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Morning Market Report

The market slumps on the back of announcements from the US Federal Reserve.

The market is down 61 points. The Dow Jones was down 190 at 15,739 in a volatile trading session with a 220 point range.

The market had been weaker throughout the morning, uncertain about how the Fed would respond to concerns about emerging markets. Earnings reports were also seen to have missed expectations. The market slid to new lows after the Fed announced an additional reduction in monetary stimulus to US$65 billion per month — after an initial attempt to recover some of the additional losses, the market closed near its lows.

The S&P fell 18 points to 1774.

Oil was flat at US$97.41.

Gold rose $17.10 to US$1267.00 per ounce.

The US$ was mixed against most major currencies in an uneventful trading session. The Aussie dollar was weaker after US markets reacted to a Herald Sun article suggesting RBA Governor Glenn Stevens will look to remove any downside bias in rates at the next meeting as inflation concerns mount. It is currently trading at US87.36c.

VIX Volatility index fell 11.01% to 17.54.

US treasury markets were stronger  —  the yield on the 10 year bond dropped seven basis points to 2.685% in response to the Fed decision. Treasury held its first floating rate note auction, raising US$15 billion in two year notes with a 0.045% spread.

European shares were weaker  — the UK FTSE fell 0.43%, the German DAX fell 0.75% and the French CAC was 0.68% lower.

European bonds were stronger  —  the yield on the Euro 10 year fell three basis point to 1.640% and the UK 10 year bond yield was 5 basis points lower at 2.760%.

Base metal prices were generally weaker  — led by nickel down 1.09%, aluminium down 0.75% and lead down 0.57%.

Iron ore fell US$1.30 to US$122.60 a tonne.

STORIES

  • Treasury Wine Estates (TWE) —  Downgrades profit guidance. They expect earnings for the first half of 2014 to be lower and in the range of $42-46 million down from $73.4 million in the pcp. They have blamed the downgrade on a lower sales from Australia, US and China. TWE does not expect to recover the first half shortfall and expects these challenges to continue in the second half. EBITS guidance range for fiscal 2014 lowered to $190-210 million from the previous range of $230-250 million.
  • Credit Corp (CCP) — First half results  — The company has reported strong results for the first half. Underlying NPAT was up 18% to $17.2 million. The result was supported by strength in CCP’s core operating metrics. CCP has also upgraded guidance.
  • Insurance Australia Group (IAG) — Will announce that they have successfully completed a share purchase plan, raising $236 million. They have issued 43 million new shares at 547c each. Funds will be used to help fund acquisition of Wesfarmers unit.
  • Navitas (NVT) — First half net profit was up 2.9% at $36.1 million. First half dividend of 9.4c. Revenue was up 19% to $421.9 million.
  • Telstra (TLS) — Morgan Stanley says the telco could be looking for acquisitions in cloud computing because it needs a new growth area. Such a deal would be dilutive to earnings. They also said “Network application service acquisition risk, combined with Telstra’s slowing three-year free cash flow, declining organic earnings, rising long-term bond yields, and expensive valuation mean we struggle to see Telstra holding its current multiple.”
  • Warrnambool Cheese & Butter (WCB) — Shareholders will now receive an increased return of $9.40 per share from Saputo after they announced they had received acceptances of more than 77% of WCB shares. Above 75% and the buyout price goes up from $9.20 to $9.40 cash per share under the terms of its takeover offer.
  • Vodafone Australia says they are winning back customers and have more than 1 million 4G devices operating on their high speed network. Optus has 1.38 million and Telstra 2.1 million.
  • Australia Post is looking to raise the cost of stamps from 60c to 70c.
  • Carsales.com (CRZ 922c) — Morningstar has upgraded their recommendation to Accumulate with a target price of 881c. They say the company has a significant competitive advantage and is a great platform for the vehicle industry as it lets them target their advertising expenditure to customers, which is a better approach that randomly advertising through print and TV media.

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