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Morning Market Report

Markets stay calm, as Putin calls off the troops in Crimea.

The market is up two points.

The Dow Jones was up 89 at 16,336 — The market jumped early in the session after positive leads from Europe and traded in a 125 point range on light volume.

European share markets had a good rise —  the FTSE rose 0.56%, the German DAX rose 0.67% and the French CAC was 0.97% higher.

Russian President Vladimir Putin calmed markets by saying there was no need to divide Ukraine further and he said he didn’t want another Ukraine split. He remarks suggested military action to seize more of the country was not a priority after earlier approving plans to make Crimea part of Russia. Sanctions issues against individual Crimeans and Russians have not had much impact on markets, or on the Russians. Despite the calm, some concerns remain. Ukraine’s Prime Minister Arseniy Yatsenyuk reportedly said that the conflict between Russia and Ukraine over Crimea was now entering a “military stage”, and a Ukrainian officer was wounded in a shooting on the outskirts of Simferopol.

US economic data generally better than expected —  US housing starts fell 0.2% in February and are down 6.4% over the year, but a rebound in building permits was considered positive after recent weather-affected softness. Inflationary pressures were also lower than expected.

The US dollar was slightly weaker and the Aussie dollar is stronger, currently trading at US 91.26c.

US FOMC —  The two-day meeting has started. The Fed is expected to announce a continuation of tapering tomorrow our time.

Gold fell a further US$17.10 or 1.25% to US$1355.80 an ounce as global tensions eased.

Base metals were all stronger, led by nickel up 1.98%. Zinc rose 0.84%

US economic data last night:

  • Housing Starts: Actual 907K, consensus 915K, prior 880K (revised 909K)
  • Building Permits: Actual 1018K, consensus 955K, prior 937K (revised 945K)
  • CPI: Actual 0.1%, consensus 0.2%, prior 0.1%
  • Core CPI: Actual 0.1%, consensus 0.1%, prior 0.1%

The German ZEW economic sentiment index fell to 46.6 in March versus 55.7 in February with expectations of 53.0. Russia/Ukraine tension was behind the drop in investor sentiment on the fear of higher energy prices.

The euro zone’s trade surplus was a much smaller than expected €900m, below forecasts of €12 bn, as imports fell and exports rose only modestly. Greek exports rose 17.2% while French exports fell 0.6%.

STORIES

  • David Jones (DJS) —  1H profit of $70.1 million down 4.6% but above a consensus forecast for $68.1 million. Total sales were up 3.8% slightly higher than expected. Like for like sales up 1.1%. No net debt, strong balance sheet. Interim dividend of 10c fully franked above an expected 9.5c. Paul Zahra said “Our result this half reflects the momentum that our Future Strategic Direction Plan is gaining, with our core Department Store business delivering 8.3% EBIT growth. Our result this half also reflects the fact that the EBIT contribution from our Financial Services business broadly halved in line with previous guidance.” DJS also completed the second year of implementation of its Future Strategic Direction Plan and has successfully transformed into an Omni Channel Retailer. In second quarter 2014 the company cycled the launch of its new webstore and delivered online sales growth of 150%. Online sales grew by 220% in the first half of 2014. Their balance sheet remains strong with no net debt. As a result they have discontinued their dividend reinvestment plan. The results are likely to be watched by Myer (MYR) following their proposal to merge with DJS. Myer initially rejected the offer, saying the transaction did not represent sufficient value for shareholders, but have since employed consultants to provide advice on the benefits of a merger. Analysts are saying the slightly better than expected results will help DJS in their negotiations with MYR and give them  bargaining power.
  • Discovery Metals (DML) — Up 34.6% after forming a JV with Japan Oil and Gas and Metals National Corp and BCL Limited for the Dikoloti Nickel Project.
  • Deutsche Bank added HVN, NEC, ANN, AZJ, AMP and NAB to their model portfolio. It removed MYR, DOW, ALL, PPT, PRY and CBA.
  • Nickel has hit its highest level in almost a year following an Indonesian ban on exports and on concerns that the Russian/Ukrainian tension plus sanctions may cause supply issues from Russia. Russia and Indonesia are the world’s largest producers of Nickel. Nickel was up 1.98% to $US16,159 a tonne last night (see chart below) and has recently hit an intraday high of $US16,235 a ton up 20% since January. Nickel has broken its recent downtrend triggering technical buying of nickel and nickel stocks. Australian listed nickel companies have bombed out over recent years. Panoramic Resources (PAN) is a stock that recently jumped on some exploration success. If you want to play nickel for a bit more than the nickel price this is a good pick.

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