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Morning Market Report

Investors put their money on gold, in light of political instability in Crimea.

The market is up eight points.

Gold up $28 or 2.3% on the search for “safe haven” investments.

Oil rose 2% to US$104.61 a barrel. Russia’s energy minister has cancelled this week’s appearance at a major global energy conference in Houston - the Crimea invasion is now part of the agenda.

RBA Board meeting today  —  no change in policy is expected but comments will be watched.

The German DAX fell 3.4%  —  France fell 2.66%  —  attributed to its heavy dependence on Russian gas. Germany imports around 40% of its gas and 35% of its oil from Russia.

The Dow Jones was down 154 at 16,168 — The market traded lower in the morning session and was down as much as 250 at one stage before recovering some ground later in the day.
Most of the day’s action was attributable to increasing tension in the Ukraine Crimean region, with talk of an ultimatum by Russian forces. Better than expected US economic data was overlooked due to the tension. ISM manufacturing activity was 53.2 against expectations of 52.3 and consumer spending rose 0.4% (previously 0.1%).

The S&P fell 14 to 1,846.

Oil rose 2.21%toUS$104.86.

Gold rose US$28.70 to US$1351.30 per ounce as part of flight to safety.

The US$ was stronger against most major currencies and the Australian dollar also rose, currently trading at US89.34c.

VIX Index rose 16.5% to 16.31 on the increasing tension.

US treasury markets were stronger  —  The yield on the 10 year bond fell 5 basis points to 2.602%.

European shares were weaker  — The UK FTSE fell 1.48%, the German DAX fell 3.44% and the French CAC fell 2.65%.

European bonds were stronger  —  The yield on the Euro 10 year bond yield fell 9 basis points to 1.549% and the UK 10 year bond yield was 10 basis points lower at 2.640%.

Base metal prices were weaker  —  Aluminium fell 2.1%, lead fell 1.245 and copper was 0.95% weaker but nickel defied the trend, rising 0.02%.

Iron ore fell US$0.40 to US$117.70 a tonne.

STORIES

  • Funtastic (FUN) —  Down 16.67%. Has announced an impairment charge relating to the sale of its Madman business. FUN had a carrying value of $52 million for its business but it has become evident that the value was higher than its fair market value. FUN now expects an impairment charge of around $22-$28 million. FUN also provided a trading update saying first half results will be significantly lower than prior year. The full year outlook without the sale of Madman will see EBITDA in the range of $19-$23 million (previous year $24.1 million including significant items). Including the impairment the first half EBITDA will be in the range of $3-4 million. Core sales will grow on a full year basis by circa 20% and second half at 30-40%.
  • AGL Energy (AGK) has entered into an agreement with the NSW Government to acquire the Macquarie Generation assets, subject to approval from the ACCC. Today the ACCC blocked the proposed acquisition of Macquarie Generation. It says the acquisition will result in a substantial lessening of competition in the market for the retail supply of electricity in NSW.
  • Cash Converters (CCV) — Has announced that it has entered into a JV with EZCORP Inc to launch Cash Converters in South America and Mexico. CCV will hold a 20% interest in the JV. EZCORP will inject $US3.6 million into the JV in return for 80% interest.
  • REA Group (REA) — Have announced that MD and CEO Mr Greg Ellis will depart on March 14. The Board has appointed Mr Peter Tonagh as interim CEO until a successor can be found.
  • Qantas Airways (QAN) – The Abbott Government has now rejected a debt guarantee and instead resolved to repeal key sections of the Qantas Sale Act. PM Abbott said “If some jobs have to go offshore in order to ensure that Qantas has a strong and viable long-term future, it may be regrettable, but nevertheless it is the best way to guarantee Australian jobs for the long term.”
  • Bank of Queensland (BOQ  —  1200c) is reportedly growing business lending at more than double the rate of the overall market. The AFR said the bank insists the lending growth is not due to a decline in credit quality but rather due to a focus on small businesses outside its home state.
  • Crown Resorts (CWN 1730c) — Macquarie have an Outperform recommendation with a target price of 2185c up from 1885c this morning. Although CWN’s first half earnings result came in below expectations, Macquarie have updated its estimates on the back of Melco’s City of Dreams reaching mass penetration. Earnings forecasts have been upped by 10.6% in financial year 2015 and 15.5% in financial year 2016.
  • RP Data says Sydney’s median price for apartments has risen to $530,000. The figure is now more expensive than the median price for a house in Melbourne, which stands at $515,000.

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