Morning Market Report

The market is up 39 points. The Dow Jones finished down 1 — it was up 72 at best and down 43 at worst. Now 15521. The S&P 500 closed up 1. 

The Case Shiller House price index came in at +12.2%, higher than the 10.5% expected. Consumer confidence came in at 80.3, lower than the 81.6 expected.

Markets remain quiet ahead of the FOMC meeting, which concludes tonight — the market is expecting to hear when the Fed will begin tapering its bond-buying program — current expectations suggest the first cutback will be announced at its September meeting. This all ignores the elephant in the room of course … US debt levels, which are still rising. We are also waiting on the US second-quarter preliminary GDP number tonight and official US jobs numbers on Friday. 

The US materials sector went sharply lower after the largest potash producer, Russia’s OAO Uralkali, withdrew from a potash cartel. Potash Corp fell 16.54% and Mosaic fell 17.28%. 

The Japanese market bounced 1.53% yesterday despite disappointing preliminary industrial production and household spending data and despite reports suggesting Japan may downgrade its real GDP forecast for 2014 to 1.0% while trimming its nominal forecast to 3.2%.

Resources down with BHP down 1.65% and RIO down 0.66% in the US with BHP closing at the equivalent of 19c down on its close in Australia yesterday. 

The A$ is at 90.61c. It has dropped from 93.19c in the last week on a weak Chinese PMI number, a lower-than-expected CPI number and yesterday’s Glenn Stevens speech, which basically suggested that the RBA will cut rates next month — there is now a 90% chance of a rate cut factored into the Futures market; 90.35c (the three-year low) is seen as the next technical support level and below that its back to 80c.

Morning Market Report

 

European markets mostly up — the UK FTSE up 0.16%, the German Dax up 0.15%, the French CAC up 0.45% with Spain up 0.96%, Italy up 1.64%, Greece down 0.86%.

Metals down. Copper the worst down 2.04% with nickel down 1.28%. Oil price down $1.47c to $103.08. Gold price down $4.40 to $1324. Spot iron ore was down another 80c to $130.90. The price is up 20% in eight weeks on Chinese restocking. There are fears that process may now be coming to an end, in which case the iron ore price is now under threat. This is the second fall in two days. 

ANNOUNCEMENTS & STORIES

  • Lynas Corp (LYC) — Is down after the company issued its quarterly report. The company has delayed plans to develop another rare-earths deposit in WA because of weak Rare Earths prices and is now focusing on reducing costs.
  • Clough (CLO) — Has received a $1.13 billion takeover offer by Murray & Roberts. It already had a 61.6% stake. The bid is priced at 146c.
  • Virgin Australia (VAH) — Etihad raised its stake to 10.55% from 9.53%.
  • Metminco (MNC) — Is up 45% after the quarterly activities report.
  • CBA (7403c) — JP Morgan have downgraded CBA to underweight from overweight with a target price of 7492c. It thinks the stock has outperformed the bank index by 5% and rival Westpac (WBC) by 7% since the May bank update. It thinks this reflects strong dividend expectations ahead of the CBA result, which is factored in.
  • WBC (3086c) — JP Morgan has upgraded to overweight from underweight with a target price of 3267c. It  thinks WBC has underperformed the bank index by 5% and rival CBA by 7% since the May bank updates. WBC has the highest capital ratio of the group, which could suggest another special div may be on the cards.
  • Cochlear (COH 6158c) — The company’s strength in the Chinese market is under threat as rival Chinese bionic ear maker Nurotron Biotechnology has received approval for a competing product. This allows the company to compete directly with Cochlear for lucrative Chinese government contracts. Nurotron says they plan to build a new factory that will be 10 times the size of its existing facility. A key government tender is due in August. Nurotron have said they are optimistic on winning the tender because the government likes to support Chinese technology and Chinese companies. Deutsche Bank has a hold recommendation with a 6100c target price. The share price is undisturbed this morning and is perhaps enjoying the lower A$.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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