After a meandering start the market cracked on with 5100 in its sights. Unusually both of the big blobs on the market map fired today. For so long we have had resources or banks. Soft tacos or hard tacos. But as the little girl says on the ad, “why can’t we have both.” And sure enough today with did. The resource stocks looked strong from the open with RIO Tinto Limited (A$61.83, +2.6%) the stand out following a bit line of stock going through the US but BHP Billiton Limited (A$36.81, +2.4%) weren’t a slouch either. Both seemed to be drawing strength from China stabilising and rumours of the death in Iron Ore being overdone.
However the banks failed to fire in the first 30 mins before finding their mojo and turning decidedly positive. Hard and soft tacos all round! So from a tentative start we closed up 55 odd points in slightly more positive volume numbers as well. We even saw a strong day from Newcrest Mining Limited (A$12.39, +7.9%) following their king size writedown. Hopefully this is the end. We shall see.
It looked like a risk on day though with defensives Wesfarmers Limited (A$40.88, +0.3%),Woolworths Limited (A$33.00, +0.6%),Csl Limited (A$65.19, -1.2%),Telstra Corporation Limited (A$5.11, +0.6%) and Westfield Group (A$11.13, -0.8%) all somewhat lacklustre whilst the punters embraced their inner risk. Gold stocks also got a wriggle on today with Silver Lake Resources Limited (A$0.795, +12.8%),Beadell Resources Limited (A$0.75, +8.7%),Evolution Mining Limited (A$0.92, +18.7%),Kingsgate Consolidated Limited (A$1.715, +9.2%) and Regis Resources Limited (A$3.52, +2.9%) all doing well, whilst in mining services, they took heart with Macmahon Holdings Limited (A$0.15, +7.1%), Monadelphous Group Limited (A$17.59, +7.3%), Worley Parsons Limited (A$21.34, +2.4%),#Bradken Limited (A$5.24, +3.8%) and Boart Longyear Limited (A$0.54, +3.8%) all firing.
In industrials, media stocks rose with REA Group Ltd (A$34.36, +4.6%) leading the way as the property market continues its run. Fairfax Media Limited (A$0.525, +2.9%) joined in as did Ten Network Holdings Limited (A$0.295, +9.3%) and Seven West Media Limited (A$2.32, +0.9%), and in election stocks McMillan Shakespeare Limited (A$10.25, +8.9%) had a good day following the “leaders” debate last night! Seems like Kev13 has two hopes now and one is “Bob.”
Big winners today on the fun side of the island included Evolution Mining Limited (A$0.92, +18.7%), Panaust Limited (A$2.14, +10.3%),McMillan Shakespeare Limited (A$10.25, +8.9%),Atlas Iron Limited (A$1.005, +9.8%),Beadell Resources Limited (A$0.75, +8.7%),Fortescue Metals Group Ltd (A$4.31, +7.5%) ad Mount Gibson Iron Limited (A$0.71, +7.6%) whilst in the naughty corner were some big defensives like Fonterra Shareholders’ Fund (A$6.18, -2.1%),G8 Education Limited (A$2.57, -1.5%),News Corporation. (A$17.49, -2.0%) and IVO.
More positive gains from China also helped sentiment although Japan let the side down again as its economy slowed more than forecast to 2.6% GDP and worries emerged about the strength of the economy if sales tax rises, as is the plan. And while we are in Japan their debt is now 1,000,000,000,000,000 yen.. at this rate ,pretty soon it’s going to be a lot of money!
Seems like the 100 point down day of last Wednesday is just a distant memory.
Stocks and Stories
Newcrest Mining Limited (A$12.39, +7.9%) were once again in “Mea Culpa” mode with a stunning $6.3bn write down which has now been well telegraphed to the market not just the select few analysts! They picked a good day to announce as the Gold price pushed them along and a hope that the worse is over.
Coffey International Limited (A$0.175, +16.7%) announced better than expected numbers today and gave the sector a boost. UGL Limited (A$7.52, +1.6%) also said they had seen better enquiries and contract conditions in the coal sector for the first time in 12 months. Leighton Holdings Limited (A$16.70, +5.6%) also benefitted.
The shorts were made to suffer today and I have to admit I was in the sell camp on JB Hi-Fi Limited (A$19.12, +3.2%) as they defied the critics and posted better numbers by far. JB Hi-Fi posted a better-than-expected 11 per cent rise in its 2013 full-year profit , its first annual profit growth since 2010.Net profit after tax for the year ending June 30 rose to $116.3 million, compared with $104.6 million a year ago.
Building materials maker James Hardie Industries PLC (A$9.57, +3.1%) reported a 19 per cent rise in first quarter net operating profit, excluding asbestos liabilities, bolstered by higher sales volumes and prices. Net operating profit rose to $52.0 million for the three months to June 30 from $43.8 million.
Property group GPT Group (A$3.74, +0.5%) has blamed softening market conditions for a 6.7 per cent profit drop. The owner of shopping centres, office blocks and business parks made a net profit of $257 million in the six months to June 30, down from $275.5 million in the same period in 2012.
Interesting to note that Chinese iron ore demand still continues at pace with the highest monthly import volume since pre 1990 with MoM growth of 17.4% and 26.4% YoY (Vs last month 6.8% YoY).
Tomorrows News Today
Expect the Whales’ mates to be charged shortly in the J P Morgan trading scandal.
The French have denied they are in retreat again. France’s finance minister has denied that the eurozone’s second-biggest country has revised down its economic prospects for 2013. Pierre Moscovici was quoted on Saturday as saying that France’s economy might shrink 0.1% this year, after predicting 0.1% growth earlier this year.
And still in Zombieland, Wages in the UK have seen one of the largest falls in the European Union during the economic downturn, according to official figures. The figures, show average hourly wages have fallen 5.5% since mid-2010, adjusted for inflation. That is the fourth-worst decline among the 27 EU nations .By contrast, German hourly wages rose by 2.7% over the same period. Across the European Union as a whole, average wages fell 0.7%.
In Greece, the most recent spot checks by Greek authorities found that almost half of the companies examined were committing some kind of tax offence. Out of 1,465 spot checks carried out between 25 July and 5 August, 731 firms were found to be breaking the rules.
S&P 500 companies are on course to increase earnings by 3.6 per cent year on year for the second quarter. But they have declined by 1.3 per cent once financials are excluded. During those 12 months, bear in mind, the S&P gained 18 per cent, and its financials index gained 33 per cent. Declining earnings no hindrance to recovery it seems! P/E expansion a wonderful thing.
That is all