The market is up seven points.The Dow Jones finished down six. It was up 15 at best and down 67 at worst.

The S&P 500 closed down 2 to 1689. A bit of talk around that the US markets are fully valued coming into a risky period including October and the fiscal cliff negotiations at the end of the year.

Talk that the People’s Bank of China will lower reserve requirements for small to medium sized banks.

Resources had a great day on our market yesterday (up 2.9%) but BHP and RIO were both down in the US overnight.

disappointing Japanese GDP number making the headlines. Second quarter GDP up 0.6% against forecasts of +0.9%. The number helped push up gold (Japan will have to keep printing money to stimulate the economy).

Gold up $22 to $1334. The gold stock ETF in the US was up 5.8% overnight.

The main overnight feature is a 4.0% rise in the iron ore price to $138.50 up $5.60.

BHP down 0.09% in the US and RIO down 0.14% –BHP closed at the equivalent of 22c up on its close here yesterday thanks to a fall in the A$.

A$ is up from a low of 88.48c last week to 91.26c but is down from a high of 92.21c yesterday.

Metal mixed up. Copper and zinc down, aluminium and nickel up small.

US 10 year bond yield up four basis points (bonds down) to 2.620%.

The US Treasury Budget number disappointed at -$97.6 billion versus expectations of -$96.0 billion. The Japanese market was down 0.7% yesterday. The Chinese market was up 2.39%.

European markets mixed and not much changed. Greece up 2.12%.

Oil price up 14c to $106.11.

US performers — Caterpillar up 2.1%, Apple up 2.8%. Blackberry up 10.45%.

US Economics tonight — Retail sales, import and export prices, business inventories.

In Europe tonight — ZEW Economic Sentiment, industrial production, and German ZEW Economic Sentiment. UK CPI, PPI and RPI.

In Asia today — Japanese machinery orders. Minutes of BoJ Meeting.

ANNOUNCEMENTS & STORIES

  • Bradken (BKN) — Net profit of $66.9 million down 33%. Underlying profit of $96.1 million down 4% and above an expected $92 million. EBITDA $183.6 million down 17%, final dividend of 18c, which brings the total to 38c down 7% from last year.
  • Stockland (SGP) — financial year net profit $104.6 million down 79%. Underlying profit $494.8 million down 27% and in line with broker consensus of $495.6 million. Final distribution of 12c. SGP expects steady improvement in 2014 financial year earnings; modest uneven housing market recovery.
  • Domino’s Pizza (DMP) — Net profit of $28.7 million up 13%. Underlying profit of $30.4 million up 13% slightly below broker consensus of $31.5 million. Final dividend of 15.4c, total 30.9c. The company has gone into trading halt pending a $156 million rights issue at 1020c to buy 75% of Domino’s Pizza Japan.
  • Iron ore flying — The iron ore price is up 4% overnight to $138.50.
  • NAB Business confidence number due out today.
  • Commonwealth Bank (CBA) — Results on Thursday … lots of speculation of a special dividend of 10c. It’s pretty much in the price now.
  • The Aussie dollar — NAB remains short the A$ against the US$ from US92.1c with a stop at US93.5c. They have lowered their A$ target to US86c from US88c. The A$ has rallied from US88.5c to above US92c in the past week.
  • Short covering rallies — If you’re wondering why stocks like Atlas Iron can jump 16% in a couple of days look no further than short positions. Small bits of good news (iron ore price going up) lead to sharp movements in shorted stocks. The AFR reports CBA saying shorters are targeting consumer and industrial stocks heading into reporting season. Bradken and UGL were two stocks reporting this week with rising short positions. Other heavily shorted stocks to report this week include Goodman Fielder (GFF), Primary Health Care (PRY) and NextDC (NXT). The largest increase in short positions last week were — The Reject Shop (TRS), Asciano (AIO), DownerEDI (DOW), Sonic Healthcare (SHL) and David Jones(DJS). Hedge funds had covered shorts on Perseus Mining (PRU), Atlas Iron (AGO), Billabong International (BBG) and  (ARI). 
  • Billabong (BBG) is up 52% since this time last week. The rise is on the back of New York hedge fund Coastal Capital International buying a 5% stake. The on-market share purchase has lifted BBG’s share price by 63c from 12c in mid-June.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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