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Morning Market Report

The market finished slightly down in the wake of a bad day’s trade for Leighton and Nexus.

The Market is down 35 points.

The Dow Jones was down 110 points at 16,734  —  the market drifted lower from the open, driven by weaker retail sales data and concerns about increasing violence in Iraq which led to a 2% increase in the oil price. Unsurprisingly, the Energy sector was the best performer, while Consumer Discretionary, Consumer Staples and Industrials underperformed. Volume continued to be below average and the market traded in a 138 point range.

Disappointing economic data —  retail sales increased just 0.3%, compared to expectations of a 0.7% rise, while core retail sales, which closely match the consumption component of GDP, slipped 0.1% in May. But the prior month was revised higher to 0.5 percent. Weekly jobs data showed initial claims rose 4,000 to 317,000, largely in line with expectations.

Iraq violence  — reports of intensifying battles in northern Iraq led by a breakaway militant group of Al-Qaeda raised concerns about the oil supply, which resulted in oil rising US$2.13 or 2.04% to US$106.53 a barrel. President Barack Obama said he would not rule out the use of airstrikes to help Iraq’s government.

US bonds were stronger —  the yield on the benchmark 10 year bond fell five basis points to 2.596%, a low for the week.

European shares were weaker  —  The German DAX was down 0.11%, the UK FTSE was down 0.03% and the French CAC was down 0.02%.

The Aussie dollar was stronger and is currently trading at US94.22c.

Gold rose US$12.8.00 or 1.02% to US$1273.60 an ounce.

Base metals were weaker —  lead was down 2.43%, zinc was down 2.28%, nickel was down 1.69% and copper fell 1.48%.

Iron ore fell US$2.00 to US$91.50 a tonne.

Australian employment fell by 4,800 in May, compared with expectation of a 10,000 increase. Full-time employment rose 22,200. The unemployment rate remained at 5.8%, compared to expectations of an increase to 5.9%. The participation rate fell to 64.6% from 64.7%.

STORIES

  • Goodman Fielder (GFF 68c) — Shares were unchanged yesterday after the food group said it will spend $27 million to expand its Christchurch ultra heat treated milk plant, giving it additional capacity to meet increased demand for its Meadow Fresh brand in Asia. 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.
  • Bendigo & Adelaide Bank (BEN 1206c) — The bank said yesterday that its Redy mobile payments application has gone live, a year after it was promised. Redy is now available on Android and iOS. The app allows customers to make purchases on mobile devices, earn rewards on purchases and choose to use the rewards for future purchases or donate them to charities and local community groups. The stock is up 2.81% this month. Macquarie upgraded its recommendation to Outperform (from Neutral) with a target price of 1170c.
  • Nexus Energy (NXS) — As expected, NXS went into administration last night after shareholders rejected the 2c bid from Seven Group Holdings (SVW). 58% of votes were against the deal with Stokes’ company. NXS shares are now worthless — they were last quoted at 1.3 cents before trading was halted ahead of yesterday’s meeting.
  • Leighton Holdings (LEI 2015c) — LEI says it is considering selling some of its businesses as part of a major restructure to simplify itscomplex structure and grow profit. This would involve job losses, sale of Services, Property and John Holland units and removal of bureaucracy.

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