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Morning Market Report

Good news for TPG shareholders, courtesy of the NBN.

The market is up 34 points.The Dow Jones was up 146 at 16,173  —  the market opened higher on good earnings, economic data and technical factors but drifted lower throughout the afternoon. Strong buying in the final hour brought the market close to intra-day highs. Trade was below average in a 155 point range.

US earnings —  Citigroup’s earnings were well received and lifted its shares and the financial sector.

US economic data was strong  —  retail sales rose 1.1%, the most since September 2012, supporting the theory that the economy is recovering after harsh weather curbed spending earlier in the year. The February number was also revised upwards. But business inventories rose a lower than expected 0.4%.

Ukraine was back in focus  — Pro-Russian separatists in the east ignored an order to depart government buildings after they took control of Ukrainian cities in the southeast over the weekend. Threats of a “full-scale anti-terrorist operation” involving the army were made but not followed up.

Russian shares fell 1.2% on the MIECX Index.

The Aussie dollar is stronger and is currently trading at US94.17c. The RBA minutes are set for release today.

Gold rose US$8.50 or 0.64% to US$1327.20 an ounce.

Base metals were generally stronger  —  nickel was up 2.25% and zinc rose 1.29% but aluminium fell 0.22% and copper was down 0.04%.

Iron ore rose US$0.10 to US$117.00 a tonne.

Fed Speak  —  Atlanta Fed President Dennis Lockhart will give opening remarks at the 2014 Financial Markets Conference tomorrow before Fed Chair Janet Yellen addresses the crowd.

STORIES

  • TPM Telecom (TPM 592c) – An article in the AFR reports on NBN Co announcing plans to connect homes and businesses, replicating the same technology that TPG is using, in an attempt to muscle the company out of the market. The move will take TPG head on as profitable apartment buildings can only allow one company to provide FTTB services. We said late month that TPM is being priced as though it’s the next Telstra. Recent results impressed but there are uncertainties with the NBN/Government and many other potential benefits are already priced in. We like the stock but we’ll hold off from buying it. Macquarie initiated coverage on TPM in late March.
  • Rio Tinto (RIO) —  Quarterly Production report  — Iron ore production has fallen just short of consensus forecasts. RIO produced 66.4 million tonnes of iron ore from its global operations which was short of the expected 70.5 million tonnes. 63.4 million of that was produced in the Pilbara,  also lower than the 68 million tonnes expected. This figure includes ores sold by Rio that were owned by JV partners like Hancock Prospecting. RIO’s share was 50.6 million tonnes which was lower than a broker consensus of 51 million tonnes. Lower volumes blamed on cyclones and heavy rain in the Pilbara. But their copper division did better than expectations with production of 156,500 tonnes above the 143,000 forecast.
  • OZ Minerals (OZL) — First quarter production results — 18,182 tonnes of copper was produced, down from 20, 474 tonnes in the pcp which was well ahead of analyst forecasts for 15,400 tonnes. 33,792 ounces of gold was produced up from 31,790 ounces. Cash costs of $US1.22 per pound down from $US1.85.  OZL is continuing its pre-feasibility study for the Carrapateena project which will be ready for internal review before the end of the first half of 2014. Guidance — it expects to produce 75,000 tonnes to 80,000 tonnes of copper and 130,000 ounces to 140,000 ounces of gold in 2014.
  • Insurance Australia Group (IAG) — Has given an Investor Day presentation. They reaffirmed guidance for the fiscal year. They expect gross written premium growth of 3%-5%, Australia Direct GWP growth to be flat. They also expect a financial year reported margin of 14.5%-16.5%. Australia Direct unit is expected to improve its underlying margin in the financial year.

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