The Dow Jones was down5 at 15,440 — the market dipped early to be down 105 at one point. Stocks recovered throughout the day but couldn’t hold onto gains and ended slightly weaker in a 130 point range.
After yesterday’s technical bounce, the market was cautious and lacked clear direction ahead of Friday’s employment data. The key factors were earnings reports, with Merck and Ralph Lauren losing early gains despite better-than-expected numbers, and mixed economic data. The ADP employment number was below expectations (but better than feared) and the ISM non-manufacturing index improved to 54.0.
The S&P fell four pointsto 1,752.
Oil was up 0.13%at US$97.32.
Gold rose $6.30to US$1257.50 per ounce.
The US$ was weaker against most major currencies and the Australian dollar was little changed from yesterday’s levels, currently trading at US89.16c.
VIX Volatility index rose 4.45% to 19.96.
US treasury markets were weaker — the yield on the 10 year bond rose 4 basis points to 2.672%.
European shares were stronger — the FTSE rose 0.13% and the French CAC rose 0.01% but the German DAX was down 0.13%.
European bonds were generally stronger — the yield on the Euro 10 year bond fell two basis points to 1.634% and the UK 10 year bond yield was one basis point lower at 2.689%. The Greek 10 year bond fell 29 points following media reports of an extension of rescue loans to Athens from 30 to 50 years.
Base metal prices were generally stronger — zinc rose 0.93%, aluminium rose 0.79% and copper was up 0.01%. Nickel fell 0.64%.
Iron ore was unchanged at US$122.60 a tonne.
ANZ loses class action on the illegality of late fees. The cost of managing a late payment was 50c to $5.50 but they were charging $20-35. To put this in perspective, this is thought likely to cost the ANZ $57 million which is 0.19% of revenue and 0.33% of Net Operating Income. The class action fashion is more the concern as well as any impact on customer perception although the other banks are in the same boat with claims against them of $71m for the CBA, $57m for WBC and $39m for the NAB. ANZ closed down 0.96% following the court ruling yesterday.
TabcorpHoldings (TAH) – first half profit up 2.3% to $74.6 million from the $72.9 million in the pcp. The result was below the consensus forecast of $76.2 million. Revenue from continuing activities was down 10.3% to $1.045 billion which was also below an expected $1.071 billion. Fully franked dividend of 8c. CEO David Attenborough (Salary $2.2 million a year – the CFO gets $1.26 million, the head of legal gets $1.4 million, the gaming division MD gets $1.8 million, non-executive Director Elmer Kupper gets $4.85 million) said “In the context of a relatively subdued retail environment, we achieved overall earnings growth, supported by good cost control.” The company also said its focus in the second half will be increasing returns and driving productivity improvement. The focus will be on growth in fixed odds, digital and key events such as Racing NSW’s new carnival ‘The Championships’, and the Soccer World Cup. Price down 2.1% first thing.
Woolworths (WOW) —Has increased first half sales from continuing operations up 6% to $31.84 billion on $30.04 billion in the pcp on the back of successful Christmas trading and solid results in Australian food and liquor. CEO Grant O’Brien said the result was strong and a positive reflection of the 4 strategic priorities that have shaped the companies focus over the last two years.
Flexigroup (FXL) — First half profit of $39 million up 20%. Volume growth momentum continues. Strong earnings growth momentum to be driven by major planned initiatives across interest free cards with 500 new distribution relationships in place, and scale benefits in established business segments. The company has also reaffirmed financial year guidance of 17% to 19% growth ($84 million-$86 million) on 2013. Dividends expected to remain within the 50-60% payout range.
Virgin Australia (VAH – CEO gets $2.8 million) — Has released an announcement saying they will now record a first half loss due to tepid demand, high fuel costs and a fierce price war with main rival Qantas. On Thursday Virgin said it expected the pre-tax loss for the six months through December to be “materially in line” with the median broker forecast of $49 million. Virgin has declined to provide any guidance for the first half.
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