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Morning Market Report

Conflict in Iraq and Ukraine led to a rough day on local and international markets.

The market is down 51 points. The Dow Jones was down 119 points at 16,818 —  The market rose at the open and was up as much as 32 points due to positive economic data but fell on news of escalating violence in Iraq. Volatility was high and the VIX index rose 10.47% to 12.13. The Energy sector was sold off on the Iraqi news and the Consumer Staples and Industrials sectors also lagged. The Consumer Discretionary and Healthcare sectors outperformed. Volume was lower than average and the market traded in a 164 point range.

US economic data  — Consumer confidence rose to 85.2, better than the 84.0 expected and the highest number since the recession began in January 2008. New home sales were higher than expected, with sales topping 500,000 for the first time since May 2008. But prices were rose less than expected.

European shares were mixed —  The German DAX was up 0.17% and the French CAC was up 0.06% but the UK FTSE was down 0.20% and peripheral markets were also weaker.

Russian shares rose  to a five month month high after President Vladimir Putin asked the upper house of parliament to revoke Russia’s right to send troops to Ukraine. The move was said to be aimed at assisting peace talks to end the conflict. In Ukraine, separatist leaders have agreed to a ceasefire with government forces until June 27.

The Aussie dollar was weaker and is currently trading at US93.68c.

Gold rose US$2.90 or 0.22% to US$1321.30c a tonne.

Oil was down US$0.14 or 0.13% to US$106.03 a barrel.

Base metals were mixed  — Aluminium rose 0.57% and copper was up 0.02% but zinc fell 0.46% and nickel was down 1.61%.

Iron ore fell US$0.10 to US$93.30 a tonne.

US economic data —  Case-Shiller 20-city Index: Actual 10.8%, consensus 11.6%, prior 12.4%, FHFA Housing Price Index: Actual 0.0%, prior 0.7%, New Home Sales: Actual 504K, consensus 440K, prior 433K, Consumer Confidence: Actual 85.2, consensus 84.0, prior 83.0 (revised 82.2), Treasury auctions $30B 2y notes, draws 0.511%

Australian economic events today —  RBA deputy governor Philip Lowe participates in a panel discussion at the Strengthening the G20’s Accountability and Effectiveness Conference. The Bureau of Resource and Energy Economics (BREE) release their second quarter review.

Dividends today —  G8 Education (GEM) — 4.5c.

Monash IVF lists today  — the offer price 185c and the company is valued at $428m. It made a profit of $18.3 million financial year 2013, and is forecasting that to grow to $22 million this year. Most of its earnings comes from fertility advice and services, while it also carries out genetic testing and provides ultrasounds.

Global economic data tonight —  US first quarter GDP revision and durable goods orders, German retail sales.

Other Key Events this Week  —  Domestically there is the ABS Financial Accounts and Jobs vacancies on Thursday. In the US, personal income and spending and weekly jobs data is Thursday and the University of Michigan Sentiment Index is Friday. In Europe, business confidence and sentiment are on Friday. The UK first quarter GDP is on Thursday. Japanese inflation and unemployment is on Friday.

The Ifo business climate index for Germany fell to 109.7 from 110.4, with Ifo saying the current business situation had deteriorated and companies were less optimistic looking ahead.

Bank of England Governor Mark Carney said the slack in Britain’s labour market needed to be absorbed before interest rates were raised, reversing the tone of earlier comments which suggested interest rates could rise sooner than markets expected.

Fed Speak —  Philadelphia Fed President Charles Plosser said the economy is nearing the central bank’s targets more quickly than expected, and could have the Fed increasing interest rates sooner than anticipated.

STORIES

  • Treasury Wine Estates (TWE 483c) — Has said it would book a $260 million Australian dollar write-down, saying the impairment charge related to prices paid for previous acquisitions and slowing demand for commercial wine brands. Last month TWE rejected a A$3.05 billion bid from the US private equity firm KKR at A$4.70 a share. New chief executive Michael Clarke raised the possibility of write-downs shortly after joining in March and has called fiscal 2015 a “reset year”.
  • Lend Lease (LLC 1362c) —  LCC announced it has sold its interest in the Bluewater Shopping Centre in Kent UK for £656 million and its management rights and sundry land interests for £40 million to Land Securities Group PLC (or approximately A$1.221 million combined). The profit on the sale will be approximately $480 million. Proceeds will initially be used to pay down debt and support the global development pipeline. They expect FY NPAT to be $810-830 million and anticipate an unfranked dividend at a payout ratio of 50% of NPAT. There will be provisions of $85 million after tax raised in relation to UK and Australian Communities Projects and UK PFI Investment and they’re comfortable with financial year 2015 consensus expectations of $600-620 million.
  • Evolution Mining (EVN 74c) — Has updated its Mineral Resource and Ore Reserve estimates as at 31 December 2013. Group Ore Reserves are now estimated at 52mt at 1.6g/t AuEq for 2.62mozs gold equivalent, a decrease of approximately 0.95mozs compared with 31 December 2012. Group Mineral Resources are now estimated at 107mt at 1.7g/t AuEq for 5.70 mozs gold equivalent, a decrease of approximately 1.99mozs compared with 31 December 2012. Chairman Jake Klein said Evolution had taken a more conservative view of its estimation of resources and reserves which is appropriate for the current gold price environment.
  • Santos (STO 1418c) — Held a GLNG Investor Presentation
  • Ten Network (TEN 26.5c) and Fairfax Media (FXJ 94.5c) — Online dating site RSVP is merging with smaller rival Oasis Active in a deal involving media companies Ten Network and Fairfax Media. RSVP is wholly owned by Fairfax and Ten controls about 40% of Oasis (other investors include co-founders David Heysen and Daniel Haigh, as well as Neil Gamble.) The combined entity would be worth around $90 million. Fairfax would retain a 50% holding and Ten will control about 20%.
  • Westfield Retail Trust (WRT) and Westfield Group (WDC) shares were suspended from trading yesterday.
  • Nexus Energy (NXS) – Creditor Meeting yesterday. Seven Group Holdings (SVW) has provided a 90-day funding arrangement with a $30m limit to keep the business running and ensure the underlying assets (the Crux gasfield in Browse Basin) was protected. Nexus was put into voluntary administration after shareholder voted down a takeover offer from Seven for 2c a share. Nexus shares last traded at 1.3c.

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