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Morning Market Report

A strong day on local markets, buoyed by news of a David Jones takeover.

The market is up 32 points. The Dow Jones was up 181 at 16,437  — the market opened higher, strengthened throughout the day and then rallied further after the FOMC meeting minutes to close on the highs for the day. Volume was a little below average and the market traded in a 180 point range.

Early gains came after a reasonable start to the earnings season and Alcoa’s quarterly profit topped expectations. Further gains came after the release of the FOMC Minutes.

FOMC policy meeting minutes  — There was nothing particularly new and exciting in the minutes. They mostly repeated what Yellen and others had already stated. But they confirmed that policy makers don’t want to commit themselves to a calendar based timetable for increasing rates. Neither do they want to limit the data based guidance to one particular target — they were unanimous in agreeing to drop an unemployment target for hiking rates. The realisation eased market concerns.

US Reporting Season  — Alcoa rose 3.75% after projecting demand for aluminium would top output this year. 24 companies have reported, including Alcoa, and the guidance is not as bad as expected or the prior quarter.

Ukraine  — Tensions re-emerged as around 70 people have been arrested in the eastern Ukrainian city of Kharkiv this week, after pro-Russian protesters stormed government buildings. This followed demonstrations, adding to fears of further Russian intervention.

The Aussie dollar is stronger, currently trading at US93.84c.

Iron Ore rose US$1.20 to US$119.40 a tonne.

Oil rose US$1.04 to US$103.60 a barrel on EIA data showing a higher than expected draw-down in inventories.

Gold was down US$3.20 to US$1305.50 an ounce.

Base metals were generally stronger  —  Aluminium rose 2.37% after upbeat comments from Alcoa. Nickel rose 1.48% but copper was down 0.66%.

China’s trade balance is today.

Australian economic data  —  Employment data is out today — economists are expecting 5,000 jobs to be lost and the unemployment rate to rise to 6.1%.

STORIES

  • Ten Network Holdings (TEN) - First half net loss of $7.98 million, up 96.7% on a $243.34 million loss in the pcp. Ten has narrowed its first half loss and reiterated that advertising market conditions remain short with advertisers unwilling to commit to long-term campaigns. Revenue was $331.56 million up 7.8% which beat analyst expectations. No dividend. The company said “our television revenue growth was ahead of the growth rate for the capital-city free-to-air television advertising market during the six months to February 28.” The company also struggled for market share against rivals Nine Entertainment Co (NEC) and Seven West Media (SWM) network. The T20 cricket Big Bash League gave the network its best summer ratings since 2008 and it also broadcast the winter Olympics in Sochi Russia, but the increase in revenue from these events didn’t offset investment in new content for the network. The company said the outlook for the television advertising market is uncertain at this stage.
  • Alumina (AWC 129c) — Closed up 2.8% on the back of earnings results from their trading partner Alcoa. The company lost $US178 million in the first quarter as revenue fell on lower aluminium prices, but profit beat expectations after excluding charges to idle capacity at aluminium smelters and mills.
  • David Jones (DJS 391c) — Shares rallied 22.57% to 391c after the surprise takeover bid by South African Woolworths yesterday. The $2.15 billion takeover offer of 400c a share was roughly a 25% premium to the pre-bid price. DJS has recommended shareholders accept the offer and MYR has formally withdrawn its offer. Woolworths Holdings is a South African chain of retail stores and one of the largest in the country, modelled on Marks & Spencer of the UK with a focus on in house or “private label” brands. The store has no affiliation with Woolworths in Europe, North America or Australia. The company has experience in Australia, with majority ownership of Country Road, Witchery and Mimco and believes this provides an advantage over other recent retail entrants into the Australian market. Overall great news for shareholders. If you hold DJS shares, you’d have been punching the air yesterday. The question now is whether a rival bid is likely to emerge – it’s very unlikely.

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