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Morning Market Report

A quiet day on the markets as investors wait for the next round of data to be released.

The market is down 8 points.

The Dow Jones closed down 130 to 15,844. The market drifted lower during the day, and closed near the lows in a 170 point range.

There wasn’t a lot of data or news out overnight. The key influence was the deal reached in the US on a budget — the agreement averts a shutdown when US spending authority expires on January 15. It was a positive but also increased the likelihood of an early start to tapering.

The S&P was down 20 points to 1,782.

Oil was down 1.12%at US$97.41.

Gold fell $9.70to US$1,251.40 per ounce.

The US$ was mixed against most major currencies. The Aussie dollar was weaker in the expectation of weaker employment data and is currently trading at US90.56c.

VIX volatility index rose 10.86% to 15.42.

US Treasury markets were weaker  —  the yield on the 10 year bond rose four basis points to 2.856%. The Federal Treasury completed the second tranche of a three part $64 billion auction with $21 billion of 10 year notes auctioned at 2.824%. Thursday (tonight for us) there is a further $13 billion in 30 year bonds.

European shares were weaker  — the UK FTSE was down 0.24%, the French CAC fell 0.10% and the German DAX was down 0.41%.

European bonds were stronger, with the yield on the Euro 10 year bond down two basis points at 1.814%.

Base metal prices were mostly stronger —  led by lead up 1.20%, zinc up 0.94% and copper up 0.86%.

Iron ore was down US 30c weaker at US$139.10 a tonne.

STORIES:

  • OZ Minerals (OZL) —  Bouncing 14% in early trade.
  • Labour Force Data out today  — the unemployment rate is expected to rise to 5.8% (from 5.7%). 10,000 jobs are expected to be created, compared with 1100 last month. Recent employment indicators, such as job ads, have been weak and the previous improvement in the unemployment rate has resulted from falls in the participation rate. As this stabilizes/increases, the headline unemployment rate will rise.
  • Tapering  — with the US reaching a provisional budget deal overnight the general feeling is that another hurdle was passed relatively smoothly and tapering can get underway. The talk is its a 50/50 thing, with some thinking the December 17/18 meeting will see the stimulus cut back while others still expect the Fed to wait until the March meeting to ensure the economic improvements are sustained and Janet Yell is in a position of leadership. The bipartisan budget agreement averts a shutdown when US spending authority expires on January 15. The agreement still needs to pass of vote in the House and Senate.
  • FlexiGroup (FXL) — Has today announced that it has agreed to acquire ThinkSmart’s (TSM) Australian and New Zealand businesses (RentSmart ANZ) for $43 million. The purchase price represents nine times the 2015 financial year Cash NPAT after synergies and pre-financing costs. It will be funded by a combination of cash and debt facilities. RentSmart ANZ is a provider of point of sale financing solutions in Australia and New Zealand with established, long-term exclusive relationships with retail partners such as JB Hi-Fi, Dick Smith Electronics and Officeworks. Its primary products are RentSmart, which provides POS lease finance solutions to SMEs and consumers; and Fido, a no interest ever payment plan product, similar to FlexiGroup’s Certegy offering.
  • Trade Me (TME) — Purchases Auckland based business MotorWeb for NZ$19.5 million. The deal is conditional but will be completed later this month. MotorWeb is an online business that packages and sells motor vehicle information and reports to finance companies, insurers, car dealers and the general public. It is recognised as providing a “one-stop shop” for the motor vehicle industry via its suite of more than a dozen products and services.
  • BHP Billiton (BHP) — said it expects its US shale oil business to become one of its major sources of revenue by the end of the decade, generating almost $US3 billion ($A3.30 billion) a year in free cash flow by 2020. BHP fell 1.74% yesterday, or 64c to $36.18.
  • GrainCorp (GNC) — After the recent drop in share price (22%) following Treasurer Joe Hockey blocking the ADM takeover bid, it was interesting to see at what level investors will start to see valued in the company. Goldmans say the stock is a “lower risk, valuation reversion story”. The failed takeover has seen the stock price fall below pre-bid levels.

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