Market review

What a difference a day makes as resources continue to fire and banks joined the fun too. After a tentative start, the market found its legs, helped along by Chinese numbers showing positive signs on the economy and pushed inevitably towards the magic 5200 number. BHP Billiton (A$34.30, +1.9%) and RIO Tinto (A$58.90, +2.6%) lead the market higher with financials like QBE Insurance Group (A$13.99, +1.9%), Macquarie Group (A$45.08, +1.1%) and Commonwealth Bank of Australia (A$71.23, +1.3%) not far behind. Insurers were especially strong as AMP (A$5.56, +3.3%), Suncorp Group (A$12.56, +1.0%) and Insurance Australia Group (A$5.97, +1.9%) enjoyed a day in the sunshine. The W’s were a little weaker though with Woodside Petroleum (A$37.02, -0.2%), Wesfarmers (A$41.98, +0.2%) and Woolworths (A$34.55, -0.7%) all bleeding a little whilst market defensive darling Telstra (A$5.07, +1.2%) grabbed back what it lost yesterday. Good to see the market knocking on Heavens door at 5200 and will not take too much to push it through that level .Industrials also back in favour Brambles (A$8.89, +3.5%), News (A$31.57, +0.9%), Computershare (A$10.08, +0.6%) and Orica (A$23.68, +2.3%) being sought. Leighton (A$19.73, +1.0%) and Seven Group (A$9.52, +5.0%) also finding some fans.

Media stocks were firm following Seven West Media (A$2.30, +10.0%) outlook statement today with APN News & Media (A$0.38, -1.3%), Fairfax Media (A$0.635, unch) and REA Group Ltd (A$31.65, +2.4%) all looking better. Mining services were mixed with Bradken (A$5.08, -1.7%) and Boart Longyear (A$0.92, -8.9%) down for a change yet Macmahon (A$0.16, +3.2%) and Ausdrill (A$1.575, +1.0%) improved. Gold stocks continue to battle strong headwinds but bargain hunters appear to be finding value amongst the rubble, Silver Lake Resources (A$1.035, +6.2%), Newcrest Mining (A$17.19, +0.4%), Evolution Mining (A$0.945, unch) and Regis Resources (A$4.06, +3.8%) a tad better. Long way to go though!

Big winners today in the larger caps were Atlas Iron (A$1.025, +12.6%), who posted record volumes on short covering, Aquila Resources (A$2.20, +12.5%), Iluka Resources (A$10.65, +7.0%), Fortescue Metals Group Ltd (A$3.89, +5.4%) and Oz Minerals (A$4.55, +6.3%) whilst the biggest losers were Slater & Gordon (A$2.70, -9.1%),CSL (A$59.61, -5.2%), G8 Education (A$2.35, -1.7%) and Energy Resources of Australia (A$1.04, -1.0%). And many happy returns today for Dyesol Limited (A$0.23, +109.09%) shareholders as the company announced breakthrough in its solar technology.

Volume was slightly better today finally but it still feels like a lot of money is waiting for the pullback and it does not seem to be happening. Ok, now we are at 5200, now what? More rotation into resources looks possible together with bubble banks holding up.

Stocks in the News

Seven West Media (A$2.30, +10.0%) announced bravely that the worse is over in ad land. Despite a small downgrade to numbers the Media star proved their Kitchen Rules and is getting optimistic about the future. Seven West also joined the trend of media groups looking to reduce their reliance on advertising revenue and attempt to ‘‘monetise’’ their relationship with their audience with transactions services and other new business opportunities.

Karoon Gas Australia (A$5.33, +4.3%) following the success of their Bilby 1 well, this one continued to find friends whilst Linc Energy Ltd (A$1.55, +3.0%) recovered from Unimat disappointment to close slightly positive.Currently there is an analysts trip to Unimat so more news to come.

CSL (A$59.61, -5.2%) After their rival Baxters announced that they had no success in treating Alzheimers with IVIG which was a hope for both these companies. Premium for success has been removed.

Coca-Cola Amatil (A$12.70, -1.8%) continued to suffer after yesterday’s AGM announcement although the red ink was stemmed today.

In economic news from China, April exports have risen 14.7% against estimates of around 9.2% .Also China imported 67.15 million tonnes of the raw material in April, the third highest on record and up 4 per cent from March, customs data showed.

Despite signs of weak demand and declining margins, China’s steel sector, the world’s biggest, continued to produce more than 2 million tonnes a day in April.

China also had a bigger-than-expected trade surplus in April of $18.2bn, after a surprise deficit of $884m in March.

Tomorrows News Today

Standard Chartered, the U.K.’s second-largest bank by market value, said operating profit in the first quarter declined “slightly” as wholesale banking revenue fell.

Some analysts are questioning the Chinese numbers as they seem a bit too good to be true, with some of the gains due to over-invoicing by exporters claiming higher payments than they actually receive from their customers. I guess we shall see.

And Alibaba’s quarterly revenues soar 80% as the IPO looks to be a stunning success and the ecommerce boom in China continues. Over in South Korea Samsung has too much money, bit like Apple and does not know what to do with it all!

Not a good idea to stand in the way of a bullet train, and that’s what the Nikkei is fast becoming as it races to its highest levels in five years. Who said stimulus doesn’t pay off?

As we press higher it is hard to fight the Fed. In fact it’s now not just the Fed but the BOE, the ECB, the BOJ and now the RBA! Coordinated Global Free Money!

Nouriel Roubini said at a dinner in Vegas that there is a “huge gap between sentiment on Wall Street and the main street,” and the real U.S. economy remains weak. He also went on to say that what goes on in Vegas should stay in Vegas!Bring on the Dancing Girls! Yay!

Clarence
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