May 12, 2014

Morning Market Report

Fairfax shares closed up 2.55%, despite a disastrous week of strikes and job losses.

The market is down 10 points. The Dow Jones was up 32 points at 16,583, a record closing high. The market opened weaker and was down as much as 52 points before rising throughout the day. Previously sold technology stocks were stronger on the day and consumer stocks performed well. Volume was lower than average and the market traded in a 90 point range. Ukraine -- Global markets were weaker in the lead-up to independence referendums in Donetsk and Lugansk on Sunday, despite calls from Russian President Vladimir Putin that they be postponed. The EU has said the referendum is illegal and it will not recognise the result. Putin was in Crimea over the weekend. US wholesale inventories rose 1.1% in March, slightly above expectations. But an upward revision to February (from 0.5% to 0.7%) will be a positive contributor in the second estimate first quarter GDP. European share markets were weaker -- The UK FTSE fell 0.36%, the German DAX fell 0.27% and the French CAC was 0.66% lower. The Euro was weaker after comments from ECB President Mario Draghi suggesting the central bank could ease monetary policy next month. The Aussie dollar was weaker andis currently trading at US93.58c. Base metals were mixed -- Aluminium fell 0.28% and zinc fell 0.22% but copper was up 0.22% and nickel rose 2.54%. Iron ore fell US$1.00 toUS$102.70 a tonne. STORIES
  • Incitec Pivot (IPL) -- Profit of $115.7 million up 7% and above consensus forecasts thanks to strong growth from one of their ammonium nitrates plants and reduced costs. EBITDA came in at $302.6 million up 20%. EBIT was $193.1 million up 14% which beat a broker forecast of $142 million. Dividend was 3.5c up 3% and better than an expected 2.2c. The good result was driven by cashflow from the Moranbah ammonium nitrate plant and management action on costs and productivity in an external environment which continues to be challenging. 1H revenues was $1.51 billion up 6% on year.
  • Aurizon Holdings (AZJ) -- Has moved to terminate enterprise agreements in Queensland. They want to end worker agreements claiming they are hurting their competitiveness. AZJ will apply to Australia's Fair Work Commission to terminate 14 enterprise agreements after failing to renegotiate with union representatives. If they are terminated workers will become employed on individual contracts, which allows the company to be more flexibility to cut jobs and relocate workers as required.
  • Envestra (ENV 133.5c) -- Closed up 18.14% on Friday after a new $2.37 billion takeover bid from a Hong Kong consortium including Cheung Kong Infrastructure, which holds a 17.5% stake in the company. The bid trumps an earlier $2.1 billion offer from APA Group (APA). The Cheung Kong consortium has offered to acquire all remaining Envestra shares for 132c.
  • Fairfax (FXJ 100.5c) -- Shares closed up 2.55% on Friday after CEO Greg Hywood said job cuts will not hurt the organisation's quality of journalism. JP Morgan has an Underweight recommendation with a target price of 66c.

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