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Morning Market Report

Markets rebound, despite confusion over Virgin Australia’s share price and profits.

The market is up 30 points.

Rebound in the Dow overnight  —  A lot of excuses for the rally but really just a herd thing. The ECB made no change to asset purchase targets and left interest rates unchanged at 0.25%. He said risks to the downside remained and turmoil in emerging markets could hinder the economic recovery. He said inflation would remain low for a long time but most importantly he didn’t see deflation as a problem.

Good weekly jobless claims fell 20,000 in the lead up to the all-important non-farm payrolls data tonight. Markets are expecting an increase of 174,000 jobs to confirm that last month’s lower than expected 74,000 increase was simply an anomaly caused by bad weather. The ADP employment report on Wednesday and today’s weekly number were both positive indicators. Productivity was also stronger than expected, rising 3.2% in the December quarter.

Twitter down over 24% after results. It was in line but the market was concerned about the growth in new users. Comments are that it is too early to be seeing a “maturing” in the growth phase. LinkedIn also down over 8%.

Europe stronger after the ECB meeting.

Greek bond yields fell a further 19 basis points after reports the maturity of its rescue loans would be extended to 50 years from 30.

Iron Ore resumed its fall  —  after a couple of flat days, iron ore fell US$1.40 to US$121.00 a tonne.

Australian retail sales yesterday  — Sales rose 0.5% in December (in line with expectations). Sales for the December quarter were 0.9% higher than sales in the September quarter (below expectations of 1.2%). Fresh food prices drove the increase which, according to Citibank, meant the result was misleading. Rising food prices were also behind the strong CPI rise of 0.85 in the December quarter.

Woolworths sales numbers for the second quarter were out yesterday and were good … best since 2011.

Australian trade data  — Surprised economists yesterday with a surplus. Imports up 2% and exports up 4% mom.

NAB Business Conditions rose to -3 in the December quarter from -7 in the September quarter. The strongest rise in more than 12 months.

NAB Business Confidence rose to +8 in the December quarter from +5 in the September quarter – the highest level in 2.5 years. Sentiment was helped by the housing sector, higher asset prices, a lower A$ and interest rates. Monthly survey suggest a fall in momentum.

Australian economic data today  — RBA Policy Statement, AIG/HIA PCI

China market reopens today after the Lunar Year holiday.

US economic data tonight  — Nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek and consumer credit.

Other international economic data  — German industrial production, UK industrial production, UK trade balance.

Weak Christmas in the eurozone  — Retail sales in the eurozone had the largest fall in 2.5 years, down 1.6% compared to November and 1% below year ago levels. German sales were 2.4% lower than year ago levels.

STORIES

  • News Corp (NWS) — second quarter revenue was down 3% to $US4.31 billion from $US4.45 billion in the first half of fiscal 2013 as it continue to face a subdued advertising market. In the December quarter revenue was down 4% to $US2.24 billion which was as expected. Despite ad income falling the company still managed to post a $US150 million profit which beat forecasts. Shares in New York rose 4.5% on the news. Most of the company’s profit was attributable to businesses outside newspapers such as online real estate and Australian pay TV group.
  • 21st Century Fox (FOX) — Which was formed at the end of June following the demerger of News Corp (NWS) into two companies, reported its second quarter results. Second quarter profit was cut in half due to higher costs and investments, despite a better-than-expected 15% boost in revenue. Profit was down to $US 1.21 billion from $US2.38 billion. Revenue increased to $8.16 billion from $7.11 billion.
  • Billabong (BBG) — Is thinking of selling its online retailing business which includes SurfStich.com and Swell.com as it works to get rid of excess baggage and focus on its core brands.
  • Flexigroup (FXL 415c) — Closed up 0.5% yesterday after posting a 14% increase in profit to $346.5 million in the first half. The company has predicted strong and sustained growth after forming business links with Dick Smith and IKEA. It is also on track to achieving full year profit growth of 19% or $86 million.
  • Virgin Australia (VAH 34c) — Closed up 7.9% yesterday following a fall of 5.97% on Wed and 4.29% on Tuesday. The ASX asked VAH to explain the sharp fall. VAH attributed blame directly at shareholders who sold out on news that VAH branded planes would stop flying between Sydney and Hong Kong from May. The problem being, it was a different carrier Virgin Atlantic Airways who made the announcement. This caused some confusion in the market with shareholders mistakenly assuming that Virgin Atlantic is the same entity as Virgin Australia. To add to this, VAH also released an update on first half results. The company has forecast a loss of $49 million.
  • Tabcorp Holdings (TAH) — Announced interim results yesterday and closed down 0.9%. First half profit was up 2.3% to $74.6 million from the $72.9 million in the pcp. The result was below the consensus forecast of $76.2 million. Revenue from continuing activities was down 10.3% to $1.045 billion which was also below an expected $1.071 billion. Fully franked dividend of 8c. CEO David Attenborough said “In the context of a relatively subdued retail environment, we achieved overall earnings growth, supported by good cost control.” The company also said its focus in the second half will be increasing returns and driving productivity improvement. The focus will be on growth in fixed odds, digital and key events such as Racing NSW’s new carnival ‘The Championships’, and the Soccer World Cup.

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