A strong day today as overnight news that Uncle Ben was intent on keeping the markets hooked on stimulus. Like any good drug dealer he has the sense not to spook his customers and take away their $85bn a month. Despite the good news from overseas we anticipated the bounce to some extent and our rise today was somewhat muted. The big drivers in the market being the big four banks were relatively subdued with Commonwealth Bank of Australia (A$66.01, +0.8%) the stand out. In other financials QBE Insurance Group (A$13.18, +3.4%) recovered some of yesterday’s losses as they finally seem to be admitting they have a problem. I think that is one of the first steps to recovery! Defensives were still in demand though with Wesfarmers (A$40.52, +0.9%), Woolworths (A$34.01, +0.2%) and Telstra (A$4.61, +0.4%) all gaining today along with CSL (A$58.85, +1.0%).

Retail stocks also benefitted from the warm and fuzzy feeling, maybe on the back on better US consumer sentiment or stories of Private Equity casting its beady eye over Hardly Normal Harvey Norman (A$2.28, -0.4%).The big winners today were resource stocks though with Gold shares significantly better in places with Newcrest Mining (A$22.58, +2.0%) and Kingsgate Consolidated (A$3.70, +2.2%) the stand outs. BHP Billiton (A$36.69, +0.9%) also improved as did RIO Tinto (A$66.01, +0.7%) making up for a large part of the gains on the ASX 200.Energy stocks were also on the front foot with Santos (A$13.13, +3.6%) and Oil Search (A$7.52, +2.3%) in demand.

Industrials also had a positive day with Seven Group (A$11.00, +4.7%) and Brambles (A$8.57, +1.1%) both drawing strength from recent results. Building stocks also received a boost following better US housing numbers and also some domestic numbers showing a pick up in activity. Media stocks were also in the news with Fairfax Media (A$0.57, +4.6%) positive as were APN News & Media (A$0.27, unch). Election years are good for media companies. Expect to see some more rebound in the share prices of these in 2013.

Volume was mediocre today as bargain hunters seemed reluctant to chase it higher with the Macro factors from ‘Zombieland’ and the US, still weighing on people’s minds. It is only two days to go until the Budget cuts are enacted in the US and we still have yet to see how Italy pans out. Expect to see some more volatility perhaps.

Stocks in the News

Few more companies reported today with AGL Energy (A$15.87, +4.5%) providing a positive touch together with news from Westfield Group (A$11.14, +0.5%) which suggested things were improving in the US whilst here at home things still remain tough.

House favourite Buru Energy (A$2.44, +6.1%) started to move in the right direction following reporting its half year numbers. Speculation in the press about moves in the Canning Basin by large multinationals also helped their cause following the deal that Beach Energy (A$1.365, -0.7%) did this week with Chevron in the Cooper.

In other house stocks Karoon Gas Australia (A$6.89, -1.6%) drifted back a little after its recent run as did New Standard Energy (A$0.205, unch) and Roc Oil Company  (A$0.58, -0.9%) despite reporting roughly in line today. Atlas Iron (A$1.48, -4.2%) also drifted down after the results yesterday as did Noble Mineral Resources (A$0.057, -9.5%) after the entitlement offer shortfall being taken up by Resolute Mining  (A$1.365, +2.2%).

Finally an up day for long suffering Pharmaxis Ltd (A$0.59, +4.4%) shareholders but it’s going to be a long way back for this one.

Mastermyne Group (A$1.59, -13.1%) was significantly weaker following our analyst’s downgrade on the lacklustre results.

One for the Canine Club today was Wotif.com (A$5.37, -8.0%) which produced seriously underwhelming results and got hammered. Hardly surprising given the competition that is now everywhere in the travel sector.

In some rare good news for Lynas (A$0.63, +7.7%) it confirmed that its troubled Malaysian Plant had produced its first products for sale. Let’s hope this is the start of the recovery for this one.

Grocery wholesaler Metcash (A$4.03, -0.2%) has picked Ian Morrice as the company’s next chief executive, taking over when current boss Andrew Reitzer resigns this year after eight years at the helm of the business.

In results today James Hardie Industries PLC (A$9.50, +1.6%) produced a decent number too and will benefit from US housing recovery.

Engineering firm UGL (A$10.30, -5.5%) first half profit has slumped by 53 per cent due to $25 million in costs from a restructure. UGL made a net profit of $26 million in the six months to December 31, down from $55.4 million in the previous corresponding period.

Tomorrows News Today

Time to batten down the hatches in the Pilbara as Cyclone Rusty (no, not Russell Crowe’s appearance in Les Mis’) hits town. BHP, RIO and FMG most affected.

Private Capex numbers out tomorrow so RBA on notice for next week. Expect to see the RBA stay their hand despite jawboning about lower rates and a lower dollar.

As we draw to the close of two very favourable months for the market it does look a little tired in places especially the very crowded yield plays like the banks. Still there is money sitting there waiting from those that missed out in the last three months. The FOMO effect is substantial (FOMO is fear of missing out!).

Warning from S&P today on the Australian economy is curious given the problems it has highlighted are nothing new.Maybe there is some jealousy in our AAA rating these days and they are looking for an excuse to down grade to bring us into line with UK, US and France!

 

Clarence

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