May 16, 2014

Morning Market Report

A rocky day on markets worldwide as the last of the March quarter results trickle in.

The market is down 17 points. The Dow Jones was down 167 points at 16,447 -- the market fell on the open and continued to slide during the day due to weaker company earnings and economic data. The Dow was down as much as 217 points at one point in a 226 point range and volume was above average. US economic data was mixed, but generally disappointing -- CPI rose 0.3%, in line with expectations but lower than hoped, and industrial production fell 0.6%, worse than the 0.2% gain expected. Also negative was weaker home builder sentiment. Positive news included a 24,000 fall in weekly jobless claim to the lowest level in seven years and a rise in the Empire State Manufacturing survey showed strong manufacturing activity in the New York region. US Earnings -- retailers Wal-Mart and Kohl's released disappointing earnings but there were some good results from JC Penney and Nordstrom after the market closed. 92% of S&P 500 companies have released March quarter results. 69% beat analyst estimates and 22% have missed. The US bond market was stronger -- the yield on the US 10 year bond fell five basis points to 2.49% after weaker economic data. Euro zone growth was lower than expectations -- GDP rose 0.2% in the March quarter compared to expectations of a 0.4% rise. German growth was strong but Italy and Portugal both reported contractions. Peripheral Bond markets weaker -- The Italian, Portuguese and Spanish 10 year bonds were all weaker, with yields increasing almost 20 basis points each. The yield on the Greek 10 year bond rose 51 basis points to 6.81%. ECB Vice President Vitor Constancio said the central bank was ready to act if needed, but added there were no distinct signs of deflation in the euro bloc. European share markets were lower -- The UK FTSE fell 0.47%, but the German DAX fell 1.01% and the French CAC fell 1.25%. The Aussie dollar was weaker and is currently trading at US93.58c. Oil fell US$0.87 or 0.85% to US$101.50 a barrel. Gold was down $12.30 or 0.94% to US$1293.60 an ounce. Base metals were mostly weaker -- Zinc fell 2.09%, aluminium fell 1.85%, copper fell 0.50% and nickel fell 6.37%. Iron ore fell US$0.70 to US$102.80 a tonne. STORIES
  • Goodman Fielder (GFF 62.25) -- Shares have been placed in a trading pending a bid update. An article in The Age this morning says Singapore's Wilmar group and Hong Kong bidding partner First Pacific have upped their bid from 65c to 70c or $1.37 billion. GFF has to respond by ‘granting Wilmar and First Pacific investment due diligence access to its books by 8pm tonight or the ''last and final'' offer by the duo will be withdrawn. GFF remain adamant the bid is still too low. There is speculation that a counter offer may materialise and the private equity firm PEP may be keen. The article finishes by saying that if Wilmar and their partners are the only bid on the table, there isnt much time left for GFF to decide. Wilmar and First Pacific have said this morning that the offer won’t rise again unless a rival bidder emerges.
  • McMillan Shakespeare (MMS) -- Citi have a Buy recommendation with a target price of 1483c. They say the outcome from the Federal budget was positive on the stock as there was "an increase in the personal income tax rate matched by an equal increase in the fringe benefits tax rate". Over the past few months there has been a few questions as to whether business is back to normal after after the federal election. Citi says we’ll have to wait until their results to know for sure.
  • IOOF (IFL 813c) -- Has announced a $621 million merger with Shadforth Financial Group (SFG). The deal with be via a scheme of arrangement. IFL have also offered an alternative cash component of up to $100 million. Deal: 0.104 IFL shares for each SFG share.
  • Crown Resorts (CWN 1584c) -- James Packer has missed out on the opportunity to secure a place on the Las Vegas strip after property giant Blackstone emerged as the new owner of The Cosmopolitan of Las Vegas

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