May 2, 2014

Morning Market Report

Markets slightly down off the back of disappointing third quarter results.

  The market is down 13 points. The Dow Jones was down 22 points at 16,559 -- the market rose early in the session but drifted throughout the day before a late improvement. The key influences were weaker jobs data, better than expected earnings and continued support from ongoing corporate activity. Trading was cautious ahead of the jobs number tonight. Volume was a little below average in an 80 point range. US economic data was mixed -- Weekly initial claims rose to 344,000, above the 330,000 last week. The four-week moving average rose to 320,000. But the ISM index rose to an above expected 54.9 and consumer spending rose 0.9%, the most in almost five years. Most European markets were closed due to the May Day holiday -- The UK FTSE was up 0.43%. The Aussie dollar was weaker andis currently trading at US92.68c. Gold fell US$12.50 or 0.96% to US$1283.40 an ounce Iron ore was unchanged at US$105.40 a tonne. Base metals were generally weaker -- zinc fell 0.92%, aluminium fell 0.80% and lead was 0.67% weaker. Copper bucked the trend and rose 0.22%. Global economic data -- UK house prices rose 10.9% over the year to April, ahead of expectations. UK manufacturing PMI rose to 57.3 in April, higher than both estimates of 55.4 and the previous figure of 55.8. Australian economic data today -- Building approvals, new home sales and PPI. Company news -- Macquarie Bank (MQG) full year results. Key events -- US employment data is out tonight. Economists are expecting an increase of 200,000-210,000, above the 192,000 jobs added in March, and for the unemployment rate to fall to 6.6% from 6.7%. STORIES
  • Macquarie (MQG) -- Financial year 2014 earnings beat but outlook disappointed. Guidance for financial year 2014 earnings are to be in line with financial year 2014 when the market consensus was for a 7% increase. Financial year  net profit $1.265 billion up 49%. Brokers were forecasting earnings of $1.243 billion which were at the top end of guidance provided by the bank. Second half 2014 profit of $764 million up 52% which was above the $742 million expected. Financial year 2014 operating income of $8.1 billion up 22%. Financial year 2014 EPS 384c up 53%. Financial year 2014 ROE 11.1% up from 7.8%. Dividend of 160c (40% franked). Financial year dividend of 260c. MQG beat its own guidance and have forecasted 2015 profits to be similar or even better than this years. Guidance provided by MQG is usually conservative. Its guidance in March was that financial year earnings would be 40%-45% higher than 2013. So some brokers are anticipating a rise in profit this year. Overall a solid result.
  • Myer (MYR) -- Sales came in slightly lower than expected. Third quarter Sales $646.5 million, -0.9% on year. The market was expecting third quarter sales to come in around $663.5 million which was a 1.7% increase and a 1.9% increase in like for like sales. The slight decline has pulled the share price lower this morning. The retailer says the weaker sales are due to disruptions from its store network from refurbishment programs. Although sales fell, like for like sales was up 0.24%.
  • Flight Centre Travel Group (FLT) -- Has bought  Ireland's Travelplan for an undisclosed amount. Travelplan is expected to report revenue of nearly $44.8 million this year and will improve earnings.
  • ANZ (3407c) -- Shares closed -1.16% yesterday following its results. Overall it was a record result but the sector has had some selling pressure. Interim profit was up 11%, 3% above expectations and the dividend of 83c was also ahead of expectations. Fantastic stuff but not enough it seems to hold the market and the sector up. It talks about the economy recovering more slowly than expected. We hold them in the “safe income” portfolio. Most of the brokers this morning have given the results the thumbs up.
  • Lend Lease (LLC 1258c) -- Was given the green light to construct the final and biggest office tower at Barangaroo in Sydney this week. HSBC and PwC both signed leases for the yet to be built Tower 1 building. Lend Lease has been waiting for tenants to sign before starting construction.

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