The market is up 1 point. Dow Jones closed down 133 — US stocks finished on  lows, down 0.87% as the Senate fiscal negotiations were suspended and the partial government shutdown which began on October continued. The market remains confident that the most likely scenario is a short-term increase in the ceiling while further negotiations take place but there is disappointment a deal hasn’t been reached as the Oct 17 deadline approaches.

Gold was down US$3.40 to US$1273.20 per ounce, falling from earlier highs.

VIX volatility index was up 16.12% (bad) to 18.66 as the budget talks dragged on. But the measure of  “fear” remains below the high of 21 reached last Wednesday.

The Empire State manufacturing index of business conditions fell from 6.29 to 1.52 in October, the lowest level since May.

The US partial government shutdown has delayed the release of other economic data, including CPI.

Apple shares rose above US$500 on news that the CEO of luxury goods manufacturer Burberry would head its retail and online stores. Apple also sent media invites to a October 22 event where it is widely expected to unveil the new iPad.

European bond yields rose — however Greek bonds continued to rally with the 10 year yield falling a further 29 basis points to 8.38%.

US Treasuries were mixed — Two year bonds rose slightly but 10 year yields rose 4 basis points to 2.732%

The US dollar rose against major currencies, up against the Euro but weaker against the Yen and Pound. The Aussie dollar was up, rising to a high of US95.45 before trading this morning at 95.31.

Oil prices fell — WTI fell 1.34% as the US stalemate continues.

Base metal prices were mixed — Aluminium and tin were the weakest, down more than 1%. Lead was up 0.42%.

Citibank fell 1.49% after posting lower than expected earnings and sales.

Coca-Cola reported higher earnings but fell 0.66%

Johnson & Johnson rose 0.14% on good number sand a lift in full year estimates

IntelYahoo! and CSX expected later today.

RESULTS & STORIES

  • Brambles (BXB) —  First quarter trading update  — Has reported sales revenue from Pooling Solutions operations were up 7% to $US1.311.9 billion for the September quarter. The increase in revenue was due to an acquisition of container company Pallecon late in 2012 for $170 million. CEO Tom Gorman said the company remained on track to deliver profit between $US930 million — $US985 million for the 2014 financial year, broadly in line with expectations. Its pooling solutions does not include the company’s Recall information management business, which it plans to de-merge.
  • Iluka (ILU) — September quarter production report — The report was downbeat with rutile prices down to US$1,200 per tonne and mineral sands output down 30% on pcp to 276,500 tonnes due to lower demand. This was lower than expectations of 280,000 tonnes and down from 397,500 tonnes in the September quarter in 2012. Total mineral sands production in the year to date was 848,500 tonnes, down from 1.2 million tonnes on the previous corresponding period. The company said, “the lower production reflects Iluka’s ability to flex production downwards in response to lower demand at the low point of the business cycle.”
  • Mount Gibson Iron (MGX) — September quarter production report — Iron ore sales increased more than 4% to the second highest in history. Production volumes were up 13% on the pcp. The company reaffirmed previous guidance for the full year.
  • Tomorrow is theoretically the deadline for the US to come to some sort of agreement on the debt ceiling or at least an extension of it. The optimism for an agreement has evaporated overnight with the Republican Speaker John Boehner leaving the building without talking to the press … seen as a bad sign … as his party fail to agree among themselves. The White House says, “we are far from a deal”.
  • Telstra (TLS) up 7c to 500c after the AGM yesterday. Well received — it reaffirmed its forecast for low single-digit income and earnings growth as it continues to invest into its 4G mobile network. Brokers are talking about a dividend increase which I think is almost immaterial compared to the share price volatility but whatever, an increase would maybe pass a more important message about the company’s confidence than it does a financial benefit. See below for the broker reaction. Basically it’s a solid hold.
  • Cochlear (COH) fell 1.3% after its AGM yesterday. Expects profit to be flat in the current financial year as margins are squeezed.  Basically a quality stock in downtrend and yesterday didn’t help. Looking to buy one day but not in the current trend.
  • Tabcorp (TAH) results yesterday. Price was unchanged. Says its group revenue for the September quarter was up more than 3% despite tough trading conditions. Comparisons are affected by changes to Victorian Wagering and Betting Licence terms which started in 2012. TAH’s share from its JV with the Victoria Racing Industry fell from 75% to 50%. Keno disappointed, revenue growing only 0.4% due to soft retailing conditions in NSW, VIC and QLD. See below for the broker reaction. We were slightly amused by the CEO comment about the “resilience of Tabcorp’s businesses in tough external trading conditions”. In other words…our customers are addicted, right?
  • RIO (RIO) up 2.5% yesterday and another 1% today after production numbers were out yesterday. Generally better than expected. Confirmed guidance — are confident of hitting its 2013 iron ore production target of 265 million tonnes.

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Peter Fray
Peter Fray
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