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Morning Market Report

A good day on the markets, following encouraging results from major players.

The market is down 17 points. The Dow Jones was up three points at 16,946 to another record high  —  the market opened weaker and strengthened throughout the day, closing little changed. It was a quiet day with little ground-breaking economic or company news. The healthcare sector and consumer staples sectors were the better performers, while consumer discretionary, energy and industrials underperformed. Small cap stocks lagged larger companies. Volume was well below average in a 49 point range.

US economic data was generally positive — wholesale sales rose 1.3% in April after a 1.6% rise in March and wholesale inventories rose 1.1% in April after a 1.1% gain in March. The inventory to sales ratio was steady. Job openings increased.

European shares were stronger —  The UK FTSE was up 0.42%, the German DAX was up 0.20% and the French CAC was 0.13%. The Spanish market fell 0.09%.

The Aussie dollar was stronger and is currently trading at US93.73c.

Gold rose US$6.30 or 0.50% to US$1259.80 an ounce.

Base metals were mostly weaker —  aluminium was down 1.09%, nickel was down 0.73% and zinc was 0.27% lower. But copper rose 0.32%.

Iron ore fell US$0.70 to US$93.60 a tonne.

US economic data —  Wholesale Inventories: Actual 1.1%, consensus 0.3%, prior 1.1%, JOLTS - Job Openings: Actual 4.455M, prior 4.014M, Treasury auction of $28B 3y notes; draws 0.930%

Australian economic data today  — Consumer sentiment.

No major company data today.

Global economic data tonight  — UK employment.

Other key events this week — Domestically, employment data is out tomorrow.Economists expect 10,000 jobs were added in May and the unemployment rate is forecast to rise to 5.9% from 5.8%. The participation rate is expected to remain steady at 64.7%.

Praise for Australian Budget —  The head of the OECD has praised the recent budget and the preference for spending cuts over tax increases, saying 80% of the work was 80% spending cuts, 20% tax increases. “This is a more sustainable, more durable type of solution,” according to Angel Gurria.

STORIES

  • SAI Global (SAI 510c) — A note in the AFR talks about SAI looking to break up their business following the PEP takeover offer. SAI has three business divisions - assurance, compliance and information services (which makes half of their earnings). Some sources are saying Intertek has been convinced to purchase the assurance and compliance divisions with PEP to buy the information services business. But it’s all rumours at the moment.
  • Ramsay Health Care (RHC) — Have agreed to buy a stake in Generale de Sante for $627 million. The deal is expected to be finalised in the fourth quarter of 2014.
  • Downer EDI (DOW) — BHP has withdrawn a $360 million contract with DOW at a Queensland coal mine. This puts some 400 jobs at risk. The contract was scheduled to end in June 2016. The termination will reduce DOW’s work in hand by $160 million in the 2014/15 year and $200m in 2015/16. But the company says they will be entitled to compensation for early termination.
  • Aristocrat Leisure (ALL) — Ex Dividend 8c.
  • St Barbara (SBM) — Gold Ridge Mining Ltd personnel return to Solomon Islands.
  • ANZ (3376c) — An article in the AFR says Aussie banks could be set to borrow at lower rates since the GFC after the ECB moved to lower rates into negative territory. In effect the ECB will charge negative interest rates for money held in their accounts, which will spark more lending by banks and will have a stimulatory effect on the economy. Aussie banks will benefit from the move to negative interest rates in Europe. It will drive more investors towards the lenders’ bonds. Banks in Australia will either be able to increase profits or lower mortgage costs.

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