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Morning Market Report

Local markets were buoyed on the back of quarterly reports released by our biggest resources companies.

 

  • The market is up 39 points.
  • The Dow Jones was up 108 at 16,482. The market rose early in the day and maintained the strength, closing near the highs in a 130 point range.
  • The Beige Book was anything but boring with the Fed’s take on the economy showing expansion is occurring at a moderate pace and some districts are experiencing a pickup in growth. The New York Fed’s manufacturing index also rose to 12.51, ahead of expectation of a 3.5 reading and 1.0 previously. On the inflation front, producer prices rose 0.4% in December, ahead of expectations of a 0.3% rise.
  • The S&P rose 10 points to 1848.
  • Oil was up 1.85% at US$94.30 after a large drop in global inventory levels.
  • Gold fell $4.60 to US$1240.80 per ounce.
  • The US$ was stronger against most major currencies. The Aussie dollar was weaker and is currently trading at US89.17c.
  • VIX volatility index fell 0.08% to 12.27.
  • US treasury markets were weaker  —  the yield on the 10 year bond rose two basis points to 2.891% following the strong economic reports and inflation data.
  • European shares were stronger  — the UK FTSE rose 0.78%, the German DAX was up 2.03% and the French CAC rose 1.35%.
  • European bonds were weaker  —  the yield on the Euro 10 year rose one basis point to 1.823%. The UK 10 year bond yield rose three basis points to 2.861% and the French and German yield both rose by one basis point to 2.274% and 1.823% respectively.
  • Base metal prices were stronger  —  nickel continued its strength, rising a further 1.37%. Aluminium was up 1.44%, copper rose 1.04%, lead rose 0.91% and zinc was up 0.41%.
  • Iron ore was up US$0.10 at US$129.60 a tonne.

STORIES

  • Unemployment figures disappoint  —  the unemployment rate remained steady at 5.8% as expected. But the number of people employed fell by 22,600 versus expectation for a gain of 10,000. This was due to a fall in the participation rate to 64.6% versus expectations that it would remain unchanged at 64.8%. The Aussie dollar has fallen post the figures.
  • Rio Tinto (RIO) — Fourth quarter production report: OK numbers, iron ore produced beats guidance.
    - Iron ore (95% of earnings) — Iron ore produced for the year was 266 million tonnes which was slightly better than the 265 million expected. Iron ore produced during the quarter was 66.5 million tonnes which was slightly below analyst estimates. But some of that production belongs to JV partners, therefore RIO’s share of Pilbara production was 53.2 million tonnes for the quarter which was slightly below the 55.7 million tonnes. Fourth quarter iron-ore shipments were up 8% on-year at 72.4 million tonnes. In the financial year iron ore output was 208.97 million tonnes up 5% in the pcp. Global iron ore shipments in 2013 were 259 million tonnes up 5% on the pcp.
    - Coal  — Production for hard coking coal was 8.21 million tonnes up 2% on the pcp. Semi-soft coking coal was up 17% at 3.86 million tonnes and thermal coal was up 11% at 22.98 million tonnes.
    - Copper  — financial year production was up 15% to 631.5 million tonnes well above expectations of 590,000 tonnes. Refined copper production was up 7% to 300.1 million tonnes.
  • RIO CEO Sam Walsh said: ”We have set new records for iron ore production and shipments as we ramp up our 290 expansion, as well as achieving an impressive recovery in copper volumes and record annual production for both bauxite and thermal coal.”
  • Overall RIO’s quarterly production report exceeded guidance in every commodity group except titanium dioxide feedstock. Iron ore continues to track well with forecast growth of 29% from 266 million tonnes to more than 340 million tonnes expected over the next two years.
  • Fortescue Metals (FMG) — Has announced the construction of a new $178 million gas pipeline to its Pilbara operations. It says the pipeline will cut operating costs and open up long-term growth opportunities. The pipeline will be built through a JV with Duet Group (DUE). The pipeline would allow the Solomon Power Station to be converted from diesel to natural gas and save $20 million a year. Construction will cost an estimated $178 million and is expected to be completed by the end of 2014. Monadelphous (MND) has won a $100 million contract for construction work on the pipeline.
  • DUE Group (DUE) — Following the FMG announcement (above), DUE has gone into trading halt while it carried out a $100 million institutional bookbuild to cover its share of the construction costs. Details about pricing etc have not been released as yet. Bit hard to comment at the moment on whether this is a positive or negative, without any details from the company on the bookbuild. Will do so when there is more information.
  • Woodside Petroleum (WPL) — Fourther quarter production report. Has increased financial year production and flagged a small increase in the year ahead. Investors welcomed the news. In the financial year, WPL produced 87mboe up 2.5% on the 84.9mboe produced in 2012. It also sold 85.7mboe up 2.3% on the pcp. Revenue fell though, coming in at $5.78 billion down 7.2% from $6.23 billion in 2012. Production volumes in the fourth quarter were down 4.5% to 23.2mboe. Production target range set for 2014 at between 86 to 93mboe. Impairment flagged in the range of $380-$400 million for 2013.
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  • 1
    JohnB
    Posted Thursday, 16 January 2014 at 2:32 pm | Permalink

    - Copper — financial year production was up 15% to 631.5 million tonnes well above expectations of 590,000 tonnes. Refined copper production was up 7% to 300.1 million tonnes.

    Someone might like to sort out the millions and thousands in Rio’s copper production.

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