Morning Market Report

The market is up 7. ASX 200 Futures were up 14 this morning. The Dow Jones finished up 3 –– it was up 37 at best and down 51 at worst. The Dow and S&P 500 hit record closing highs again. The Dow is at 15464 is 0.5% below the intraday all time high of 15542 hit in May.

Fedspeak — Philadelphia Fed President Charles Plosser said the Fed should start tapering its quantitative easing program from September. Fed Bank of St Louis President James Bullard commented that the Fed should not start winding back its quantitative easing program until inflation hits 2% against 1.0% in May.

US Bonds fell — The US 10-year bond yield was up a touch to 2.5881%.

The best US sectors — financials (+0.8%), healthcare (+0.7%) and consumer services (+0.6%).

The worst US sectors — telecoms (-0.6%), industrials (-0.4%) and basic materials (-0.4%).

JP Morgan  fell 0.31% after results.

Wells Fargo — up 1.77% on results.

Boeing down 5% on Friday. 

The Chinese market fell 1.62% on Friday. A comment from the Chinese Finance Minister — later amended– was that economic growth as low as 6.5% might be tolerable in the future.

European markets mixed – UK FTSE up 0.02%, Germany up 0.66%, France down 0.36%, Spain down 2.32%, Italy down 1.57%, Greece down 0.90%.

The Portuguese 10-year government bond yield jumped by 69 basis points taking the yield above 7.5% for the first time since early December. The rise comes on continuing political issues.

Resources — After 6% rises in the US on Thursday BHP and RIO fell 1.80% and 2.72% in the US on Friday with BHP closing at the equivalent of up 10c on its close here.

Metals down — Copper down 1.04%, Nickel down 0.66%, Zinc down 1.30% Aluminium down 0.56%.

ANNOUNCEMENTS & STORIES

  • Chinese GDP came in at 7.5% which was in line with expectations. January-June Crude Steel Output 389.87m tonnes, up 7.4% on Year. Aussie dollar rose to US9093c.
  • Treasury Wine Estates (TWE) – Impairment charge – The company will book a $160m writedown after bullish sales forecasts resulted in an oversupply of wine in US. They had been forced to destroy old stock and offer big discounts to clear the oversupply which has led to the charge. Operating earnings excluding the write off are expected to come in at $216m in line with analyst expectations.
  • BHP (3331c) and RIO (5474) report their production numbers this week. They are expected to be hit by bad weather experienced across WA’s Pilbara region during the quarter. RIO reports tomorrow and is forecast to hit 51.2 million tonnes for the June quarter, which is 5% higher. BHP reports on Wednesday and is forecast to reach 43.5 million tonnes for the quarter, which will be 7% higher than the pcp. UBS has kept its buy recommendation on BHP with a target price of 4000c. It forecasts iron ore production of 47.6 million tonnes for the quarter or a yearly figure of 190 million tonnes. JP Morgan has a neutral recommendation on BHP with a target price of 4200c. It has slightly reduced their forecasts ahead of the production report but also don’t expect any major surprises. It prefers RIO because of its cheaper valuation metrics. UBS has a buy on RIO.
  • Fourth quarter production reports from Australian resources companies. We have RIO tomorrow and BHP on Wednesday. Production numbers are just that, production numbers, not profit releases. The main variable in the BHP and RIO share prices are the prices not the volumes so these numbers are unlikely to surprise although they will be scanned for any signs of a weaker trend in the sales numbers.
  • US Results season — Some big names this week. 70 US S&P500 companies will release their earnings results including General Electric, Verizon, Johnson & Johnson as well as tech giants Microsoft, Intel, Google and IBM. In the financial sector they have Bank of America, Citigroup, Goldman Sachs and Morgan Stanley. JP Morgan and Wells Fargo reported on Friday with mixed if not muted reactions.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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