Market Action

In the words of John Mclean, ”Welcome to the party pal”. Another strong day as the market picked up the Wall Street vibe and powered ahead. Gathering momentum as the day wore on in fact, as shorts and underinvested caught the FOMO (fear of missing out) bug. Once again the usual suspects stole the show with the banks just pushing higher and higher. Westpac Banking (A$30.77, +1.9%) was the stand out with Commonwealth Bank of Australia (A$67.27, +1.9%) continuing its run towards 70 bucks on large volume. There seems to be no stopping this sector at the moment. It has become a very crowded trade with too much money chasing too few assets. Other financials joined in too with Perpetual (A$41.12, +4.2%) announcing better results today and proof that their restructuring is really working. Challenger (A$3.61, -0.3%) also reported today and pushed up with AMP (A$5.48, +2.0%) and Macquarie Group (A$37.72, +0.5%) also better.

Other defensives were mixed with Telstra (A$4.59, -0.4%) taking a wrong call and falling back as with no dividend looming the best may have passed but would expect it to recover back in the next day or so. Wesfarmers (A$41.03, +1.3%) coat-tailed on the Woolworths (A$34.93, +2.7%) result and even Metcash (A$4.08, +1.2%) showed some signs of life.

In resource stocks Newcrest Mining (A$22.66, +0.4%) staged a recovery after early losses after the fall in the Gold price however other gold shares joined the list of losers with Evolution Mining (A$1.36, -2.9%),Kingsgate Consolidated (A$3.58, -3.2%),St Barbara (A$1.32, unch) and Silver Lake Resources (A$2.19, -0.5%) all suffering today. In large cap land BHP Billiton (A$37.07, +1.0%), RIO Tinto (A$67.05, +1.6%) and Fortescue Metals Group Ltd (A$4.72, +2.6%) seemed to have dodged Cyclone Rusty and looks like Port Headland will reopen today so that’s good news.

Industrials today edged higher with Brambles (A$8.75, +2.1%),Seven Group (A$11.26, +2.4%) and Transfield Services (A$1.96, +5.9%) in the top ten big caps today whilst wearing the dunces hat were Insurance Australia Group (A$5.69, -1.0%) not able to hold the dividend and falling some more. There seems to be a theme as companies go Ex Div the attraction starts to wane. In which case we could see some interesting times in May when the Banks go Ex!

Building materials companies have been heading higher too as better housing numbers from the US help sentiment, James Hardie Industries PLC (A$9.80, +3.2%) continuing to find friends following their results yesterday and Boral (A$5.17, +5.1%) the stand out.

Media stocks were also better with Fairfax Media (A$0.575, +0.9%) due to launch a new look digital platform for their newspapers in the next week attracting some interest. It was even Ex Div today… Who would have thought they still pay a dividend.

Retail stocks were slightly better with David Jones (A$2.79, +2.2%) and Myer (A$2.79, +3.0%) catching the Hardly Normal buzz Harvey Norman (A$2.49, +9.2%).

Stocks in the News

So far in our reporting season 133 companies have reported interim earnings: Aggregate revenue +1.5%, expenses +5.9%, profit -11%, dividends +0.5%, cash -5.7%…and 54% of these are seeing analysts upgrade their earnings numbers.

Hardly Normal Harvey Norman (A$2.49, +9.2%) took a bow today and despite showing the full force of consumer ire and the internet, pushed higher on comments from Chairman Gerry suggesting that the recent aggressive discounting is over. Certainly echoing JB Hi-Fi (A$12.95, +2.9%) position as well… Maybe they got together over a quiet beer to discuss…

In house stocks today Buru Energy (A$2.70, +10.7%) had a great day in the sunshine as they released some weekly drilling results. There is still a huge short position in this one and they are wrong… Suspect they will be made to pay. Linc Energy Ltd (A$2.70, +15.9%) also shot higher as did other Cockatoo Coal (A$0.11, unch) and REY Resources (A$0.051, -1.9%). Good to see some interest in the energy sector ,maybe the move from Chevron is helping investors understand the attraction of some of these assets.

Other stocks to report today include Perpetual (A$41.12, +4.2%) and Challenger (A$3.61, -0.3%) together with Woolworths (A$34.93, +2.7%) which set a positive tome from the off. Our favourite fresh food people made a whopping first half profit of $1.15 billion from its supermarkets.

The supermarket giant’s net profit in the six months to December 31 was up 19 per cent from $966.9 million in the previous corresponding period. Definitely not ‘Down! Down! Prices are down” there! No sign of the Red Right hand… Sorry went all a bit Nick Cave there for a minute.

In the naughty corner today were! Wotif.com (A$4.92, -8.4%) as they continued to suffer after yesterday’s results. Indeed WTF.

Vitamin maker Blackmores (A$31.80, -7.3%) lifted sales across Australia, Asia and New Zealand by 29 per cent rise to $164.3 million. However, its net profit fell 4.8 per cent to $13.6 million in the half year to December 31.

Economic numbers today were a little disappointing on Private Capex. Mining was the big loser with investment falling by 11.6 per cent, the Bureau of Statistics reported. 2013-14 expectations of capital expenditure was 8.1 per cent lower than the first estimate for the previous corresponding period but analysts said it was broadly in line and long term investment wasn’t too bad. But sure looks like the mining boom has well and truly peaked! Let’s hope the rest of the currency affected economy can pick up the slack.

Tomorrows News Today

The market has pushed through 5100 .US markets are touching all-time highs ,no one cares about sequestration and Italy and companies are rolling in money. Welcome to the new bull market. Of course if you only just realised it is a bull market you have probably missed the 50% gains in the banks in the last 18 months!

Whilst Uncle Ben, Super Mario and now the new Japanese man are still printing money faster than you can say GFC, we will continue to push higher with the occasional pullback. Not that occasional at the moment! And here’s why we will continue to push ahead… Households had some $588 billion on deposit with the nation’s banks last month, that’s up 10% from last year… That money is parked on the sidelines as investors have remained cautious…if this bull market continues this money will start to come back into the market… Parking money in the bank at 5% taxed doesn’t look too flash now does it!! Plus gives the banks a great source of funding.

The Japanese government has nominated Asian Development Bank President Haruhiko Kuroda to be the next governor of the Bank of Japan. This will signal yet another Central bank opening the printing presses. These guys have seen how successful it has been for US and European markets so bound to give it a go in the land of the Rising Sun.

Federal Reserve Chairman Ben S. Bernanke said the central bank may decide to hold bonds on its $3.1 trillion balance sheet to maturity as part of a review of its strategy for an exit from record monetary easing.

 

Clarence

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