Jun 6, 2014

Morning Market Report

The local market stayed buoyant, but that wasn't the case worldwide.

The market is up 21 points. The Dow Jones was up 99 points at 16,836 -- The market opened lower but received a boost after the ECB decision to cut interest rates.  Small cap stocks were the best performers. The Industrials sector performed well after good earnings from Joy Global and the Consumer Discretionary, Financials and Energy sectors also outperformed. Health Care and Materials lagged. Volume again increased but remained lower than average in a 136 point range US economic data was largely ignored, considering the ECB decision and key employment data tomorrow -- but weekly jobs claims were higher than expected at 312,000 and last month was revised upwards. European share markets were mostly stronger -- The French CAC rose 1.06% and the German DAX rose 0.21% after the ECB cut interest rates. But the UK FTSE fell 0.46%. ECB action -- The ECB cut all three of its interest rates -- the main refinancing rate to 0.15% from 0.25%, the marginal lending facility rate to 0.40% from 0.75%, and the deposit facility rate to -0.10% from 0.00%, announced a targeted LTRO (long term refinancing operation) and said preparations for purchases of asset-backed securities have begun. In addition, the ECB announced it will suspend the weekly sterilising purchases under its Securities Market Program. The Aussie dollar was stronger and is currently trading at US93.36c. Gold rose US$9.00 or 0.72%to US$1253.00 an ounce. Oil fell US$0.16 or 0.16% to US$102.48 a barrel. Base metals were mostly stronger -- Aluminium rose 0.63%, zinc rose 0.32% and nickel was up 0.04%. But copper fell 0.45%. Iron ore fell US$0.30 to US$94.30 a tonne. Australian economic data today -- AiG Performance of Construction Index (PCI) Company news today -- Wesfarmers (WES) -- Coles will be in the Federal Court defending ACCC allegations of unconscionable conduct in relation to its Active Retail Collaboration (ARC) program (rebates paid by suppliers), in contravention of the Australian Consumer Law (ACL). Ex-dividend -- Korvest (KOV) 100c Chinese trade figures are released over the weekend. STORIES
  • Boral (BLD 522) -- Shares underperformed last month, falling roughly 6.85%. Yesterday Deutsche Bank released a note on the stock. They have a Buy recommendation with a target price of 618c and remain bullish. They say the USG JV on gypsum is on track and performing to expectations. The company held an investor presentation on June 2 which touched on their Asian presence.
  • James Hardie (JHX 1424c) -- Macquarie have an Outperform recommendation with a target price of 1569c. They remain bullish on the US housing market and the effects on JHX. Macquarie say "the average American new house is 10% bigger than it was in 2009 and has more bathrooms". These factors are positive for JHX because they involve a higher use of fibre cement sheeting within house construction
  • iSentia (ISD 243c) -- Made an impressive debut on the ASX yesterday with shares closing up 19.12%. iSentia is a media intelligence group that operates in Australia, New Zealand, South-East Asia and Greater China. They provide clients (government and businesses) with online, print and social media monitoring, business intelligence, insights and analysis services. The bookbuild was done at 204c, the price reflecting 15 times a 2015 forecast profit of $27 million. Management hold 4.9% in the company and major shareholder Quadrant holds 25%. It’s been a successful year for IPOs. Bloomberg says 14 companies have listed and nine are above their listing price.
  • Seven West Media (SWM 175c) -- We last wrote about SWM back in February with they delivered their profit results. A few brokers had Buy recommendations. This week CIMB Securities upgraded to an Add recommendation with a target price of 230c, up from 223c. The upgrade comes on the back of a fall in the SWM share price. They think there is value in the stock and in the media sector. They note that Network 7 looks like they will lose market share in the short term. Despite this CIMB remains positive on the business, saying it's solid and the current share price is undervalued, reflecting a loss of market share that is overdone.

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