After the big falls on Wall Street last night it was inevitable that we would struggle today especially in the much hated resource sector. Things didn’t disappoint with BHP Billiton (A$31.79, -1.2%), RIO Tinto (A$53.91, -2.0%) and of course Newcrest Mining (A$16.10, -2.1%) all worse than the bubble banks. More Chinese PMI numbers helped the Shanghai index fall to its lowest level this year. Financials were weak but not too much damage with Westpac Banking (A$33.90, -0.5%) announcing their profit number tomorrow. In other financials Bendigo and Adelaide Bank (A$11.09, +1.5%) and Macquarie Group (A$38.88, +1.0%) were star performers as were Suncorp Group (A$12.91, +1.0%). In other defensives Woolworths (A$35.67, -1.6%) seems to be suffering from a hardware hangover as talk of big start-up losses are weighing on the stock. The one bright spot in the sea of red was Telstra (A$5.06, +0.6%). Interestingly according to a Cisco survey Australia already has the third fastest internet in the World and will still have the third spot in 2017. And that’s without the NBN. In media stocks News (A$30.54, +1.6%) were another bright spot as was TPG as the Teoh’s became Billionaires.

In media stocks, Fairfax Media (A$0.635, -3.1%),REA Group Ltd (A$29.59, -4.9%) and Ten Network (A$0.305, unch) all fell. Energy stocks were also weaker after falls in the oil price overnight with Santos (A$12.02, -1.3%), Oil Search (A$7.60, -0.4%) and Woodside Petroleum (A$36.80, -1.0%) leading the sector down with Karoon Gas Australia (A$3.96, -5.9%) and Linc Energy Ltd (A$1.77, -5.9%) all suffering. Mining services are completely on the nose at the moment with no respite in sight, Bradken (A$4.77, -4.4%), Boart Longyear (A$0.92, unch), Cardno (A$6.41, -3.3%), Macmahon (A$0.155, -8.8%) and NRW (A$1.255, -4.9%) all looking pretty horrid. Gold shares, too continued to try investors patience and towels will be thrown in at some stage, Silver Lake Resources (A$1.03, -3.3%), St Barbara (A$0.555, -7.5%), Kingsgate Consolidated (A$1.97, -5.7%) and Evolution Mining (A$0.925, -4.6%). At some point these companies will start to look attractive to bigger ones with cash looking to expand their reserves without drilling any holes. But maybe not yet!

Volume was slightly better but still no champagne corks in brokers offices and a note of caution is creeping in after the three big events of the last month sink in. Japan reflates, WPL pays a special Div and ANZ increase their div. All significant.

Stocks in the News

News today that Fairfax Media (A$0.635, -3.1%) is launching a TV version of the Financial review on Channel Nine and has been overwhelmed with advertisers. This is a good sign that FXJ are now thinking outside the conventional print environment to push their digital and new revenue streams.

Another house favourite had their AGM today, APN News & Media (A$0.365, -7.6%). This has been the first chance the company has had to let the market know their strategy going forward. Seems a few profit takes are using this as an opportunity to exit.

In other house stocks Buru Energy (A$1.645, -6.8%) presented to us yesterday. Did not do them any good as the stock continues to drift lower as the ‘shorters’ appear to be winning the battle in this one at the moment.

There is life in retail as Super Retail Group (A$13.09, -0.1%) has lifted its sales for the financial year to date across its auto and sport divisions due to loyalty programs and better marketing. The company announced that comparable sales, which strips out store openings and closures, for its auto division has lifted 5.1 per cent in the 43 weeks to April 27.

Sounds like the Iron Price could be the next commodity to fall as Fortescue Metals Group Ltd (A$3.33, -4.3%) has warned that de-stockings by the China’s steel mills may see some volatility in its exports of iron ore despite the optimism for the broad outlook for steel demands.

Of the 199 companies in the S&P/ASX 200 that have reported earnings thus far for FY 2012, 40 per cent have reported earnings better than street expectations. Collectively, the S&P/ASX 200 has reported a 0.7% EPS surprise.

Record Australian debt maturities of $29.5 billion this month are spurring demand for its sovereign bonds, the best performers this year among top-rated nations. Australia’s caretaker government will pay $16.7 billion to investors May 15 when the 6.5 per cent note initially sold May 2000 falls due, its biggest-ever maturity.

Tomorrows News Today

ECB to cut rates tonight to a new low of 0.5%. I am sure the 6 million Spaniards will be relieved.

Expect a good number form WBC, increase in Dividend and a good headline number but maybe we will not see the ‘ANZ surge’ as the market has had a week to get used to the new normal in banking.

We will also see Macquarie Group (A$38.88, +1.0%) tomorrow and would expect some more cost cutting but maybe room to disappoint given the still low level of M&A activity and the low levels of activity in the Equity markets. Focus will be on the boring bits of the business being Funds management and Mortgage business perhaps.

The great joy of internet businesses is no one knows where the money is, thus making it hard to tax. Ebay and Google are prime examples, if you keep it moving around jurisdictions like a massive find the lady scam tricky for Government to get a handle on the money. This story from the FT explains why Apple have done the five knuckle shuffle with their iBond this week. Apple will avoid a potential tax bill of up to $9bn by using the proceeds from its $17bn blockbuster bond issue to pay shareholders rather than bringing back cash from abroad.

The technology group would have paid as much as 35 per cent in tax to bring that amount of cash back into the US, according to lawyers and accountants. Apple, which has $100bn worth of offshore cash compared with just $45bn in the US

The US government is paying welfare support to around 89m people at the moment!

And for early risers I am on Sky Biz tomorrow at dawn!! Must be mad. The things I do!

 

Clarence

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