Morning Market Report

The market is up 8. ASX 200 Futures were up 18 this morning.

The Dow Jones finished up 20 – it was up 45 at best and down 9 at worst. The intr-aday all-time high of 15542 was hit in May. Now 15484. S&P 500 up for 8 days on the trot and hit an all-time closing high.

The best US sectors — utilities (+1.6%), financials (+0.3%), basic materials (0.3%) and technology (+0.3%). The worst US sectors — cyclicals fell. The US Home Construction index fell 2.0%. Consumer discretionary down as well, as were telecoms (-0.7%) and consumer services (-0.3%).

Retail sales numbers a bit below expectations (+0.4% versus consensus +0.8%). Core number up a muted 0.1%. The culture of borrowing top spend appears to have died. The Empire Manufacturing index was better than expected (9.46 v consensus 3.6). Citigroup up 1.97% on results. US$ fell- A$ at 91.05c up from 90.5c ahead of yesterday’s Chinese GDP number.

Some downgrades to Chinese full year GDP numbers of the GDP numbers yesterday, which were in line with expectations.

European markets up — UK FTSE up 0.63%, Germany up 0.27%, France up 0.61%, Spain up 0.13%, Italy up 1.08%, Greece down 0.41%. Most European bond markets improved, with the Portuguese 10-year bond yield down 25bp after a 69bp rise on Friday. The Greek 10-year bond yield fell 25bp.

Resources — BHP and RIO up 0.33% and 0.28% in the US overnight. BHP closing up 19c on the close here last night. The gold price up $4.20 at $1281. It hit a low of $1179 on 28th June and is since up 8.65%.

Metals down — copper down 0.46%, nickel down 1.36%, zinc down 0.27%, aluminium down 1.62%. Spot iron ore was up 10c to $126.90. Oil was up 52c to $106.47 on talk that OPEC could cut production by 500,000bpd in December.

ANNOUNCEMENTS & STORIES

  • RBA minutes are out — The central bank left rates on hold in July with the view that if the economy requires more support, the door is open to further rate cuts. A sharp fall in the Australian dollar since the start of May would add a little to inflation over time, with inflation to remain within target. The RBA cut rates in May to 2.75% due to a slowdown in mining, which has weakened economic growth and increased unemployment. There are signs that that low interest rates were starting to spur sectors of the economy outside of mining. Ahead of the minutes, financial markets put a 60% probability of a cut in rates at the next policy meeting in early August.
  • Billabong (BBG) — Has gone into trading halt pending an announcement on refinancing and asset sale proposals.
  • McMillan Shakespeare (MMS) — Down 14.67% before going into trading halt pending an announcement.
  • Orica (ORI) and Strike Energy (STX) have signed a binding term sheet for up to 150pj of gas and to undertake a rapid evaluation program to commercialise their gas resource in the cooper basin.
  • Paladin Energy (PDN) — Up 7.81% on the back of its quarterly activities report. Highlights — revenue $US408.4 million +23%, PDN forecasts 2014 financial year uranium output of 8.3 million to 8.7 million pounds, financial year uranium output 8.3 million pounds +20%.
  • Sims Metals (SGM) – Has announced a $9 million loss on the sale of its US metals recycling unit. It has sold an aerospace metals recycling unit in North America, resulting in a $9 million pre-tax loss. The business was deemed non core.
  • ALS (ALQ) — Has announced a $US533 million purchase of a large oil and gas operator, Reservoir Group. It will be funded through a 1-for-11 rights issue priced at 780c a share, a 17% discount to its last traded share price of 941c. The equity raising will raise $246m with the balance funded through debt.
  • APA Group (APA) — Has made a takeover bid for Envestra (ENV) as it looks to dominate the pipeline network sector. APA already holds a third of Envestra’s capital and operates its extensive gas network. APA Will offer 0.1678 APA shares for each Envestra share held, placing a 110c value on the shares on issue. It values ENV at $1.98 billion. The move will raise eyebrows as APA is reaching a position of market strength, which may restrain competition in the sector.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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