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Morning Market Report

A big start to the year, with Foxtel leaving the ASX and Telstra selling off the majority of Sensis.

  • The market is down seven points. The Dow Jones was down eight at 16,437. The market fell early in the day then traded in a narrow bank, closing at the top end of the band.
  • The nonfarm payroll report showed only 74,000 jobs were added during December, much lower than the almost 200,000 expected. Even more disappointing was the continued decline in the participation rate to 62.8%, the lowest since 1978. Due to the fall in the participation rate, the unemployment rate fell to 6.7% from 7.0%. Some of the commentary suggested the data was negatively affected by weather-related factors.
  • The S&P rose four points to 1842.
  • Oil was up 1.16% at US$92.72.
  • Gold rose $17.50 to US$1246.90 per ounce.
  • The US$ was weaker against most major currencies. The Aussie dollar was stronger and is currently trading at US89.97c.
  • VIX volatility index fell 5.82% to 12.14.
  • US treasury markets were stronger  —  the yield on the 10 year bond fell 10 basis points to 2.860% following disappointing nonfarm payrolls (jobs) data.
  • European shares were stronger  — the UK FTSE rose 0.73%, the German DAX was up 0.55% and the French CAC rose 0.60%.
  • European bonds were weaker  —  the yield on the Euro 10 year bond rose one basis point to 1.843%. The UK 10 year bond yield rose two basis points to 2.871% and the French and German yields rose by one and two basis points respectively.
  • Base metal prices were stronger  —  led by nickel up 3.86%, tin up 1.5% and copper up 1.29%.
  • Iron ore was down US$0.30 at US$130.70 a tonne.

STORIES

  • Telstra (TLS) — Announced it has entered into an agreement to sell a 70% stake in its directories business Sensis to US based private equity firm Platinum Equity for $454 million. The sale excludes the voice services business and includes economic benefits to Telstra from services they will continue to provide to Sensis. Telstra will retain a 30% shareholding with Sensis now valued at $649 million. The sale proceeds of $454 million are incremental to Telstra’s 2014 financial year free cashflow guidance of $4.6-$5.1 billion. Telstra expects to book an accounting loss on Sensis of approximately $150 million. Approximately $100 million is expected to be included in the December 2013 half year results with the balance accounted for on completion, which is expected in the second half of the financial year. The value of Sensis had fallen dramatically as online directories such as Google have become more popular. Most economists are saying a higher dividend and a share buy-back are the most likely outcomes for the additional cash.
  • Nickel stocks  — Indonesia’s ban on exporting raw ore has bumped share prices of locally listed nickel stocks. WSA is up 9.36% and MCR up 4.42%.
  • Whitehaven Coal (WHC) and Asciano (AIO) have entered into a Rail Haulage Deal for 9.5 million tonnes out until 2026.
  • 21st Century Fox (FOX) — Shares fell 4.65% on Friday after the company announced plans to de-list from the ASX. Shareholders vote on the delisting proposal at a special meeting in March or April. The move comes only six months after the company split from News Corp. After the ASX delisting, all of the company’s Class A and Class B Common Stock will be listed solely on the Nasdaq market.
  • Warnambool Cheese & Butter(WCB) — Saputo has extended its takeover offer once again and increased its stake in the target to 21.39% from 20.14%. Saputo said on Friday its $9.00 unconditional offer would now close at January 22. The WCB board has unanimously recommended shareholders accept Canadian company Saputo’s offer,  despite Murray Goulburn having a $9.50 offer on the table. The Murray Goulburn offer is conditional on the company getting majority ownership and approval from the Australian Competition Tribunal. Bega dropped out of the battle for WCB in late December. Bega owns about 19% of Warrnambool Cheese and Butter, Murray Goulburn owns almost 18% and Saputo 21%. ACCC has concerns over Murray Goulburn’s takeover of WCB. The competition regulator has cast doubts over Murray Goulburn’s claim that its acquisition of Warrnambool Cheese & Butter will yield benefits to the public and re-establish Australian dairy’s global competitiveness.
  • China’s annual trade surplus reached $US259.75 billion in 2013, up 12.8% from the previous year. Exports rose 7.9% to $US2.21 trillion, while imports increased 7.3% to $US1.95 trillion.
  • US fourth quarter reporting season gets underway with Alcoa the first cab off the rank. Shares fell 5.4% after the company reported losses due to declines in aluminium prices and a non-cash impairment charge. Despite the shaky start, US investors are optimistic about the latest earnings season. A survey by Thomson Reuters found that quarterly profits are expected to rise 7.6% over year ago levels.

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