Morning Market Report

The market is up 60 points. Dow Jones was up 147. It was up 180 at best and down 60 at worst. S&P 500 was up 21 to 1726. The US$ fell sharply with the A$ up 1.5c to over 95c although it has since dropped under 95c. The recent rise in the A$ puts pressure on the RBA to cut rates again. It considered the A$ “elevated” at 90c, let alone 95c. The euro hit a seven-month high and the A$ a three-month high.

The gold price popped — up $42.60 to $1307/60.
The US bond market rallied (interest rates down) – the 10 year bond yield fell 16bp to 2.693%. Commodities jumped as a function of the fall in the US$ — Oil price up 2.5% and all metal prices up although the LME closed before the FOMC and copper is up 3% since. We’ll see the reaction on the LME tonight. BHP was up 3.79% in the US overnight. The stock closed in the US up 78c on the close yesterday. RIO was up 3.16% in the US.
Iron ore price up 60c to $131.70.European markets quiet ahead of the FOMC … will obviously jump tonight. 

RESULTS & STORIES 

  • No Tapering. A 9-0 vote in favour of leaving settings in place. A shock to the markets. “In evaluating whether a modest reduction in the pace of asset purchases would be appropriate at this meeting, however, the Committee concluded that the economic data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction.”
  • There is now pressure on the RBA for another rate cut.
  • US housing market — The MBA Mortgage Index jumped last night, housing starts and building permits were a bit below expectations.
  • General Motors Holden requires a commitment from the Abbott government on subsidies in two months or it will potentially follow Ford and cease operations in Australia. Holden had agreed to keep its Adelaide operations until 2022 but the US parent now argues that things have changed with the new government.
  • This week’s talk about a possible housing bubble has been dismissed by the RBA, which labelled it as “unrealistically alarmist”. It played down suggestions that a bubble was forming, saying prices had moved in line with salaries over the past decade.
  • Perpetual (PPT) — The ACCC has given the green light for the company to take over The TrustCompany Limited (TRU). This undertaking includes a commitment to dispose of TRU’s 13% shareholding in Equity Trustees Limited (EQT). IOOF (IFL) and PPT have entered into a share sale agreement where IFL will acquire this strategic stake in Equity Trustees (EQT).
  • Origin Energy (ORG) — Has secured a 432 peta joules of natural gas from ESSO / BHP to increase its portfolio to meet customer demand.
  • Oroton Group (ORL) — Net profit of $27.5m up 10%, which was slightly below an expected $27.8 million profit. Group revenue up 0.8% to $186.2 million. Fully franked dividend of 28c. The company said this year was a “year of transition” for the brand, which wound up its partnership with Ralph Lauren and signed a new deal with Brooks Brothers. Softer sales are expected in the second half. In the event no further deals a profit of between $16 million to $18 million is expected for 2014.
  • Brickworks (BKW) — Has almost doubled financial year profit to $85.2 million, up from $43.3 million. Better earnings from brick sales drove an increase in profits  for the building products group. Earnings up 14.9% to $32.8m. A final dividend of 27c fully franked.
  • Billabong (BBG — up 7% today) — It has gone with a re-financing offer from Centrebridge/Oaktree and has announced a new CEO Neil Fiske. It has rejected a similar approach from Altamont Capital and Blackstone. The new bid offers cheaper funding via a 33.9%-40.8% equity stake. The deal will fund the Alamont loan, repaying $294 million. Centrebridge and Oaktree will own 40.8% between them. The company will also issue $50 million worth of stock to shareholders at 28c. Now 48.5c.
  • Washington H Soul Pattinson & Company (SOL) — Profit was $105.4 million, down 26.3%. Revenue was $791.3 million, down 13.3%. Final dividend was 28c. The group’s profit was driven higher due to contributions from Brickworks (BKW) and TPG Telecom (TPM).

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Peter Fray
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