After a positive lead from Wall Street, the market raced out of the blocks to breach the 5200 level on thin air. Hasn’t been above 5200 since July 2008! However like poor old Icarus who flew too close so did we and the rarefied air was nowhere near enough to support the much inflated financial sector. Reversals in stocks like Westpac Banking (A$33.17, -1.1%), Commonwealth Bank of Australia (A$71.67, +0.9%) and National Australia Bank (A$33.50, -0.7%) all helped take the gloss off the market as it drifted down through the afternoon. The big green blob of financials failed to sustain their dizzy heights although some survived the Tokyo drift, with Macquarie Group (A$44.10, +2.3%), Commonwealth Bank of Australia (A$71.67, +0.9%) and QBE Insurance Group (A$13.50, +2.4%) firm. Instead it was left to the out of favour resource stocks like BHP Billiton (A$32.87, +2.8%), Fortescue Metals Group Ltd (A$3.61, +5.9%) and RIO Tinto (A$56.20, +3.1%) to lead us out of oblivion. Energy stocks also joined in with Woodside Petroleum (A$37.18, +1.6%), Karoon Gas Australia (A$4.89, +22.6%) and Santos (A$12.27, +1.6%) all having good days. Karoon Gas Australia (A$4.89, +22.6%) was especially good after announcing an oil strike. And in shock news Newcrest Mining (A$16.03, +0.1%) managed to eke out a miserly gain!
Mining services attracted a few sharks circling the boats picking off some survivors like Bradken (A$4.95, +3.1%), Boart Longyear (A$0.94, +0.5%), Macmahon (A$0.16, +3.2%), WorleyParsons (A$23.15, +2.9%) and NRW (A$1.285, +4.0%).
In defensives Telstra (A$5.06, -0.6%) succumbed to gravity as did Westfield Group (A$11.70, -0.4%),Wesfarmers (A$42.50, -0.5%) and Woolworths (A$35.52, -0.2%). Retailers were a little down cast after retail sales figures did disappoint, with David Jones (A$2.88, +0.3%), Myer (A$2.97, -0.7%) and Harvey Norman (A$2.85, -1.7%) all weaker.
Big winner today was Mirabela Nickel (A$0.165, +50.0%) following a presentation at an Investment Banking Conference last week and a rise in the nickel price overseas, mind you it has been a horrible slide up until then! The Biggest loser was Codan (A$2.79, -8.8%).
Volume was pretty pathetic considering and once again the market is being driven by short coverers and the computers. Real business still seems elusive. Certainly follow through is elusive!
Stocks in the News
News today that GPG intends to sell it near 20% holding in Ridley (A$0.84, +7.0%) to a Canadian agribusiness. Bit of a theme developing here with GrainCorp (A$12.76, -0.2%) under takeover at the moment. Maybe Warrnambool Cheese & Butter Factory Co.Hold.Ltd (A$4.25, +1.2%) are next to be in the frame!
Good news today in Karoon Gas Australia (A$4.89, +22.6%) as they announced that their Bilby 1 prospect was a winner. As Meatloaf once said two out of three ain’t bad!
Orica (A$22.56, +1.6%) reported today with an increase in 2013 profits.
In other resource stocks Oz Minerals (A$4.38, +9.5%) announced significant copper from their Khamsin project whilst other copper stocks also rose like Sandfire Resources NL (A$6.03, +9.0%) .However market darling Sirius Resources NL (A$2.88, -2.7%) fell like a rock after announcing some flat Bollinger updates
In company news Leighton (A$19.43, +2.2%) said it expects to make a full year profit of up to $600 million after completing what it said was a pleasing first quarter. Leighton made a net profit of $123 million in the three months to the end of March. The company is on track to deliver a full year underlying profit within its previously issued guidance range of $520 to $600 million, chief executive Hamish Tyrwhitt says.
Fortescue Metals Group Ltd (A$3.61, +5.9%) has opened its Firetail iron ore mine in Western Australia’s Pilbara region, part of a wider $3.2 billion development. The company has described the opening of the mine at Solomon, 60km north of Tom Price, as one of the most important milestones in its 10-year history.
Following on from the Malaysian election win of the incumbents, Lynas (A$0.58, +16.0%) had a much better day. Malaysian Markets at a high! APN News & Media (A$0.39, +5.4%) found themselves a CEO in Michael Miller and Boral (A$4.52, -3.2%) announced more job cuts, difficult market conditions etc. but at least they rallied off their lows. “Fix, execute and transform” seems to be hitting some speed bumps.
In Chinese economic news today, the HSBC services Purchasing Managers’ Index (PMI) fell to 51.1 in April from 54.3 in March, with new order expansion the slowest in 20 months and staffing levels in the service sector decreasing for the first time since January 2009.
Whilst here at home retail sales numbers were back on the dire side of the ledger Retail sales fell 0.4 per cent in March seasonally adjusted, below economists’ expectations of a 0.1 per cent rise. In real terms, total retail spending was $21.872 billion in March, down from $21.950 billion in February, the Australian Bureau of Statistics.
Tomorrows News Today
All eyes will be on the RBA tomorrow at 2.30pm as they announce the rate that the banks will ignore. I am expecting no change as they stand waiting and watching, however I would expect pressure to be kept on the high street banks to cut their rates. Unfortunately the RBA is becoming less and less relevant .I know the feeling.
Couple of things in the FT that caught my Eye. ‘Zombieland’ regulators are looking at clamping down on shadow banking. Something the UK is really good at and Obama is keen to expand the US export of Gas. Not good news for Aussie projects already suffering from cost overruns and delays.
Portugal has announced that it will sack another 30,000 public servants. These guys only work 35 hour weeks anyway so not sure if anyway is going to miss them at all.
The ECB rate cut last week is being described as opening the window when the tops down on a convertible! UK on holiday today for May day. Natives are restless around Zombieland, France seems to have fallen out of love with Hollande!
Expect to see more trouble between Israel and Syria after they have had the weekend off. Possible catalyst for Gold but definitely for OIL.