May 9, 2014

Morning Market Report

Disappointing net profits for News Corp see share prices plummet.

The market is down 33 points. The Dow Jones was up 32 points at 16,551 -- the market opened strongly on improving sentiment in Europe regarding Russia/Ukraine and hopes for monetary stimulus from the ECB next month. Shares then drifted lower in the after in the afternoon before a late bounce. Volume was below average in a 120 point range. Janet Yellen gave testimony to the Senate Budget Committee. The prepared remarks were identical to comments she made on Wednesday to the Joint Economic committee. She said the economy was on track for solid growth after a harsh winter but that housing is a potential lasting problem. She said they will continue to reduce asset purchases if labour market conditions improve. Ukraine -- Russian President Vladimir Putin has called for peace talks over the unrest in Ukraine and for a postponement of a secession vote in Donetsk. But pro-Russian separatists are still in favour of holding the vote on Sunday. The ECB left rates unchanged at 0.25% and made no changes to policy despite ongoing concern about disinflation and encouragement by the IMF and OECD. But president Mario Draghi hinted at possible stimulus measures next month, saying "the governing council is comfortable with acting next time but before we want to see the staff projections that will come out in early June." The Bank of England also kept interest rates on hold at 0.5%. US economic data was better than expected -- weekly initial jobless claims fell by 26,000 to 319,000 last week, compared to 325,000 estimated. But the four-week average rose to 324,750 from 320,250. European share markets were stronger -- The UK FTSE rose 0.63%, the German DAX rose 0.90% and the French CAC rose 1.37%. The Aussie dollar was stronger and is currently trading at US92.69c. Iron ore fell US$1.40 toUS$103.70 a tonne. Global Economic Data -- German industrial production fell 0.5% compared to expectations of a 0.2% rise STORIES
  • JB Hi-Fi (JBH) -- Plans to buy back $27 million of its shares to help strengthen its capital position. The buy back will offset the dilutionary impact of shares issued to employees during the year.
  • Envestra (ENV) -- Is up 19% on a competing bid, which comes in higher than APA Group’s (APA) bid. The bid is an indicative, non-binding, highly conditional off market takeover proposal from a consortium that includes members of the Cheung Kong Group.
  • Super Retail Group (SUL) -- Shares closed -2.76% yesterday following a trading update. Like-for-like sales for the 18 weeks to May 2 were up 3.4% in the Auto division, fell 0.7% in leisure and was up 2.9% in sports.
  • Melco Crown Entertainment (MPEL) -- Net revenue rose 19% percent to $1.14 billion which was below an expected $1.36 billion. Its share price fell 5.61% overnight. Net income rose to $239.5 million from $53.8 million.
  • News Corp (NWS 1775c) -- Posted a 85% fall in quarterly profit to $US48 million. The year-ago quarter benefited from the sale of its stake in Sky Network Television, New Zealand's biggest pay-television operator. For the latest quarter, net income fell to $48 million or 8c a share. Excluding the Sky transaction and other costs, the company had adjusted earnings of $66 million or 11c a share, down from $73 million or 13c a share, a year earlier. Revenue fell 5% to $2.08 billion due to weaker advertising revenues in the news division compounded by a weaker Australian dollar. Analysts had forecast earnings of 22c a share and revenue of $2.06 billion. The publishing company was demerged in 2013 from the more profitable TV and movie operations, which are now called 21st Century Fox. NWS paid $US46 million in fees relating to the fallout from the UK phone-hacking scandal.
  • Boart LongYear (BLY 23c) -- Shares closed down 20.7% yesterday hitting an all time low of 23c following disappointing first quarter results where revenue fell short. Following a loss of $US620 million in 2013, BLY said revenue continued to fall at the beginning of 2014 as the company shed more staff and began a strategic review.    Revenue was $US197 million in the quarter down from $US370.2 million in the 2013 first quarter. Rig utilisation fell to 3% from 39%.

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