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Morning Market Report

The local market finished slightly down, as Aussies shut their wallets the in the wake of the budget.

The market is down 19 points.

The Dow Jones was down 102 points at 16,844  —  the market fell on the open after profit taking was prompted by news the World Bank had cut its global growth forecast. It was another quiet day with little ground-breaking economic or company news. There was some political uncertainty following the defeat of House Majority Leader Eric Cantor to a tea party activist. Financials, Industrials and Materials underperformed while Energy and Health Care stocks were the strongest. Volume was below average in a 121 point range.

World Bank cuts growth forecast —  Global GDP is expected to grow 2.8% in 2014, compared to the 3.2% increase forecast in January. Next year’s forecast is unchanged at 3.4%. The downgrade is due to a weaker outlook for the US, Russian and Chinese economies. US GDP was reduced to 2.1% from 2.8% and China’s growth forecast was cut to 7.6% from 7.7%.

European shares were weaker —  The French CAC was down 0.87%, the German DAX fell 0.79% and the UK FTSE was down 0.09%.

The Aussie dollar was stronger and is currently trading at US93.85c.

Gold rose US$1.00 or 0.08% to US$1260.80 an ounce.

Oil rose US$0.50 or 0.05%to US$104.40 a barrel.

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$0.10 to US$93.50 a tonne.

US economic data —  MBA Mortgage Index: Actual 10.3%, prior -3.1%

Australian economic data today  — Employment data is out. Economists estimate 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 have remained steady at 64.7%.

Company events today  —  Goodman Group (GMG) investor update.

No dividends today.

Global economic data tonight —  US retail sales and weekly jobs claims. Eurozone industrial production.

STORIES

  • Goodman Fielder (GFF) — Have announced that they will upgrade their ultra heat treated (UHT) milk plant in Christchurch New Zealand for $NZ27 million. This will increase its capacity to meet growth opportunities across the Asia Pacific region. Work is expected to be completed by October 2015 and will increase production by around 32 million litres per year. That’s an increase of 50% on the plant’s existing UHT volume. Overall, a long term positive for the stock.
  • Leighton Holdings (LEI) — Says it is considering selling some of its businesses as part of a major restructure to simplify its complex structure and grow profit. This would involve job losses, sale of Services, Property and John Holland units and removal of bureaucracy.
  • Ramsey Health Care (RHC 4514c) Shares close up 1.35% yesterday after RHC announced it had acquired a 57% stake in French hospital company Générale de Santé (GDS) through its Ramsey Santé joint venture. GDS operates 75 facilities (including 61 hospitals) and the arrangement brings RHC’s French assets to 115 facilities (101 hospitals) with 15,400 beds. It is RHC’s fourth acquisition in France and makes it the largest private-hospital operator in France. RHC MD Chris Rex said France, like Australia, was experiencing the combination of an expanding and aging population which would increase demand for healthcare for many years. France will now generate 40% of RHC earnings, while Australia and Asia will produce 52% of revenue and the British business 8%. The deal should be finalised in fourth quarter 2014 and RHC said it expects the acquisition to be EPS accretive immediately.
  • Flight Centre (FLT 4643c) — Shares closed up 1.15% yesterday despite a downbeat market update. The company said it expected a record underlying profit of $370-380 million for the financial year, at the low to mid-point of current market guidance. The narrowing of the range is effectively a profit downgrade and resulted from a disappointing leisure travel result in Canada and a tougher trading environment in Australia since the budget. The Australian business is not achieving the high growth of fourth quarter last year as Aussies are reining in their holiday plans post the government’s budget.

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