The market is down 14. The SFE Futures were up 7 this morning.

The Dow closed up 65 and was up 118 at best on strong US earnings results. The Dow ended the week up 1.4%. The S&P 500 closed up 0.12% and recorded its first weekly gain in six weeks, up 0.6%. The Nasdaq closed down 0.24% and ended the week down 0.4% — its third straight week lower. European markets were higher. Metals were up on the LME. Gold was up $1.40 to $1642.80. Oil down 33¢ to $103.72. The Australian dollar is higher at 103.68¢ from 103.35¢. Utilities and Consumer Staples were the best S&P 500 sector, while Financials and tech stocks underperformed. Ten-year US bond yields dropped to 1.969%.

Main points:

  • Australia’s producer price index (PPI) was much lower than expected suggesting an interest rate cut is more likely – Q3 PPI fell 0.3% versus consensus of +0.4%. Annual number +1.4% versus consensus of +2.2%. The A$ has dropped on the news. The CPI numbers are tomorrow – there is talk that even if they are ahead of the 0.5-0.7% range expected at 0.8% the annual number will still fall well within the RBA’s 2-3% band. The Futures market is pricing in a 90% chance of a rate cut next week.
  • Cockatoo Coal (COK) says their major shareholder SK Networks has decided not to proceed with a $313m placement. This is negative news for the company. The existing $150m debt facility is in place, with $80m undrawn but is not sufficient to fund their planned capex, which means a possible equity raising may be required.
  • BHP Billiton (BHP) faces a potential $5bn loss on shale gas deals in the US according to the Sunday Times. This comes after the company paid $20bn to gain exposure in US’s shale gas industry which has seen gas prices more than halve.
  • ANZ says their decision to raise interest rates in February was justified and says it is difficult to have an informed public debate about these issues when the community is not aware of key facts.
  • Origin Energy (ORG) says the cost of an upgrade to their BassGass project offshore Victoria has gone up to $460m from $360m after delays caused by construction challenges. The company expects to restart production from the Yolla platform in July and finalise project commissioning during September Q. ORG owns 42.5% of BassGass, AWE owns 46.25% and Toyota Tsusho Corp has the remainder.
  • Paladin Energy (PDN) says it will issue a US$225m convertible bond to meet debt maturity payments. The bookbuild period has commenced and is expected to finish by the end of today. PDN is in a trading halt. 
  • Biota Holdings (BTA) will merge with US Nabi Pharmaceuticals to form a new company which will be listed on the Nasdaq Index. The new company will be called Biota Pharmaceuticals and will achieve better value recognition and liquidity through a stronger US shareholder base.
  • Punch Buggy Red — Read Marcus’ weekend article which tells you how to manipulate your children. Sign up for a free trial at www.marcustoday.com.au.

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