Jan 22, 2014

Morning Market Report

More earnings results released, with many companies cautious about future prospects.

  • The market is down 33 points.  The Dow Jones was down 44 at 16,414. The market fell in the first two hours and then drifted higher in a 200 point range.
  • Stocks were mostly higher (S&P and Nasdaq both stronger). Earnings results were the key driver today, with disappointing results from Verizon, Traveler and Johnson & Johnson. The results season so far has been mixed, with a similar story to last quarter. Headline numbers are meeting expectations but the underlying top line growth (ie revenue) is yet to emerge.
  • The S&P rose 5 points to 1844.
  • Oil was up 0.54% at US$94.88.
  • Gold fell $10.60 to US$1241.30 per ounce.
  • The US$ was mixed against most major currencies. The Aussie dollar was stronger and is currently trading at US88.11c.
  • VIX Volatility index rose 3.38% to 12.86.
  • US treasury markets ended flat -- the yield on the 10 year bond was unchanged at 2.834%.
  • European shares were mixed -- the UK FTSE fell 0.04%, the German DAX was up 0.15% and the French CAC rose 0.02%.
  • European bonds were weaker -- the yield on the Euro 10 year was unchanged at 1.734%. The UK 10 year bond yield rose one basis point to 2.834%.
  • Base metal prices were mostly stronger -- nickel rose 1.23%, zinc was up 0.70%, copper rose 0.60%. Tin and aluminium were weaker, falling 0.66% and 0.49% respectively.
  • Iron ore was down US$1.60 at US$123.20 a tonne.
  • BHP second quarter production numbers are out -- share price down 1.5% following the quarterly production report --  iron ore production was slightly lower than expected but guidance reaffirmed. BHP said their December quarter iron ore production was 48.9 million tonnes, up 16% on the 42.2 million tonnes but below the 49.4 million tonnes that was expected by brokers. BHP maintained financial year production guidance for their iron ore, petroleum, copper and coal businesses despite results that fell short of some expectations. The petroleum business came close to meeting expectations, producing 57.7mboe.
  • IMF upgrades global growth forecasts and says the global recovery is fragile, commodity prices are set to fall and central banks must be very careful about raising interest rates -- should interest rates rise, emerging markets are exposed to capital flight.
  • The IMF growth forecasts for the global economy are up from 3.6% to 3.7% for 2014 -- the first upgrade in two years. In 2015 they are looking for 3.9%.
  • December quarter CPI numbers today -- influences interest rate expectations. The market is expecting a reading of +0.5% and +2.5% YonY -- in the middle of the RBA's target range. Some forecasts are for a higher number.
  • We have the Westpac/MI Consumer Sentiment index today.
  • A$ holding above 88c.
  • BHP Production numbers not as good as RIO's … not quite as good as expected but not bad and a record. They maintain production guidance for the full year against some expectations of an upgrade post the RIO numbers last week. Iron ore production of 48.9 million (up 16%) tons of iron ore versus consensus of 49.4 million tonnes.
  • Iron ore price falls again -- another $1.60 to $123.20.
  • Qantas Airways (QAN) -- Talk today of a possible float of Qantas' Jetstar business. A partial sale of Jetstar could unlock some $1.7 billion in value. There is also talk of a possible float of their $3 billion frequent flyer program.
  • IPO -- New Zealand cloud-based marketing company VMob is looking to launch an IPO. VMob is already listed on NZ Alternative Market with a $NZ50 million market capitalisation and is trying to dual list in Australia by year end. An already highly successful NZ company is Xero (XRO) which is now a $5 billion NZ software giant. The founding chairman of Xero now chairs VMob's board, so it should open some doors.
  • Warrnambool Cheese & Butter (WCB) -- A day before the offer closes, Saputo now has 52.7% stake in the company.
  • Sandfire Resources (SFR) -- shares closed down 3.28% on Tuesday to $6.48 following a fall in December quarter production and disappointing full year output and cost guidance. Copper production fell 5.8% and gold production was 30.8% lower than the September quarter. Sandfire reiterated it full year guidance but expected copper production at the mid-point of the 65,000-75,000 tonne range, gold at the lower end of the 35,000-45,000oz range and higher cash costs at the upper end of the $US1.05-1.15 a pound range ...

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