May 29, 2014

Morning Market Report

A busy day on the markets following announcements of job cuts and restructures by some of our biggest companies.

The Market is down 15 points. The Dow Jones was down 42 points at 16,633 – The market fell on the open, recovered throughout the day but sold off in late trade. There was little economic data and the weakness was attributed to profit taking after 4 days of gains and a rally in the bond markets which sent 10 year yields to 11 month lows. US 10 bonds were stronger -- the yield on the benchmark 10 year bond fell seven basis points to 2.444%. European share markets were mostly stronger -- The UK FTSE rose 0.09% and the French CAC rose 0.04% but the German DAX fell 0.02%. The Aussie dollar was weaker and is currently trading at US92.34c. Gold fell US$6.20 or 0.49% to US$1259.30 an ounce. Oil fell US$1.39 or 1.34% to US$102.72 a barrel. Base metals were mixed -- Aluminium rose 0.73% and copper rose 0.39% but nickel fell 1.29% and zinc fell 0.48%. Iron ore fell US$1.30 to US$96.80 a tonne. US economic data -- MBA Mortgage Index: Actual -1.2%, prior 0.9%. US Earnings- Michael Kors -- down 0.18% in after hours trade, Toll Brothers -- up 2.08%. Australian economic data today -- Private New Capex, HIA new home sales Company News -- Westfield Group (WDC), Westfield Retail Trust (WRT) AGMs, Suncorp (SUN) Investor Day Ex-dividend today -- Orica (ORI) 40c, E&A (EAL) 2.75c Fed Speak -- Cleveland Fed President Sandra Pianalto makes opening remarks at the Inflation, Monetary Policy, and the Public conference. STORIES
  • Toll Group (TOL) -- Has announced 100 job cuts. It expects to save up to $12 million each year by streamlining their business structure. Complexity will be reduced after cutting their business structure from six divisions to five. It will save $10m-12 million.
  • Transurban (TCL) -- Has announced the completion of the retail component of its fully underwritten accelerated renounceable entitlement offer. The offer raised $557 million.
  • Westfield Group (WDC) -- Chairman's address to shareholders. Frank Lowy says 98% of Westfield shareholders voting by proxy had voted in favour of the restructure. The deal needs approval from shareholders of Westfield Retail Trust (WRT). It requires a 75% approval rate to get over the line. He also said "because of this 75% hurdle, as I have already said, Westfield Retail Trust's vote is too close to call."   The meeting takes place at 2pm.
  • Aristocrat Leisure (ALL) -- First half profit rose 9.2% on year to $57.4 million which was broadly in line with market expectations, mostly due to a lower Australian dollar and tax rate. Revenue up 7.6% but fell 2.2% in constant-currency terms. 1H dividend 8c unfranked. They expect strong financial year net profit growth. EBIT rose 1.1% to $76.1m, above consensus of $73.0 million. Chief executive Jamie Odell said the highlight was increased profitability in North America.  Australian market share of new machines sold reached a in the March Quarter, although revenue fell 6.4% as the sale price of new poker machines fell 5.1%.
  • Wesfarmers (WES) -- Closed down 0.6% yesterday after launching an overhaul of the Coles liquor business. Coles will focus on improving the look of its liquor outlets and narrowing the range of beer, wine and spirits. At the moment Coles operates 820 bottle shops under the Liquorland, First Choice and Vintage Cellars brands. The company agrees that the bottle shops are cluttered and confusing and staff are under-trained. With the streamlining of the bottle shops, they are seeking to implement a turnaround strategy to take on Woolworths’ (WOW) Dan Murphy's. The announcement to cut more costs and drive supermarket prices down to underpin another five years of profit growth was seen as a positive move by the company.

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