Market Round Up

Well most pundits got today wrong. Seems that the International Hedge Funds have launched a two prong attack on Australia. Sell the Aussie Dollar and Sell the SPI. Large volumes of sell orders hit the market around 11am after the index opened strongly. At the opening we moved ahead to hit 5250 before the selling hit and took us down to 5168 at its lowest before closing in the middle for diddle at around 5192 down 29 points. Financials kept the market positive this morning with Commonwealth Bank of Australia (A$72.65, +0.8%) results helping the bubble banks push ever higher, together with Westpac Banking (A$31.67, -0.3%) and Macquarie Group (A$46.98, +1.3%), however the selling mid-morning hit them hard too before a afternoon rally kept losses to a minimum. Resources were weak from the get go and the overseas selling mid-morning only made things worse. BHP Billiton (A$34.03, -1.8%), RIO Tinto (A$55.77, -3.1%) and Newcrest Mining (A$15.86, -2.9%) led the resources down with nowhere to hide in Golds or Copper stocks. Fortescue Metals Group Ltd (A$3.59, -4.0%), Sandfire Resources NL (A$6.41, -4.6%) Oz Minerals (A$4.05, -3.8%) and Evolution Mining (A$0.935, -1.1%) were not happy chappies.

Industrials fared slightly better but another ‘Mea Culpa’ from UGL (A$7.94, -17.0%) upset the mining services sector. What is really surprising is the speed of the drop off in business in that sector. Stocks across the board in the sector were savaged again, Monadelphous Group (A$18.40, -7.4%), Cardno (A$5.85, -4.9%), Boart Longyear (A$0.825, -6.8%) Als (A$9.02, -8.0%) Also the costs do not seem as controllable as the market thought. It seems that service companies are reluctant to let quality staff and teams go at the first sign of a downturn and procrastinate until they have no choice.

Healthcare seemed to be one of the winners out of the Budget with Primary Health Care (A$5.11, +1.6%),Sonic Healthcare (A$14.73, +0.2%) and Sigma Pharmaceuticals (A$0.835, +4.4%) however retailers were disappointing given the Government did not change the GST threshold for imports, David Jones (A$2.78, -3.8%),Myer (A$2.77, -3.8%),JB Hi-Fi (A$17.09, -1.6%) and Harvey Norman (A$2.79, -2.4%).

Winners for the day included Carsales.Com (A$10.37, +3.3%), Slater & Gordon (A$2.95, +4.2%) and Platinum Asset Management (A$5.29, +3.1%) whilst in the bad boy club were Transfield Services (A$1.395, -8.5%), Ausdrill (A$1.52, -6.7%), Downer EDI (A$4.35, -6.0%) and Seven Group (A$8.42, -5.8%)

Volume was slightly higher than we have seen but considering the volume on the futures market once again most players sidelined and working out the budget implications!

Stocks in the News

In house stocks today, perennial favourite G8 Education (A$2.43, +5.7%) piled on some more gains as NAB and it’s associates became a substantial shareholder. Bullabulling Gold (A$0.048, +26.3%) had a wonderful day bucking the trend although Commonwealth Bank of Australia (A$72.65, +0.8%) released their March quarter numbers today and showed the benefits of not passing on rate cuts from the RBA. Those credit cards at 20% must be a real winner too! $1.9bn and on track for yet another record result.

Sims Metal Management (A$10.48, -3.8%) reported more problems with their UK business, the word fraud never conjures up confidence and this one certainly struggled today.

UGL (A$7.94, -17.0%) enjoyed a horror story today as they shocked the market with their latest downgrade and corporate restructure. Mining services seems to be a really, really tough place at the moment!

CSR (A$1.95, -0.8%) has warned its glass division will be a continued drag on earnings in the year ahead, even after a reorganisation and a $196 million provision booked in the latest financial year.

As a result, the glass division will see an ‘‘improved result’’ this financial year, but with the full benefits of the restructuring, and associated job losses, not to be seen until fiscal 2015.

CSR posted a net loss of $146.9 million for the year to March, reversing the profit of $76.3 million earned a year earlier.

RIO Tinto (A$55.77, -3.1%) is finally able to push ahead with a big new bauxite project near Weipa in Queensland, after Federal Environment minister Tony Burke gave conditional approval for the project.

Tomorrow’s News Today

The US deficit is falling faster than expected as budget cuts and increased tax revenue take their toll. This is a positive story. Maybe worth mentioning this to Swanny! The World’s greatest Treasurer seems to have believed his own hype.

Now when we talk about bubbles and frothy markets this one sure springs to mind as the BOJ stimulus has sent the Nikkei into an orbit that Chris Hatfield would be proud of. Ground control to Major Tom. The Nikkei 225 is up 2.07 per cent today to 15063.56 points. It has been rising steadily and has increased by 73.52 per cent in the past six months. We have lift off!! Sony shake up is also helping sentiment as US investor Daniel Loeb calls for a break-up of the company.

Moody’s has issued its outlook for the Globe and it’s not good. They expect Zombieland to suffer a long and tough decline into irrelevance. The US is seen as slowing down due to the budget cuts enacted and World growth to be around 5.5% in G20 countries which is slightly below its February forecasts. And with news today that France has slipped back into recession the pressure is on Hollande to try and grow the economy .Good luck with that. Whilst Germans look to have underwhelmed with their growth numbers too as the Southern European disease spreads!

Few big Euro oil companies have been raided BP, Royal Dutch Shell, Norway’s Statoil and the pricing agency Platts confirmed that they were working with the authorities in their inquiries. And on Oil or at least Shale, A steeper-than-expected rise in US shale oil reserves is about to change the global balance of power between new and existing producers, a report says. Over the next five years, the US will account for a third of new oil supplies, according to the International Energy Agency (IEA).The US will change from the world’s leading importer of oil to a net exporter.

And while US bulls look to the earnings yield on S&P companies at 5.4% which is nearly three times the 10 year Treasury bond at 1.9%.This is a 58 year high. That is all!

 

Clarence

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