Jun 24, 2014

Morning Market Report

A busy day on the markets, with big announcements from Woolworths Australia and Woolworths South Africa.

The market is down 21 points. The Dow Jones was down 10 points at 16,937 -- The market closed slightly lower after six consecutive days of gains. It was a quiet day of trading with little economic news apart from existing home sales which rose 4.9% to an annualised rate of 4.89 million versus the 4.80 million expected. Energy, Financials and Technology were the best performing sectors and Consumer Staples and Industrials lagged. Volume was a little below average and the market traded in a 58 point range. Markit's flash US PMI reading rose to 57.5 in June from 56.4, above expectations for 56.5. European shares were weaker -- The German DAX was down 0.66%, the French CAC was down 0.57% and the UK FTSE was down 0.36%. The Aussie dollar was stronger after better than expected Chinese manufacturing data yesterday and is currently trading at US94.25c. Gold rose US$1.80 or 0.14% to US$1318.40c a tonne. Oil was down US$0.66 or 0.62% to US$106.17 a barrel. Base metals were mostly stronger -- Copper rose 1.12%, nickel rose 0.13% and aluminium rose 0.24%. Lead was 3.52% higher. Iron ore rose US$1.30 to US$93.40 a tonne. US economic data -- Existing Home Sales: Actual 4.89M, consensus 4.80M, prior 4.65M (revised 4.66M) US earnings -- Micron -- down 1.85%, Sonic -- up 1.5% in after-hours trade Australian economic events today -- ASIC chairman Greg Medcraft speaking at Australian Institute of Company Directors lunch. Company events today -- Nexus Energy creditors meeting Dividends today -- Village Roadshow (VRL) -- 15c. Global economic data tonight -- US housing data including the Case-Shiller 20-city index, FHFA house price index, new home sales and consumer confidence. Other Key Events this Week -- there isn't a lot on domestically. Wednesday the Bureau of Resource and Energy Economics (BREE) release their second quarter review. On Thursday there is the ABS Financial Accounts and Jobs vacancies. In the US, there is a lot happening. See the diary for full details. The focus will the housing sector (lots of sales, price and mortgage numbers), confidence and a revision to first quarter GDP growth. In Europe, business confidence and sentiment are on Friday. The UK first quarter GDP is on Thursday. Japanese inflation and unemployment is on Friday. STORIES
  • Woolworths South Africa has made a bid to buy the whole of Country Road (CTY) at 1700c -- the last price was 1400c. It’s a 21% premium. Woolworths SA own 87.88% themselves and Solomon Lew owns most of the rest -- 11.88%. They say the deal is conditional on the scheme of arrangement with David Jones going through.
  • Amcor (AMC 1047c) -- Will now report in US dollars, commencing in 2014/15. The change will reduce currency related changes in reported results given Australian dollar sales are less than 5% of the total. Dividends will be declared in US dollars but paid in Australian dollars. Results for Flexibles will be presented in Euros, with a US dollar result alongside.
  • Kathmandu (KMD 332c) -- Has downgraded profit forecasts due to a warm start to winter. They say if the normal winter pattern did not return by July than the company anticipated earnings for its 2014 fiscal year would be 10-15% down on the 2013 financial year EBIT of $63.4 million. KMD chief executive Peter Halkett said there is still a chance of improvement in the last 5 weeks but forecasts of a mild and dry winter reduced hopes of a recovery. 2014 financial year results will be released on September 22 and an updated estimated will be provided in early August.
  • Sims Metals Management (SGM 966c) -- SGM has announced restructuring initiatives to reset and streamline the Sims Recycling Solutions business as part of a Group strategic review currently being undertaken. The restructuring charges will be $80-85 million, in addition to a an expected goodwill impairment charge of $20-30 million.
  • Virtus Health (VRT 880c) -- VRT has announced the establishment of the Virtus Fertility Centre Singapore, a greenfield fertility clinic, in collaboration with three Singaporean fertility specialists. The clinic is expected to open in December 2014 and will provide a platform for access into the wider South-East Asia region. The number of couples opting for IVF in Singapore has grown from 1,710 in 2005 to approximately 4,000 in 2013. It is VRT’s second international operation after the recent SIMS IVF acquisition in Ireland and will involve capital of $3.5 million.
  • Woolworth (WOW -- 3567c) -- The AFR reports that WOW is within two weeks of deciding whether to sell its pubs and liquor stores to a trade buyer or proceed with an IPO of the business. The 54 pubs are held within a joint venture with ALH Group and about six groups are said to have submitted bids, including ALE Group, the largest listed pub landlord.

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