The market is up 48 points. The Dow Jones finished up 128 — it was up 150 at best. Now 15628. The S&P 500 closed up 21 (1.25%) and went through 1700 for the first time to close at a new record high of 1707.

 Reasons for the rally include:

Relief that the FOMC ‘tapering risk’ is out of the way.

The better than expected Chinese PMI number yesterday (50.3 versus 50.1 and consensus of 49.8). Comments from the Chinese that growth of 7-8% was still a target.

Some suggestion the rally was as fund managers reinvested after selling down on the last day of the quarter on Wednesday — this is the Dow Jones in the last five days showing the end of quarter sell down.

Good weekly jobless numbers. Five-year low.

A stronger than expected US ISM index number (55.4 v 51.5 expected).

Hopes that the US Job Numbers tonight will be good after a strong ADP (private sector) employment report this week.

AIG up 3.43% and up 5.33% after hours on results — it paid a dividend (coming all the way back from being rescued in the GFC). Proctor & Gamble results OK – up 1.76%. Financial sector up 1.7%.

 European markets up — the UK FTSE up 0.92%, the German Dax up 1.63%, the French CAC up 1.25% with Spain up 1.27%, Italy up 2.04%, Greece up 1.75%.

Mario Draghi after the ECB Meeting suggested that the futures market shouldn’t be pricing in a rise in eurozone interest rates and that they intend to keep them low for an extended period of time (the Euro fell).

Eurozone PMI better than expected (50.3 v. 50.1 expected) prompting talk about Europe emerging from recession. An uneventful Bank of England meeting.

The Japanese market fell 1.42% yesterday and continues its recent drop. The Chinese market was up 0.18% yesterday, a fairly muted response to the PMI number.

Resources up with BHP up 1.40% and RIO up 1.80% in the US with BHP closing at the equivalent of 41c up on its close in Australia yesterday.

Oil price strong — up $2.86 to $107.89. Gold price down $1.40 to $1311. Spot iron ore was down for the fourth day on the trot — down 20c $129.70.

ANNOUNCEMENTS & STORIES

  • ResMed (RMD) — Shares up 3.4% after their financial year report. It has lifted its dividend by 47%following a strong June quarter when revenue hit a new record. Revenue of US$ 414 million up from US$371 million. Net profit fell to US$73 million from US$76.8 million. Overall results in line with consensus forecasts.
  • Paladin (PDN) — Has announced a proposed institutional placement of shares. It intends to do the placement for up to 15% of company’s issued shares. It has also announced the termination of the sale of a minority interest in its main mine — Langer Heinrich. A few points on the placement:
  • Bookbuild floor price 70c per share.
  • Institutional placement for up to 15% of company’s issued shares.
  • Oroton Group (ORL) – Has issued a profit downgrade and is down 6.42% in early trade.
  • BANK LEVY (Tax) — STORM IN A TEACUP — If anything the falls in the banks yesterday were more knee jerk reaction than valuation based. If anything the main stock market impact should have been on Macmillan Shakespeare (MMS) which will jump should the coalition win the next election (it was up 3.32% yesterday). The bank levy is another bit of pre-election “policy on the go” introduced with minimal consultation with either industry or Labor colleagues. Surely the point of getting rid of Gillard and Swan was to win the next election but the Rudd/Wong/Bowen combination is simply continuing the legacy of surprising business and consumers with policy changes. The net results is that the banks over-reacted yesterday. From being up at the start of the day yesterday the CBA closed down 1.47%, WBC -0.06%, NAB -1.6% and ANZ -1.24%. At their lows the CBA was down 2.83%, WBC down 2.14%, ANZ down 2.64% and NAB down 2.79%. The concern of course is that this is the thin end of an “anti-bank” attitude of a Labor government which might well end up in power for another three years. What next … a bank sector super tax?
  • The government’s economic statement is due at 1pm today and will outline details of the planned deposit insurance levy.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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