that it put 15 of the 17 eurozone member countries on review for downgrade in early December.  Market participants have been especially concerned about France losing its top-notch, triple-A rating. AAA rated countries including Germany, Finland, the Netherlands, Luxembourg, Belgium, Estonia and Ireland were all spared from downgrade. The S&P Reatings Agency has cut the French credit rating to AA+ (down one notch) and Austria’s rating was also cut by a similar amount. Italy, Spain, Portugal and Cyprus had their ratings cut by two notches each.  The euro weakened to a 16-month low versus the dollar Friday on these widespread downgrades.

In London the FTSE 100 index closed down -0.2% (or -8 points) at 5,662, the German DAX was up 0.4% (or 27 points) at 6,179 while in France the CAC was down -0.2% (or -5 points) at 3,200. Spain was flat and Italy ended up 2.0%.

Asian Markets

Asian stock markets finished mostly higher on Friday, but China still hovers around 34-month lows.  Japan’s Nikkei Stock Index rose 1.4%, while in China the Shanghai Composite fell for a third consecutive loss. 

In commodities gold futures eased to around $US1,630 an ounce, while crude-oil futures also fell around $US99. 

The Asia markets have had a positive start to the year with the Chinese Shanghai Composite up 2.0%, while in Hong Kong the Hang Seng Index is up 4.2% and in Japan the Nikkei 225 Index is up 0.5%. The South Korean KOSPI was up 2.7%, while the Indian market was up 4.5%, year-to-date (YTD).

In China the SSE Composite was closed down -1.3% (or -30 points) at 2,244, while in Hong Kong the Hang Seng Index was up 109 points at 19,204 and in Japan the Nikkei 225 Index closed up 1.4% (or 114 points) at 8,500. The South Korean KOSPI was up 0.6% for the session, while the Indian market was up 0.7%.

Commodities

The Dollar Index was higher at 81.51 on a lower Euro, while the Australian Dollar last traded lower at 1.0319. Commodities prices traded mostly lower.

For the session the benchmark crude NYMEX for January delivery was down -0.4% (or -$US0.40) to settle at $US99.03.  Copper prices are seeking a support level as Copper for January delivery was lower -0.3% (or -1.2 cents) at $US3.6450.  January gold was lower -1.0% (or -$US16.90) at $US1,632.

ASX News Today

FBU – Fletcher Building, the country’s biggest listed company, has tapped private US investors in a $US300 million ($NZ376.46 million) debt placement to repay bank loans.

GBG – Gindalbie Metals, the iron ore producer, says its flagship Karara project in WA remains on track for first shipments later this year.

GNS – Woodchipper Gunns has welcomed the dismissal of legal action against its Bell Bay pulp mill brought by anti-mill group Pulp the Mill.

NAB – National Bank has transferred almost $600 million in capital to its UK subsidiary to strengthen its balance sheet.

PNA – PanAust has narrowly missed its target for copper production in 2011 despite a record output in December.

STO – Santos has confirmed it will develop the $490 million Fletcher Finucane oil project in the Carnarvon Basin off the northwest coast of WA.

Ex-dividend Date

None

Market Summary

ASX – to open lower
US & UK/Europe – lower
Commodities Stock Index down -0.8%
Gold Stocks Index down -1.3%
Oil Stocks Index down -0.5% 

US ADRs – Broadly Lower

BHP down -1.9% & RIO down -0.8%; AWC down -0.4%
ANZ down -1.1% & NAB down -0.5%
NEM  down -1.0%, JHX down , NWS down -1.2%

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: Reality Check – The Eurozone Debt Crisis Is Not Over!

Tuesday, October 18th, 2011

* US stock markets retraced overnight, as renewed concerns over the progress of Europe’s sovereign-debt negotiations triggered a sell-off.
* European stock markets ended lower overnight, after a reality check about how soon the eurozone debt crisis can be resolved.
* Asian stock markets ended mostly higher Monday, as investors followed the positive momentum from the US and Europe. However markets are expected to retrace today.
* Commodities prices traded lower, as Gold prices fell to $US1,673 and while crude-oil closed around $US86.

The SPI Futures is trading around the key pivot level of 4200, ended down -1.6% (or -70 points) at 4,214. The key levels for our index today are 4250 to 4150.

Yesterday Australian shares have resumed their “melt-up”, following the strong gains in the US and Europe markets last week. The G-20 leaders and central bankers met in Paris over the weekend, as they endeavour to resolve the euro-zone debt crisis.  The All Ordinaries (XAO) gave back some of its recent gains today closing up 1.6% at 4338, the S&P/ASX 200 (XJO) closed up 1.7% at 4275.

Aussie investors are expected to retrace today, following the negative leads from the US and Europe, as investors questioned the European Commision’s commitment to the bank rescue plan.  Chinese trade and CPI data came in weaker than expected last week.

See below for ASX listed companies in the news today.

US Markets

US stock markets retraced overnight, as renewed concerns over the progress of Europe’s sovereign-debt negotiations triggered a sell-off. 

The three major indices retraced from key resistance levels onver -2% for the session.  Trading volumes were relatively light, but decliners outnumbered gainers by 5 to 1 on the NYSE.  Materials and financial stocks led the decliners. 

Markets had a reality check overnight after surging  last week after top European officials vowed to unveil a comprehensive sovereign-debt rescue plan by that date. Investors chose caution, after a representative for German Chancellor Angela Merkel said at the recent G-20 meeting that there will be no definitive solution to the sovereign-debt crisis at the G-20 summit. 

In corporate news Citigroup was down -1.1% despite annonuncing adjusted third-quarter earnings which came in slightly ahead of expectations. In M&A activity El Paso jumped 25% after the company agreed to be acquired by Kinder Morgan in a $US21.1 billion cash and stock deal, in a deal that creates North America’s largest natural-gas pipeline network. 

US industrial production registered a weak increase from September, as the US Empire State data had offered some positive signals as it came in at a negative 8.5 in October, (up from -8.8 in September).   Commodities traded lower.
 
All ten company groups that make up the S&P index traded lower:  the Materials were down -3.2%, Energy sector was were down -0.1%, Financials sector was down -3.1%, Industrials were down -2.9%,  Technology sector was down -1.6% , while the Consumer Staples were down -2.0%.
The Dow Jones closed down 2.1% (or -248 points) at 11,397, the S&P 500 index closed down -1.9% (or -23 points) at 1,200, the Nasdaq ended down -1.9% (or -53 points)  at 2,615, and the smaller cap Russell 2000 was down -2.6%.

European Markets

European stock markets ended lower overnight, after a reality check about how soon the eurozone debt crisis can be resolved. The Stoxx Europe 600 index lost -1%. 
 
Financial shares resumed their sell-off after a note from Deutsche Bank said that France’s debt rating was under threat, citing “deterioration in economic conditions is now creating a distinct risk”. 
 
In London FTSE 100 declined 0.5%, while the German DAX 30 and the French CAC 40 were down over -1.6%.  Comments from eurozone officials caused investors to reassess the G-20′s commitment to tackle the eurozone debt crisis.  The German Finance Minister Wolfgang Schaeuble said the forthcoming European Union summit will be unable to provide a definitive solution to the eurozone debt crisis.  Last week G-20 finance ministers had sought to reassure nervous investors with commitments to ensure the eurozone banks were adequately capitalised and would have access to funding, which triggered a surge in stock prices, but now investors are looking for the devil in the detail. 
 
In corporate news BP the British oil giant rose 2.2%, after reporting they have settled all claims with Anadarko Petroleum related to the Deepwater Horizon accident in 2010.
 
In London the FTSE 100 index closed down -0.5% (or -29 points) 5,437, the German DAX was down -1.8% (or -108 points) at 5,859  while in France the CAC was down -1.6% (or -51 points)  at 3,166.

Asian Markets

Asian stock markets ended mostly higher yesterday, as investors followed the positive momentum from the US and Europe. Investors were buoyed as Finance ministers at the Group of 20 meeting over the weekend endorsed part of a developing plan by European leaders to avoid a Greek default, recapitalise eurozone banks and prevent contagion.

Across the region growth sensitive resource shares were broadly higher across the region, while higher crude-oil prices sent many energy firms higher.  In Japan the Nikkei Stock Index rose 1.5%, heavily weighted exporters were broadly higher, helped by a weaker yen. In Hong Kong the Hang Seng Index gained 2%, while in China the Shanghai Composite added 0.4% in choppy trade.

In China the SSE Composite was closed down -0.3% (or -7 points) at 2,431, while in Hong Kong the Hang Seng Index was  down -1.4% (or -256 points)  at 18,501 and in Japan the Nikkei 225 Index was down -0.9% (or -75 points)  at 8,748,while the Indian market was up 1.2%.  


Commodities

The Dollar Index was lower at 77.00 on a higher Euro, while the Australian Dollar last traded higher at 1.0198 Commodities prices were lower.

For the session the Benchmark crude NYMEX for December delivery was surged 3.6% (or $US3.05) settle at $US87.28.  Copper prices are seeking a support level as Copper for December delivery was up 3.2% (or 9 cents) at $US3.4025.  December gold was up 0.8% (or $US12.70) at $US1,680.70. 

 
ASX News Today

ASX – Chi-X, which is owned by Nomura, says it will start operations on October 31, as expected, thereby ending the two decade monopoly of local bourse operator ASX Group.

CXG – Cougar Energy is seeking more than $34 million from the Queensland government and three government officials for stopping the company’s power plant project at Kingaroy in the state’s southeast.

ERA – Energy Resources of Australia has raised $380 million from institutional investors in a new share sale to extend its Ranger uranium mine.

FMG – Fortescue Metals Group says the iron ore prices have softened and are likely to continue doing so in the months ahead.  Fortescue iron ore sold for an average price of $US160 per tonne during the three months to September, but they said that “softening” steel prices and tightening monetary policy in China had combined to weigh on iron ore prices and would continue to do so.
GFF – Goodman Fielder is merging its three NZ divisions into a single business and tapped one of its executives to the newly created role of country managing director.

NWS – Rupert Murdoch and his leaders at News Corp face their shareholders at Friday’s meeting amid calls for Murdoch and sons James and Lachlan to be removed from the company’s board.

QAN – Qantas is still facing disrutpions as it has cancelled 16 domestic flights on Monday, with the airline blaming maintenance engineers for having to ground five planes as its dispute with pilots escalates.

RIO – Rio Tinto will sell 13 aluminium units such as refineries and smelters as the world’s second biggest miner seeks to streamline its Alcan aluminium business.

SUL – Super Retail Group has agreed to buy sports goods retailer Rebel Group for $610 million from private equity firm Archer Capital as the company seeks to expand in the leisure retail market.

Local Corporate Reporting
Cochlear Ltd (COH)          Full year 2011 AGM 
SMS Management & Tech (SMX) Full year 2011 AGM 
Telstra Corp (TLS)          Full year 2011 AGM 
Grange Resources (GRR)      September Quarterly Report 
Western Areas NL (WSA)      September  Quarterly Activities 
Ex-dividend Date
NHC – New Hope Corporation
 
Market Summary

ASX – to open lower
US & UK/Europe –  Lower

Commodities Stock Index  down -3.0%
Gold Stocks Index down -2.3%
Oil Stocks Index  down -1.2% 

US ADRs – Broadly Lower!!…

BHP down -4.0% & RIO down -4.5%; AWC down -7.5%
ANZ down -1.4% & NAB down -2.0%
NEM  down -1.0%, JHX down , NWS down -2.1%

By Michael Hevern
Head of Research

 
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Stock Market Analysis: Investors Are Wary Ahead of US Economic Summit

Friday, August 26th, 2011

* US stock markets traded lower throughout the session after early gains faded, snapping 3 days of sharp gains as concerns escalate that the US might be slipping back into recession.
* European stock markets closed lower, breaking a 3-day winning streak after sellers stepped in after a flurry of rumours about Germany.
* Asian stock markets ended mostly higher yesterday.  The gains came as US traders provided a positive lead, but expect caution today.
* Commodities prices traded higher, but gold prices rose above $US1,1769 and while crude oil closed around $US85.

The SPI Futures is trading around the key pivot level of 4000, ending down -1.1% (or -46 points) at 4,168. The key levels for our index this week are 4200 to 4100. Overnight global stocks traded sharply lower as US and European investors chose caution ahead of the US economic summit at Jackson Hole, Euro banks remained under pressure. 

Investors are keenly watching the recent lows for any sign of support near-term. Price action in the US sold down throughout the session as traders look for an announcement of further quantitative easing on Friday.  The All Ordinaries (XAO) was up 1.1% at 4281 yesterday, the S&P/ASX 200 (XJO) also closed up 1.1% at 4213.

Our market is set to follow Europe and the US lower today, with mining and financial stocks trading lower overnight, providing a negative lead. There will be a flurry of activity on open due to the completion of options expiry.

See below for ASX listed companies in the news today.

Economics News Today

*   RBA Governor Glenn Stevens appears before House Economics Committee.

US Markets

US stock markets traded lower throughout the session after early gains faded, snapping 3 days of sharp gains. 

The Dow Jones Index declined as only two stocks finished in the green. Bank of America bucked the trend, jumping 9.4% after Warren Buffett disclosed a $US5 billion investment in the bank.  In the broader market the S&P 500 stock index lost ground as all 10 sectors finished in the red, led lower by energy, industrial and consumer discretionary stocks. The tech-heavy Nasdaq Composite fell the most after the resignation of Apple Chief Executive Steve Jobs weighed on the technology sector.

Investor caution came as weekly jobs data disappointed and ahead of the Fed speech in Jackson Hole Wyoming and as European stocks underwent selling pressure.

Over the past couple of weeks the US markets appear to have been building expectations of a QE3 announcement at the Fed’s annual conference on Friday in Jackson Hole, Wyoming. However there is an increasing realisation that Federal Reserve Chairman Ben Bernanke will most likely not hint at additional forms of monetary support for the struggling US economy. The view that the economy might be slipping back into recession has sparked renewed demand for safe haven assets.

In commodities gold rebounded to around $US1,770 and crude oil remained around $US85.

All ten company groups that make up the S&P index traded lower: Industrials were down -1.9%, Materials were down -1.1%, Energy was down -2.1%, the Financials sector was down -0.3%, Technology was down -1.4%, while Consumer Staples were down -2.0%.

The Dow Jones closed sharply down -1.5% (or -171 points) at 11,150, the S&P 500 index closed down -1.6% (or -18 points) at 1,159, the Nasdaq ended down -1.9% (or -48 points) at 2,419, and the smaller cap Russell 2000 was down -2.6%.

European Markets

European stock markets closed lower, snapping a 3-day winning streak after sellers stepped in after rumours of speculation that Germany would introduce a ban on short-selling financial shares and their economy may be downgraded. The Stoxx Europe 600 index dropped 1.2%.

Investors remained on edge overnight when several rumours in Germany sparked selling. France, Italy and Spain announced they were extending bans on short-selling financial shares, while in Belgium the stock market regulator said it would lift the short-selling ban only when market conditions allow.

In London the FTSE 100 fell 1.4%, but banks found some support with Barclays and Royal Bank of Scotland jumping over 5.5%.

In Germany the DAX 30 index had slumped 4% at one point in the session, hit by several unconfirmed market rumours. The market finished well off its lows after German regulator Bafin later said that there are no planned changes to its short selling rules. There were also rumours that Germany’s credit rating may be downgraded, but credit-rating firms Standard & Poor’s, Moody’s and Fitch all confirmed Germany’s AAA rating.

In London the FTSE 100 index was down -1.4% (or -75 points) at 5,131, the German DAX was down -1.7% (or -97 points) at 5,584, while in France the CAC was down -0.7% (or -20 points) at 3,119. 

Asian Markets

Asian stock markets ended mostly higher yesterday.  The gains came as the US traders provided a positive lead on optimism that the Federal Reserve will take steps to stimulate the US economy. 

In Japan the Nikkei Stock Index finished higher. In Hong Kong the Hang Seng Index advanced, while in China the Shanghai Composite Index rose nearly 3%, as energy and telecom stocks led the gains.

The Chinese SSE Composite was up 2.9% (or 74 points) at 2,615, in Hong Kong the Hang Seng Index was up 1.5% (or 286 points) at 19,753 and in Japan the Nikkei 225 Index was up 1.5% (or 132 points) at 8,772. The South Korean KOSPI was up 0.6% for the session, while the Indian market was down -0.9%.

Commodities

The Dollar Index was higher at 74.23 on a lower Euro, while the Australian Dollar last traded lower at 104.34. Commodities prices were lower.

For the session the benchmark crude NYMEX for August delivery was down -0.2% (or -$US0.18) to settle at $US84.98.  Copper prices are still below key pivot level as Copper for August delivery was up 2.1% (or 8.2 cents) at $US4.0860.  August gold was up 0.3% (or $US5.70) at $US1,769.80.

ASX News Today

AGO – Atlas Iron has declared its maiden full year profit of $169 million and had cash of $366 million at the end of June, and the company remains debt free. Cash operating costs for the FY11 year were within the targeted range of $40-43 a tonne.  The company is looking to build its production to 40 million tons annually, on a par with Fortescue Metals Group’s 2011 production.  Atlas Iron closed up 2.2%.

BHP – BHP Billiton has handed down the biggest profit ever delivered by an Australian company and almost double last year’s result. The result was a record breaking $22.5 billion profit but the CEO has given a blunt warning that rising wages are fuelling inflation and this will negatively impact Australia’s productivity due to rising cost pressures.  The company reported its 2010-11 underlying profit was up 74 percent as Chinese demand continued to push up prices, offsetting a fall in production volumes and rising costs. The value of the company’s sales of iron ore, oil and gas, copper, coal and other minerals last financial year jumped 35 per cent. BHP Billiton shares closed up 1.1%.

COK – Cockatoo Coal, which is one of the few Australian listed miners with coal production, said it has held talks with South Korea’s SK Networks Co. and other companies on supporting the development of new mines. There is no certainty that an agreement will be reached, but SK Networks said it has reviewed a possible investment in Cockatoo Coal in order to boost its resource business. Cockatoo Coal shares closed up 27%.

DTE – Dart Energy said it plans a Singapore IPO for its international coal seam gas assets in a move to tap rising interest in unconventional energy as climate and safety concerns dent the appeal of rival fuels.  Dart’s international assets are mostly concentrated in Asian markets such as China and India where energy demand is growing rapidly, and a traditional reliance on burning coal for power has made cities like Shanghai among the smoggiest in the world. Its current international reserves total 16.3 trillion cubic feet of gas in place, of which 43 billion cubic feet is in the proven and probable category that is a better indication of how much gas can be recovered profitably from the ground. Dart aims to sell its minority stake in the IPO by March 2012. Shares in Dart jumped 11%.

FKP – FKP Property Group (FKP) has delivered a solid profit result, with underlying profit after tax of $121 million for FY11 representing a move up of 11 percent.  Earnings were in line with guidance but were underpinned by strong contributions from the Residential Communities and Retirement divisions.  FKP’s future growth will be generated from the delivery of the existing development pipeline which is supported by the stability of the recurring income generated from the high quality retirement portfolio.

IAG – Insurance Australia Group Ltd has nearly tripled its full year profit to $250 million and the owner of NRMA and CGU expects insurance margin growth in the year ahead. They reported revenues grew 30 percent and insurance margins grew 9.1 percent. CEO Mike Wilkins has forecast gross written premium growth of between six and nine percent in the current financial year, and an insurance margin of 10 to 12 per cent.

IFL – IOOF Holdings has delivered a 29 percent rise in annual net profit of $99.5 million and flagged it is eyeing acquisitions. The company’s funds under management (FUM), administration, advice and supervision in FY11 rose $7.1 billion to $106.2 billion and its cost to income ratio was 51 per cent on an underlying basis.  IOOF Holdings closed up 8%.

ILU – Iluka Resources the mineral sands miner, has reported a return to profitability in the first half of calendar 2011 with a profit of $146 million while revenues increased 45.3 percent and they expect pricing to be good in the period ahead. Iluka said higher sales volumes, higher product pricing and a full half contribution from new higher margin operations were behind the move into first half profitability. Iluka Resources shares closed up 5.5%.

MCC – Macarthur has recently booked a 93 percent jump in net profit for the FY11 financial year to $241 million due to record prices for metallurgical coal in the final quarter of the year. The bid for Macarthur Coal overcomes another hurdle as Japan’s Fair Trade Commission (JTFC) will not challenge a proposed joint $4.7 billion takeover, by a US miner Peabody Coal and the world’s largest steel maker ArcelorMittal, however approval from the Chinese Ministry of Commerce is still required.  They already have Australia’s FIRB approval but Macarthur has said it is in ongoing discussions with several interested parties. Its shares closed down -0.3%.

MTS – The ACCC watchdog has lost its Federal Court bid to prevent Metcash Ltd from buying the Franklins supermarket chain. Metcash shares closed up 1.2%, while Wesfarmers closed up 1.7%.

RHC – Ramsay Health Care the private hospital operator, has increased full year profit to $198.4 million, with revenue up 9.4 percent and earnings per share up 31 percent, as it targets core earnings growth in the current year of 10 to 12 percent, barring any unforeseen circumstances. Ramsey remains well positioned to capture growing demand in the health care services industry.

TOL – Toll Holdings the logistics company said its annual net profit edged up 1% as acquisitions helped boost revenue amid challenging economic conditions and disruptive natural disasters. Net profit for the year rose to $281 million, as revenue jumped 18%. Toll said it expects domestic retail and industrial sectors to remain challenging, although conditions look to have stabilised. Investors were relieved by a lack of writedowns tied to the aggressive Asian expansion. The share price closed up 8.6%.

TSE – Transfield Services shares were trashed yesterday after the company booked an annual net loss of $19.7 million and shocked the market with a steep downgrade to its guidance. The company manages projects and provides maintenance to sectors including mining and transport, but it was the company forecast that sent investors scurrying for the exits as they forecast 5% growth in operating profit, pre-amortization, which compared to previous guidance of 30-35% growth in earnings before interest, tax, depreciation and amortization (EBITDA). Its shares plunged over 22%.

WOW – Woolworths, the owner of Australia’s largest supermarket chain has increased full year profit to $2.12 billion up by 5.1 percent with revenues up 4.9 percent, and says it is well positioned in all its market segments. They said they expected a year of further earnings growth in fiscal 2012, with profit growth of between 2 to 6 percent in FY12, due to the tough economic conditions they are currently experience. Australia’s retail sector has been hit by its slowest growth in 50 years as consumers are concerned over rising cost of living pressures, global economic uncertainty and high interest rates. Investors were unimpressed with their guidance and the shares slumped 5.6%.  

VBA – Virgin Blue has reported a full year loss of $67.8 million, while revenues increased 9.8 percent, but the airline expects an improvement in financial performance in 2012. 

Local Corporate Reporting

ACR – Acrux Ltd full year results
PPT – Perpetual Ltd full year results
LLC – Lend Lease full year results
GPT – GPT Group first half results
FXJ – Fairfax Media Ltd full year results
SKI – Spark Infrastructure first half results

Ex-dividend Date

COH – Cochlear Limited
WLL – Wellcom Group Ltd

Market Summary

ASX – to open lower
US & UK/Europe – lower
US ADRs – Broadly Lower

BHP down -1.7% & RIO down -2.2%; AWC down -1.9%
ANZ down -1.1% & NAB up 0.3%
NEM  up 0.9%, JHX up 1.3%, NWS down -1.8%

Commodities Stock Index down -1.4%
Gold Stocks Index up 1.9%
Oil Stocks Index down -2.3% 

By Michael Hevern
Head of Research

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Stock Market Analysis: Weekly Market Wrap

Friday, July 15th, 2011

Debt Fears Grip Global Markets

Australian shares have traded lower this week after negative leads from key markets in the U.S. and Europe, despite surprisingly good GDP data out of China.

Our markets were hit from a number of sides with the details of the carbon tax revealed last Sunday, Moody’s Ratings Agency downgrading Ireland and putting the U.S. on a negative watch, and disappointing monthly jobs data out of the U.S.

Commodity prices have continued to rise as the U.S. dollar struggles, with copper prices still around 10-week highs and the gold price at all-time highs. This has helped support our miners this week.

Australian Market

Australian shares started the week poorly in reaction to negative leads from key markets in the U.S. after a disappointing jobs report, and from Europe, where fears of euro-zone debt contagion have weighed on markets. Investors also had to digest details of the proposed carbon tax, which would see 500 companies taxed from 1 July 2012 starting at $23/tonne of carbon produced and released into the atmosphere. This price will increase by 2.5% per annum and after three years the pricing will be set by an Emissions Trading Scheme.

The mining sector has held up quite well this week in response to solid commodity price gains, while the banks are back at their previous support levels and retailers have been hit hard after David Jones announced an earnings downgrade.

After this week’s heavy sell-off we are again testing key support levels and if these are broken we will likely resume trading in the falling channel which has been in place since mid-April. To put it in perspective this week’s losses have eaten up all of the gains of the previous three weeks.

U.S. Markets

U.S. stock markets have backed off their 2011 highs. Investor sentiment was dented from the start of the week after the disappointing U.S. non-farm jobs data (the U.S. unemployment rate remains stubbornly high at 9.2%) and the ongoing brinkmanship in the debate being held in Washington regarding the $US14.3 trillion debt ceiling and the growing fiscal deficit, scheduled for a vote on August 2.

Overnight, the U.S. government agreed on $US1.5 trillion in spending cuts and will resume negotiations over raising the debt ceiling. The Federal Reserve Chairman Ben Bernanke has moved markets again this week, but has now clarified his comments about a possible third round of quantitative easing (QE3), saying that the Fed is unlikely to act on any easing in the near-term.

The warning of a possible debt-downgrade for the United States had fuelled fears of higher borrowing costs and cast a shadow over the markets. Investors have chosen caution after Moody’s Rating Agency announced a review of the U.S. AAA credit ratings for a possible downgrade, which has seen financial stocks and some exporters sell-down.

There is some M&A activity in the U.S. with ArcelorMittal and Peabody Energy launching a $US5.0 billion takeover bid for Australian’s coal miner Macarthur Coal, at $15.50/share which is only slightly higher than the previous bid of $15.00/share. Also, BHP Billiton has entered into a definitive agreement to acquire Petrohawk Energy Corporation for a total equity value of approximately $US12.1 billion and a total enterprise value of approximately $US15.1 billion, including the assumption of net debt. The earnings season has begun on a positive note with JP Morgan and Google.

Overnight, the Dow Jones closed down -0.4% at 12,437, the S&P 500 index closed down -0.7% at 1,309, the Nasdaq ended down -1.2% at 2,763, and the smaller cap Russell 2000 was up 0.9%.

European Markets

European equity markets have fallen this week, backing of their 2011 highs due to continuing worries over sovereign debt contagion. A downgrade of the Irish sovereign debt rating to junk status by ratings firm Moody’s Investors Service has cast a cloud across Europe with Ireland now joining Greece and Portugal as debt crisis basket cases. European bank stocks continued to weigh throughout the week, especially those with exposure to the sovereign debt of Italy and peripheral European PIIGS nations. The Italian economy is in a debt mire and overnight the government’s borrowing costs surged in a bond auction, rekindling worries about the spread of the euro-zone debt crisis. The Italian government successfully sold nearly EUR5 billion of long-term bonds, but its borrowing costs rose sharply, while the Senate approved a EUR40 billion austerity package, which will now go to the lower house of parliament for a vote.

The next key data out of Europe will come from the European Banking Authority which will release the results of the stress tests for 91 banks as part of an effort to reassure investors that the region’s banks have sufficient capital. The publication will be released this weekend and will include information on capital levels, estimates for profitability in 2011 and 2012 as well as the size and maturity of their holdings of sovereign debt, the EBA said this month. Analysts are concerned however that there was an unwillingness to test for a Greek default in the scenarios.

Overnight in London the FTSE 100 index was down -0.9% at 5,852, the German DAX was down -0.7% at 7,215, while in France the CAC was down -1.1% at 3,741.

Asian Markets

Asian stock markets continued to fall this week as investors focused on the debt issues in Europe and the U.S. The Chinese market bucked the trend after the announcement of robust GDP data boosted investor sentiment. Data showed the second-quarter gross domestic product rose 9.5% year on year, and industrial production in June was up 15.1%, beating forecasts and easing fears that the Chinese economy may be heading for a hard landing. This is another reason Aussie miners have supported our market.

The Japanese market is again trading below the 10,000 level and the Hong Kong market has been sold off heavily this week and is again testing recent key support.

Overnight in China the SSE Composite was up 0.5% at 2,810, while in Hong Kong the Hang Seng Index was up 0.1% at 21,940 and in Japan the Nikkei 225 Index was down -0.3% at 9,936. The South Korean KOSPI was flat for the session, while the Indian market was up 0.1%.

Our View

The Australian share market has suffered from the negative sentiment from overseas. The S&P/ASX 200 index rejected the key resistance level around 4650 and has remained below its 50 day moving average, which are negative signs going forward.

Look for the market to continue seeking support around the 4450 level which it has held for the past month. If this level is broken, then we will likely resume trading in the falling channel which has been in place since mid-April and 4250 will be the next target.

The U.S. earnings season continues next week but the debt crises in the U.S. and Europe are dominating sentiment near-term. If the fears over debt subside, then earnings could be the catalyst for a move higher, as many of the analyst earnings forecasts have been ratcheted down because of the soft June economic data showing slowing economic growth.

Our miners continue to support our market due to the robust commodities prices which have occured because of the weakening US dollar. The carbon tax and mining tax remain as headwinds. Banks are attractive on a yield basis but they have broken monthly key support levels and many blue chip stocks are cheap on a valuation basis, plus fund managers and investors alike are underweight equities.

The S&P/ASX 200 is currently trading at 4480 and has broken above short-term resistance. Key levels for the index next week will be 4550 and 4400.

By Michael Hevern
Head of Research

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Stock Market Analysis: Weekly Market Wrap

Friday, June 24th, 2011

Faltering Global Growth Is The Crux Of The Problem

Traders again headed for the exits this week as the sell-down continued with the spectre of Greek default continuing to spook global markets. Investors remain cautious, with soft economic data coming out of the U.S. and Asia, and the concerns over a debt restructure or default in Greece dominating investor sentiment.

Globally, markets have continued to be plagued with concerns over the sovereign debt issues in Europe, particularly those in Greece. Asian markets have also been dragged lower by the fact that Chinese banks have been downgraded by Credit Suisse, and Chinese growth is slowing in the manufacturing sector near-term.

Commodities prices have again been under pressure this week due to concerns over the faltering global economy and the significant moves in global currencies.

Australian Market

The ASX All Ordinaries and the S&P/ASX 200 have experienced selling again this week, though these markets have held on to the previous week’s support levels, which is positive. The Aussie market is again testing the key support levels of its March lows and is trading at the lower end of its falling channel formation. It is crucial that support holds at these levels otherwise we could see the market test 4200 near-term.

Australian shares are starting to show some value but investors are unlikely to rush to open new positions until the situation in Greece is resolved. Miners again have suffered due to concerns about economic growth near-term and energy stocks have been weak as crude oil tested $US90 per barrel overnight.

Commodities have been under pressure this week with crude oil down 20% from its April highs, copper down 13% from its February highs and gold down 4% from its April highs.

U.S. Markets

U.S. stock markets are trying to find support for a second week, though trading has been volatile. The themes for the week have again been the continuing concerns over the slowdown in the U.S., Europe and Asia and the threat of contagion of the Greek debt crisis into global economies.

Financials have led the falls, but materials and energy stocks also weighed due to economic worries dragging the indices down again. Investors continue to be wary of risk as the Greek debt crisis remains unresolved. Investors have also sold off stocks in reaction to the Federal Reserve downgrading its assessment of the U.S. economic performance and estimating growth will be down to 2.7%-2.9% (down from previous estimates of 3% in April). It was also said that unemployment is likely to remain high, from 8.6% to 8.9% (currently running at 9.1%).

Other primary market movers included news that the International Energy Agency (IEA) will release 60 million barrels from its strategic emergency reserves in the next month, in order to push crude oil prices lower in a time of peak demand to attempt to help the sluggish economic growth. Investors were also discouraged by weekly initial jobless claims which were below economists’ expectations, indicating persistent weakness in U.S. employment as highlighted by the Fed yesterday.

Overnight U.S. stock markets recovered from a sharp early sell-off, with the S&P 500 and the Nasdaq bouncing off their lows for the year. The US dollar jumped higher in a “flight to safety” which put pressure on commodities prices.

Overnight the the Dow Jones closed down -0.5% at 12,050, the S&P 500 index closed down -0.3% at 1,284, the Nasdaq ended up 0.7% at 2,687, and the smaller cap Russell 2000 was up 0.4%.

European Markets

European stocks have continued to weaken this week as worries about Greek finances and the health of the global economies continued to weigh on sentiment. The Greek debt crisis remains the primary focus.

Financials weighed on the markets while private-sector growth was the weakest since September 2009 and the president of the European Central Bank (ECB) also warned that instability risks in the European banking system are extremely high.

Overnight in London the FTSE 100 index was down -1.7% at 5,674, the German DAX was down -1.8% at 7,149, while in France the CAC was down -2.2% at 3,788.

Asian Markets

Asian share markets have traded lower again this week with Hong Kong and Australian markets hitting multi-month lows and trading near their lows for the year. Persistent news of a possible Greek default has also unnerved investors globally. Investors fretted over news about slowing U.S. economic growth and worries about the prospect of further tightening in China.

Exporters in Japan suffered following the U.S. Federal Reserve’s comments about the world’s largest economy facing a sustained slowdown in economic growth. Meanwhile Moody’s downgraded Tepco’s debt to junk status, citing further escalation of costs and damages from the continuing Fukushima nuclear plant disaster.

In Hong Kong, the Hang Seng Index has lost ground weighed down by banks again. Credit Suisse has downgraded the Chinese banking sector to underweight from overweight, and has cut its forecast for China’s 2012 gross domestic product growth to 8.5%, from 8.9%, citing 2011 persistent inflation, slowing growth and continued monetary tightening as the likely cause for dampening growth near-term.

Also data released by HSBC in a preliminary reading of its gauge of Chinese manufacturing activity, fell to an 11-month low of 50.1 in June (from 51.6 previously). The data indicates Chinese growth is slowing, which should ease the pressure on the government to tighten monetary policies. The Chinese Shanghai Composite Index has defied the regional trend by rallying, as interest-rate-sensitive stocks saw some buying. In China the market has now managed to hold support and even broke above a downtrend line which has been in place since mid-April.

Overnight the SSE Composite was up 1.5% at 2,688, while in Hong Kong the Hang Seng Index was down -0.5% at 21,759 and in Japan the Nikkei 225 Index was down -0.3% at 9,597. The South Korean KOSPI was down -0.5% for the session, while the Indian market was up 1.0%.

Our View

The Australian share market has had yet another tough week and it looks set to remain subdued as we head into the end of the financial year. Investors remain cautious with fears of Greek debt contagion and the faltering global recovery messing with investor psyche.

The S&P/ASX 200 index again tested its March lows and we may see consolidation near-term as the index has pushed towards the lower end trading range of its falling channel. The headwinds remain with a strong Aussie dollar, slow jobs and retail sales numbers and the proposed carbon and mining resource taxes, plus the end-of-financial year clean-out all weighing on sentiment.

The S&P/ASX 200 is currently trading at 4492 and is trying to find support around these levels. Key levels for the index next week will be 4600 and 4400.

By Michael Hevern
Head of Research

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Stock Market Analysis: Weekly Market Wrap

Friday, June 10th, 2011

Another Tough Week

Traders faced another testing week as the sell-down continues. Investors remain cautious over soft data in the U.S. and now Asia, as well as the spectre of a debt restructure in Greece. Last Friday’s disappointing U.S. employment report set a negative tone for the week, though a surprising narrower-than-expected U.S. trade deficit sparked some bargain hunting overnight.

Many Asian markets had a holiday on Monday and as a result trading volumes in our local market have been below average.

Globally, markets have continued to be plagued by concerns over the sovereign debt issues in Europe, but now the European central banks are hinting at an interest rate rise near-term, which points to some forecast improvement in the European economies. Asian markets have also been hindered by reports showing Japan is in a recession and Chinese growth is slowing near-term.

Australian Market

The ASX All Ordinaries and the S&P/ASX 200 have experienced selling again this week, but trading volumes have been down. The Aussie market is again testing key support levels and is trading at the lower end of its falling channel formation.

Australian shares are starting to show some value, but investors are unlikely to rush to open new positions ahead of the long weekend and we can again expect trading volumes to remain light today.

We can also expect some bargain hunting as concerns over global growth eased overnight. The banks are starting to look good on a yield basis and energy stocks should provide support as OPEC did not increase production quotas. The RBA left interest rates on hold this week and yesterday’s employment report showed the unemployment rate remained at 4.9% as expected, but the economy added only 7,800 jobs in May which was short of the 25,000 jobs expected by analysts. The gains came from 29,800 part-time jobs created but full-time jobs decreased by 22,000. Also the ANZ reported the number of job ads in May fell, the biggest monthly drop in more than two years, indicating a softening in activity within the economy.

The employment data means the RBA will be able to leave interest rates on hold for longer. The headwinds continuing to confront investors include the poor GDP figures, the mining tax and the spectre of the carbon tax, which are all weighing on sentiment.

U.S. Markets

U.S. stock markets are trading lower for another week, though bargain hunters stepped in overnight. The week started poorly after the weaker-than-expected non-farm employment report showed unemployment rising to 9.1%. The theme for the week has been the continuing concern over the slowdown in the U.S. and global economies.

During the week the Dow Jones experienced six straight days of losses, its longest losing streak since July 2010, and the S&P 500 experienced its longest losing streak since February 2009.

Overnight U.S. stock markets jumped higher however, boosted by an unexpected narrowing of the U.S. trade deficit in April. The material, energy and even the financial sectors all traded higher in the session.

The trade deficit has now fallen to its lowest level for the year, declining 6.7% to $US43.7 billion from $US46.8 billion in March, as exports hit a new high and purchases of oil fell off sharply due to the continuing high prices. Elsewhere investors ignored other signs of persistent weakness in the economy in jobs and wholesale sales figures.

While the surprise trade deficit sparked some bargain hunting overnight, it still needs to be seen in light of many other indicators pointing to slowing growth in the U.S.

Overnight the Dow Jones closed up 0.6% at 12,124, the S&P 500 index closed up 0.7% at 1,289, the Nasdaq ended up 0.4% at 2,685, and the smaller cap Russell 2000 was up 1.1%.

European Markets

European stock markets have been trying to find support this week and broke their 6-session losing streak overnight. Stocks have continued to weaken as investors digested the weak economic data from the euro-zone, the U.S. and China. Greek sovereign debt remains a concern as the IMF said that banks needed to further strengthen their capital and that Greece cannot afford to slow its pace of reform. Banks with exposure to Greek debt have been particularly hard it. Overnight both the Bank of England and the European Central Bank decided to leave interest rates on hold, but their comments indicated a tightening bias near-term.

Overnight the FTSE 100 index was up 0.8% at 5,856, the German DAX was up 1.4% at 7,160, while in France the CAC was up 1.1% at 3,878.

Asian Markets

Asian share markets have traded mostly lower in a shortened week. Many Asian markets were closed on Monday, so they had to play catch-up after the poor U.S. Non-Farm employment report. Banks have been under pressure due to fears of capitalisation constraints, while energy stocks rose on the back of higher crude oil prices. Airline stocks suffered across the region as crude oil remains above $US100 per barrel.

In Japan the market has been under pressure, despite Japanese growth being revised upward modestly in the January-March period, easing concern, and exporters were helped as the yen weakened. TEPCO has been in the spotlight as the operator of the Fukushima Nuclear Plant again sold off as much as 20% overnight but ended only 4% down at the close.

In Hong Kong the Hang Seng Index recovered from a sharp early sell-off but still finished lower. In China and Hong Kong the markets have been under pressure as losses in the Chinese banks weighed on sentiment, as the result of a new round of equity raisings.

Overnight in China the SSE Composite was down -1.6% at 2,703, while in Hong Kong the Hang Seng Index was down -0.2% at 22,609 and in Japan the Nikkei 225 Index was up 0.2% at 9,467. The South Korean KOSPI was down -0.6% for the session, while the Indian market was down -0.1%.

Our View

The Australian share market has had another sell-off this week, but the selling appears to be abating near-term. As the week progressed investors continued to choose caution ahead of the long weekend.

The S&P/ASX 200 index is testing its previous week’s low and we may see consolidation near-term as the index has pushed towards the lower end trading range of its falling channel. The headwinds remain with a strong Aussie dollar and the proposed carbon and mining resource tax, and the end-of-financial year clean-out all weighing on sentiment.

The S&P/ASX 200 is currently trading at 4585 and is trying to find support around these levels. Key levels for the index next week will be 4700 and 4500.

By Michael Hevern
Head of Research

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Stock Market Analysis: Global Markets Down For A Fourth Week

Monday, May 30th, 2011

* U.S. stock markets declined for a fourth straight week, giving the U.S the first month of consecutive weekly losses since the GFC in June 2008.
* European stock markets closed lower for a fourth week as sovereign debt concerns escalated.  Resources stocks offered support as commodities prices rose.
* Asian markets have fallen for a fourth week, due to concerns over a faltering global recovery. Many markets have had their biggest string of consecutive losses in two years.
* Commodities prices continued to recover.  

The SPI Futures is trading below the key level of 4800, rising 0.1% (or 5 pts) to 4,695. The key levels for our index this week are 4780 and 4600.

Australian shares are expected to trade flat today as markets fell for a fourth week across the world, with China leading the declines.  Banks were the worst hit in our ASX Top 20 stocks last week.  The mining tax will be in focus again this week after the WA Government sharply increased the state iron ore royalities from the miners by $2 billion.  The spectre of the carbon tax is also weighing on sentiment.

The Australian GDP figures are due out this week and comments from the Treasurer are not very reassuring, as he said the natural disasters in Australia probably cut more than 1 percent from economic growth in the first quarter.  He went on to say “… 85 percent of Queensland’s 57 coal mines suffered production losses in the early part of the year”.  The OECD has forecast the Australian economy will advance 2.9 percent this year and accelerate to 4.5 percent by 2012.

See below for ASX listed companies in the news today.

Economic News Today

* Q1 Business Indicators Company Profits  &  Inventories.

US Markets

U.S. stock markets declined for a fourth straight week, giving the U.S the first month of consecutive weekly losses since the GFC in June 2008.  To date the pullback has been measured with stocks down only 2.4% during the four-week sell-off. 

The U.S. markets appear to be following the same script as this time last year. Despite the Japanese earthquake disaster thowing a spanner in the works, the other issues that are impacting the markets are similar to that of this time last year.  The jury is out as to whether the Fed will still hold to its commitment to turn off the QE2 tap in June. 

Economic data continues to disappoint with the latest data showing weekly jobless claims exceeding 400,000 for a seventh straight week.  Consumer spending growth has been revised down from 2.7% to 2.2%, while economic growth for the first quarter remained at 1.8%. 

A recent survey from the American Association of Individual Investors showed the bullish numbers shrinking to less than 26%, the smallest since last August, as investors have withdawn nearly $US5.8 billion from U.S. stock mutual funds so far in May, while redeploying funds into more defensive positions with more than $US16.5 billion invested in bond funds even as yields are miserable.  This could be setting up for another bullish run in the next quarter, as the VIX volatility index remains at 3-year lows showing investors are not actively buying put options to protect their positions, ie. the fear gauge is currently running low. 

Commodity prices have supported the markets recently with crude oil prices hovering around $US100 after having slumped 12% in May, copper rebounding 5.5% over the past three weeks, and gold has bouncing above the $US1,500 level again.

The Dow Jones closed up 0.3% (or 39 points) at 12,441, the S&P 500 index closed up 0.4% (or 5 points) at 1,331, the Nasdaq ended up 0.5% (or 14 points) at 2,797, and the smaller cap Russell 2000 was up 0.6%.  The U.S. market in on holiday tonight.

All ten company groups that make up the S&P index traded higher: the Financials sector was higher by 0.7%, Materials were up 1.1%, Industrials were up 0.5%, Consumer Staples were up 0.3%, Technology was up 0.5%, while the Energy sector was up 0.3%.

European Markets

European stock markets closed lower for a fourth week as sovereign debt concerns escalate.  The Stoxx Europe 600 index ended down -0.2% for the week. The debt issues are most problematic in the PIIGS economies in particular Greece, Portugal and Spain. 

Resource stocks were among the best performing of the 19 industry sectors in the Stoxx 600 last week, while Russia has announced it will cease its ban on wheat exports on 1 July. 

The European Central Bank is signaling that it remains on track to raise interest rates further despite the continent’s debt crisis. 

In London the FTSE 100 managed to finish in the green on Friday, as the miners and energy majors again provided support, making up some ground after losses of the past few weeks.  In Germany markets recovered on Friday as the sentiment for banks improved as the Fitch Ratings credit ratings agency said it does not foresee any rating action on German banks as a direct result of their exposure to Greek sovereign debt.

The FTSE 100 index closed up 1.0% (or 58 points) at 5,939, the German DAX was up 0.7% (or 49 points) at 7,163, and the French CAC was up 0.9% (or 4 points) at 4,062.

Asian Markets

Asian markets have fallen for a fourth week, due to concerns over a faltering global recovery as many markets have experienced their biggest string of consecutive losses in two years.

Resource stocks have provided support in the region on the back of the recent rising commodities prices, with crude oil holding around $US100 after Goldman Sachs and Morgan Stanley raised their 2011 and 2012 forecasts earlier in the week.  There have been pockets of investor bagain hunting for stocks that have been sold-off recently, but the broader markets continued their falls. 

In the course of the week the Japanese Nikkei Index fell 0.9%, South Korea fell 0.5% and the Aussie S&P/ASX 200 dropped 1%.  Hong Kong finshed 0.4% lower, while the Chinese Shanghai market plunged 5.8% for the week, its fifth loss in six weeks and is 11.4% off its mid-April high. 

Credit Suisse the investment house noted that the Shanghai Composite Index is now well below its 200-day average and is trading at 15.3 times profits, below the average 16.9 multiple seen over its last three troughs in 1996, 2005 and 2008.

However Chinese data continues to point to slow growth in the world’s second largest economy, as data showed a preliminary HSBC Purchasing Managers Index had slipped to a 10-month low, pointing to a slowdown in manufacturing.

In China the SSE Composite was down -1.0% (or -27 points) at 2,710, while in Hong Kong the Hang Seng Index was closed up 0.9% (or 217 points) at 23,118 and in Japan the Nikkei 225 Index was down -0.4% (or  -40 points) at 9,522.  The South Korean KOSPI was up 0.4%, while Indian market was up 1.2%.  

Commodities

The Dollar Index was lower at 74.95 on a higher Euro, while the Australian Dollar last traded lower at 106.96. Commodities prices rose.

For the session the benchmark crude NYMEX for June delivery was up 0.4% to settle at $100.75. Copper prices are higher but still below 2-year highs as Copper for June delivery was up 1.7% (or 7.3 cents) at $US4.1760.  June gold was up 0.9% (or $US13.50) at $US1,536.50.

ASX Market News

AJL – AJ Lucas Group, the resources services provider, has downgraded its full year earnings guidance, and flagged asset sales to reduce its debilitating debt.

ALL – Aristocrat Leisure Ltd our largest poker machine maker is business as usual after governments from around the country failed to reach a consensus on reforms to limit problem gambling.

AUN – Austar United Communications the Pay-TV provider has had a takeover bid from Foxtel, valuing the company at $1.93 billion.

CIL – Centrebet International the internet gaming and wagering company has agreed on a scheme by which the London-based online gaming company Sportingbet Plc will acquire the company for $183 million.

CTX – Caltex says refiner margins continued to contract in April, as the price of crude oil rose on tight supply after the Japanese earthquake and Libyan conflict.

CXY – Cougar Energy will open an office in Beijing to help support the growth its underground coal gasification (UCG) projects in China and Asia.

FPA – Fisher & Paykel returned to profit in the year to March, but its revenue for the latest 12 months fell 3.7 per cent from the year before to $NZ1.12 billion ($A850.84 million).

GNC – Graincorp, the grain handler and marketer, has posted half year net profit up 66 percent, and has lifted guidance for earnings and profit for the full year.

ILU – Iluka Resources Ltd, the mineral sands producer, plans to boost production of zircon and high grade titanium ore after achieving price increases in the first half of calendar 2011.

LLC – Lend Lease Group the construction company and property developer, is on track to deliver its target full year return on equity (ROE) of 15 percent.

NHC – New Hope Corp has updated its JORC compliant reserves and resources statement, increasing coal resources by 56% to 1,539Mt while coal reserves increased by 12.4% to 544Mt.

ORG – The Origin majority-owned Contact Energy has welcomed the granting of resource consents for 168 wind turbines and transmission lines to its proposed Hauauru ma raki wind farm in Waikato.

OZL – OZ Minerals, the single-mine gold and copper producer, will trade on a post consolidation basis from Monday 30 May until 10 June. The number of shares on issue will reduce by a factor of 10 to 324 million.

TWR – Tower, the insurer and fund manager, says 1H11 net profit fell 54 percent to $A9.7 million, with the result including the impact of earthquakes in Christchurch and a loss due to changes in the global investment market.

VBA – Virgin Australia has to wait until June for final approval of its proposed partnership with Delta Air Lines on trans-Pacific routes after the US government extended the comment period by a week. While locally Virgin Blue Holdings has suffered a fall in domestic and international passenger numbers in April.

Local Corporate Reporting

None

Ex-dividend Date

None

Market Summary

ASX – to open higher
US & UK/Europe – higher but down again for the week

US ADRs – Generally Higher

BHP up 0.8% & RIO  up 1.3%; AWC up 0.1%
ANZ up 0.1% & NAB up 1.4%
NEM  up 1.0%, JHX up 2.4% , NWS up 1.3%

Commodities Stock Index up 0.3%
Gold Stocks Index up 1.9%
Oil Stocks Index up 0.3% 

By Michael Hevern
Head of Research

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

Written on 30 May, 7:15am

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