Tag Archives: Consumer Discretionary

article 3 months old

Weekly Broker Wrap: Slowly, Slowly Grinds The Recovery

-Recovery will be slow in 2013
-Mid cap resources making headway
-Opportunity in software
-Tough times in healthcare


By Eva Brocklehurst

Domestic recovery is coming, slowly. CIMB has launched a semi-annual survey of its analysts to see how their macro views are tracking. A domestic cyclical recovery seems to be in the early stages but the momentum is fairly weak. Firms are focused on reducing costs. CIMB notes cost reduction has been weak in the basic materials sector, but this could be changing with Boral’s ((BLD)) announcement of staff cuts. Retail, food & beverage and infrastructure sectors have also been less aggressive on costs. The mining sector has an improved outlook for margins, given a combination of cost mitigation and stronger demand. CIMB says business conditions are unchanged, or have weakened, for the small-cap stocks exposed to domestic housing and consumer spending.

Of course any meaningful dip, say 10%, in the Australian dollar would have a large positive effect on earnings for S&P/ASX 200 companies in the broker's coverage. Miners would have the most to lose from further appreciation of the Australian dollar and transport and infrastructure stocks would see relatively little impact, CIMB notes. The analysts believe 36% of investors are neutral on the market, while 35% are underweight and 25% overweight. Large-cap diversified miners are seeing a pick-up in demand and some margin expansion. However, the broker is seeing the mid-cap iron ore, uranium, zircon and rare earths stocks (led by iron-ore miners) making up the most ground. Demand in the mid-cap coal and gold sector is relatively weaker.

The market will be fighting to sustain the rally in the year ahead, BA-ML contends. While small caps rallied in 2012, resources were a weak spot. Despite this, small-cap valuations are still attractive to the broker, but investors need to be selective. Small-cap industrials are attractively valued at a 1% discount relative to the broader market, despite a vast majority of quality stocks having re-rated in 2012. Industrial goods & services dropping materially within the index. Preferences are for energy over resources. Mining services have run too hard and consequently the broker downgraded Bradken ((BKN)) and Sedgman ((SDM)) to Underperform. Super Retail ((SUL)) is considered a quality play and other BA-ML favourites include Automotive Holdings ((AHE)), Ainsworth ((AGI)), Henderson ((HGG)) and Technology One ((TNE)). Goldman Sachs also favours Henderson with a Buy rating.

Goldman Sachs sees positive markets ahead and early signs of a turn in flows, which should deliver earnings upgrades. Models have been adjusted to reflect the strength in equity markets during the December quarter. However, the size of earnings upgrades depends on each stock's leverage to markets. Again, the theme is selective. In financial services the broker sees AMP ((AMP)) with the lowest leverage and BT Management ((BTT)), Henderson and Perpetual ((PPT)) with the highest. In summary, the broker is Neutral on AMP but sees upside in the AXA synergies. BTT is Neutral rated, with a downside in the UK slowdown. Henderson is a Buy, as mentioned, IOOF ((IFL)) is Neutral while Perpetual is rated a Sell.

The year has started with a triumph of hope over earnings, at least in building materials and steel, according to JP Morgan. The sector has enjoyed a particularly strong performance over the past six months, outperforming the ASX 200 by 20%. Drivers of this strength are the growing expectations for material cost cutting at Boral and Fletcher Building ((FBU)) and the ongoing momentum in the US housing recovery for Boral and James Hardie (( JHX)). The broker believes Boral and Fletcher share prices are ahead of the rationalisation prospects and so has downgraded both to Underweight from Neutral. On the FNArena database Boral got the rounds of the kitchen this week. The stock received two rating upgrades (Deutsche Bank and Credit Suisse) to Buy and two downgrades to Sell (CIMB and JP Morgan). Upgraders cite the reduced costs while downgrader CIMB takes a more cynical view of the longer term impact.

In contrast, the US housing recovery is seen gathering momentum and a strong order book raises Hardie to Neutral from Underweight for JP Morgan. Adelaide Brighton ((ABC)) remains Overweight and is JP Morgan's preferred pick in the sector. The broker notes ABC is trading at a deep discount to the sector on most valuation metrics, as well as offering a relatively defensive cash flow profile. However, on FNArena's database, BA-ML takes a dimmer view, expecting growth to slow. It has downgraded the stock to Underperform from Neutral. For JP Morgan, CSR ((CSR)) remains in Neutral and Deutsche Bank and Macquarie's ratings concur. After hitting an all-time low in July last year, CSR has staged a strong rebound, based on an improved aluminium price and JP Morgan sees limited upside to the current share price.

Macquarie has taken a snapshot of Christmas trading trends to see the outfall for retailers. The first two weeks in December were particularly weak but it was a strong Boxing Day clearance through to the first week of January. Hot weather drove air-con and refrigeration sales. Seasonal appliance sales were seen up in excess of 40% in December and refrigeration sales grew high single digits. Department store feedback favours Myer ((MYR)) over David Jones ((DJS)) at Christmas, Macquarie said. Due to the significant improvement in weather in December and trade feedback indicating over 40% improvement in seasonal appliance sales during the month, Macquarie upgraded Harvey Norman ((HVN)) earnings estimates for FY13 by 4.7%. The remainder of the Christmas trading feedback was largely in line with expectations and no other significant changes were made to earnings or valuations of the other discretionary retailers.

Morgan Stanley can see pockets of opportunity in a tough software industry exposed to soft corporate and government expenditure. CSG's ((CSV)) turnaround and Reckon's ((RKN)) expected growth profile stand out. However, job vacancies and business confidence continue to languish. Morgan Stanley says industry feedback from both IT providers and client firms suggests pressure on budgets and uncertain project timing. Individually, CSV has rallied 22% from its late September low and the broker's 80c targets reflects a 10% upgrade to FY14 earnings estimates a re-rating towards industry peers. Consulting and services stocks like SMS Management ((SMX)), Oakton ((OKN)) and ASG Group ((ASZ)) face negative first half earnings momentum due to soft demand and increased uncertainty relating to delays and deferrals. Morgan Stanley cut SMX earnings 9% for FY13 estimates but expects it is best positioned to take advantage of any rebound in demand.

UBS notes that the Australian healthcare sector is unlikely to repeat its 2012 performance this year. Sector earnings risk is low but improving demographics are now factored in and price catalysts are scarce. Upside is seen in any broader market weakness and stock specific events. In view of the fact the next Australian federal election must be held by November domestic healthcare service providers such as Primary ((PRY)), Ramsay ((RHC)) and Sonic ((SHL)) are quite exposed. UBS suspects there won't be unnecessary policy change/confrontation this year. On FNArena's database BA-ML has singled out Primary as a Buy, at high risk, noting synergies with the Symbion merger are starting to deliver. Australian names deriving revenues globally, such as CSL ((CSL)), Cochlear ((COH)), ResMed ((RMD)), Sonic, Ramsay, Ansell ((ANN)) and Sirtex ((SRX)) are all likely to confront similar headwinds and Europe has never been tougher, UBS maintains.

 

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article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

-          The ASX200 closed down 10 points or 0.23% to 4623

-          The AUD fell sharply lower at midday.. Currently reading 1.0451 vs the USD

-          Total volume for the day was $8.3B. Less the influence of premarket options exercise ($3.3) gives a real volume figure of $5B.

It was a rollercoaster ride on the final major trading day for the year as the ASX reversed early gains at midday after an 11th hour vote was pulled by House of Representatives speaker John Boehner who was unable to muster majority support  to avert a possible fiscal cliff disaster.  The vote was supposed to extend Bush era tax cuts on incomes below $1m and allow higher tax rates for incomes above $1m. Boehner and Obama remain at loggerheads over the threshold at which the tax hikes will come into effect. Obama wants higher taxes on income above $400,000 where Boehner remained fixed on only agreeing to increases above $1m.

The market is all too aware that time is running out to resolve the crisis as most politicians will take holiday from today. Our market jagged 40 points lower on the news before financials and defensives regained traction and slowed the fall in the final two hours of trade. The news sent DOW futures plunging 220 points on the failed vote and remained down around 200 for most of our session.

The finale of this soap opera is anyone’s guess really. The market has a nasty habit on ‘selling the fact’ so perhaps a fall in the US market is likely even if a resolution is reached before the year end. We do know that there won’t be another House of Reps vote before Christmas so any immediate resolution remains up to Senate leader Harry Reid and President Obama. It looks as though the market is in for a good old country and western standoff. Perhaps the pollies have set the market up for one of the greatest bull traps in history. The way the US futures were looking most of the day, Iam not sure why Aussie market thinks they’re only bluffing?

If we put this noise to the side, the GDP news out of the US overnight and the reason for our market’s rise early on was due to a shock upward revision in 3Q GDP in the US from 2.7% to 3.1%.  Existing home sales also rose 5.9% in November from October, the biggest jump since 2009 and in contrast with analyst expectations of a rise of 2.3%. Both data sets are genuinely encouraging and illustrate a US economy genuinely in uptrend.

Bring on 2013, as a US economy hitting its straps and a centralised communist government willing to throw seemingly unlimited dollars on the world’s second biggest economy hopefully make the lingering GFC of ‘07 and Euro Crisis of ‘12 a distant memory.

Cliff uncertainty drove our market lower but saw cyclicals take the brunt of the fall with defensives showing good resilience. Westpac Bank ((WBC)) Commonwealth Bank ((CBA)) and ANZ Bank ((ANZ)) all showed gains of between 0.5-1%.

The big miners were the largest drag on the market. Rio Tinto ((RIO)) falling 0.90% and BHP Billiton ((BHP)) down 0.92%.

Gold struggled again today as it took another substantial hit overnight and continued slide throughout our session to $1641oz. (current pricing). Newcrest Mining ((NCM)) fell 2 cents to $22.47 and closing in on 3 year lows.

Those who remember the little animal chocolate, Yowie ((YOW)) will be pleased to hear it’s about to hit shelves again with a new and improved (child friendly) design and new listing on the ASX. YOW hit the boards today up 19,400% (reconstructed) as it unveiled a new US based production facility and a new confectionary range due out in Q1 2013. Hooray!

DOW futures are pointing to a disastrously weaker opening, currently down 195 points
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

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article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

 The scoreboard:

-          The ASX200 closed up 16 points or 0.35% to 4634

-          The AUD broke below 1.05 overnight. Currently reading 1.0479 vs the USD

-          Index and Equity option expiry resulted in $6.4B worth of stock changing hands

Trading on the ASX was surprisingly resilient ahead of the Christmas and New Year break following on from a nervous session offshore as concerns surrounding the Fiscal Cliff weighed on sentiment. Other Asian markets were weaker across the board in today’s session following on from the US session which ended in the red as investors became increasingly pessimistic that a budgetary deal would be reached in time. Republican House speaker John Boehner spooked markets by declaring he would only approve legislation that protected the current income tax rates for Americans earning less than $1m per year.

Strong gains in the defensives offset mild profit taking in the miners as investors appeared unperturbed by the slower trading environment next week.  

Qantas Airways ((QAN)) and Emirates won approval from Australian competition regulators today for their proposed partnership overcoming the biggest hurdle the two companies faces in sealing their alliance. Though the determination as only in draft form, the ACCC announced it had concern that traffic between Australia and New Zealand would be neglected and that the airlines must agree to maintaining minimum flight capacity on the Trans-Tasman route. In other ACCC news, Carsales.com’s ((CRZ)) proposed takeover of the Trading post website was blocked by regulators as it was determined to reduce competition in the online car classifieds market. QAN closed flat at $1.46, CRZ closed down 1.2% to $7.49.

It was hardly earth shattering news but our economic hero Wayne Swan said the federal budget was unlikely to be in surplus by end of this fiscal year breaking the market’s nice uptrend and pushing the market beneath its highs.

Miners BHP Billiton ((BHP)) and Rio Tinto ((RIO)) closed lower down 0.05% and 0.62% respectively. Fortescue Metals ((FMG)) lost 3.43% to close at $4.50.

Dexus Property ((DXS)) closed up 4.5% to $1.055 following an announcement that It had sold the majority of its industrial assets in the US for $560m above their current value.

ANZ Bank ((ANZ)) gained 0.65% to $24.80 and Westpac Bank ((WBC)) put on 0.66% to $25.97.

DOW futures are pointing to a sharply negative opening currently reading down 40 points
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)


This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Billabong Between Rock And A Hard Place

-Earnings downgrade disappoints
-Brokers pessimistic over latest bid
-Company may be better privatised
-Regional difficulties continue


By Eva Brocklehurst

Action clothing retailer Billabong International ((BBG)) is between a rock and a hard place. As the company issued a further downgrade to earnings estimates for FY13 it received a fresh takeover offer at $1.10 per share, from a consortium including director Paul Naude. The difficulties faced by the company raise questions over whether this new bid can proceed. Citi gives it just a 20% probability. Billabong's board is yet to respond to the proposal and the bid is substantially lower than the $1.45 conditional bid offered by private equity firm TPG earlier this year.

Meanwhile, Billabong revised down its FY13 guidance for earnings to $85m-92m, below the previous guidance of $100m-110m. In addition, the company identified $29m in significant items. This throws up the question of just what is the value of Billabong stock. Credit Suisse has not been able to build a sufficient case for forecasting significant brand improvements. Its valuation would move to $1.10 per share with the addition of $50m more in earnings over the forecast horizon. So, the bid price incorporates a substantial turnaround premium. Also, debt is "uncomfortably high" according to the broker. Credit Suisse's target of 38c per share is based on average earnings growth of 6.5% per annum over the next five years. That forecast assumes continuing weakness in Europe, offset by store closure benefits and normal seasons in Australasia and the Americas. On FNArena's database the consensus target price is 91c within a range of 38c (Credit Suisse) to $1.50 (CIMB).

Billabong estimated that its turnaround strategy would generate $155mn in incremental earnings, however, Credit Suisse does not support the assumptions made in generating that forecast. Billabong has deferred payment obligations associated with past acquisitions of $64m current and $68m non-current. These liabilities are incorporated in Credit Suisse's valuations.The broker's Sell rating is keeping company with that of JP Morgan. JP Morgan has lowered the rating to Sell, also noting the asset impairment risk is heightened and gearing issues return. The broker believes Sycamore Partners, one of the players in the consortium, is well positioned to turn around Billabong but has been a disciplined acquirer, having reduced the offer price for Talbots after due diligence. Despite the fall in the share price after the trading update, JP Morgan also believes the risk/reward is not attractive. In summary, the broker says, while there are company-specific factors at play for Billabong, the company is facing an exposure to markets with challenging macroeconomic dynamics, namely Europe and Canada.

UBS has cut its rating to Hold, also noting the stock does not look compelling from a risk-reward perspective, given considerable downside risk should a bid not proceed, a low prospect of alternative bids and high probability of any final bid being lower than the current one. The broker says the downgrade implies a 33-42% decline in underlying earnings, a disappointing result in light of recent re-structuring and the low base from which it comes. As a result, UBS has cut its FY13 earnings estimates by 14%. Moreover, in this broker's view, the company's cut to guidance further highlights its lack of agility and raises concerns over its ability to achieve the FY16 earnings target of over $210m, albeit UBS is already around 20% below this figure. UBS suggests the turnaround of Billabong may be best handled in private hands and believes any reasonable proposal by the consortium should be seriously considered by the board.

For Deutsche Bank too, the company would be better off privatised. The broker has little confidence that earnings have bottomed and balance sheet concerns are re-emerging given the diminishing ability to cover fixed lease and interest costs. The broker notes the interest from an insider at $1.10 prevents a Sell recommendation but a completed deal is far from certain. A Hold is retained with a price target of 85c. Following the trading update, Deutsche has reduced earnings estimates for the group by around 21% in FY13 and 26% in FY14, forecasting earnings of $82.2m or $84m on a constant currency basis for FY13. The downgrade in FY14 is larger because the broker has reduced expectations for a recovery from the problematic regions. The valuation implies there is a 45% probability that a $1.10 deal is successful.

Citi sees the whole affair as awkward, as the board felt $1.45 undervalued the company only a few months ago. Valuation support exists, the broker maintains, as global peers trade at an FY13 enterprise value to earnings estimate of 8.5 times compared with Billabong's 9.4 times. However, Billabong's margin is roughly half these global peers and thus offers room for improvement. While there is a margin recovery opportunity, Citi expects the sales base needs to shrink.  The broker suspects the board will have difficulty supporting the private equity approach but the business conditions continue to deteriorate and a turnaround away from equity market scrutiny may be required. Citi has downgraded its recommendation to Hold with a price target of 90c.

CIMB has taken a different tack, expecting the bid to be rejected by the board on the basis that it overlooks long-term valuation potential. However, the broker said the bids highlight the inherent long-term value in the business. In its view, the consortium is attempting to take advantage of near-term earnings softness. By CIMB's numbers the offer values Billabong at 8.5 times revised earnings guidance, similar to the TPG bid, which valued it at 8.8 times previous guidance. The recent offer therefore seems to reflect the outlook rather than a genuine assessment of longer-term value. The broker retains a Buy rating, reflecting the turnaround opportunity under new management. However, CIMB expects the share price to trade lower in coming weeks as expectations of a successful bid subside. CIMB has a price target of $1.50 and retains a Buy rating. 
 

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article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

-          The ASX200 finished up 22 points or 0.50% to 4617

-          The AUD is still holding above 1.05. Currently reading 1.0517 vs the USD

-          Strong volumes were felt again today with $4.7B of stock changing hands.

Shares on the ASX performed strongly despite profit in the first part of the session to close the day up 22 points or 0.5% to 4617. Fiscal cliff talks remained in focus as President Obama demonstrated his willingness to compromise on the level of annual income that may be subject to higher taxes. Stocks were unable to match the moves on Wall St however showing that momentum may be slowing coming into the final real week of trade before Christmas and NYE. 

Traders should treat the year end and early January period with extreme caution. We’ve had a great move for the last two weeks and we’re entering a period of very low liquidity as traders and fund managers put their feet up which is likely to increase the potential of more volatile trading, particularly as traders will have built up sufficient long positions to be able to short markets and exacerbate any weakness the light trading may cause. There is also a huge option expiry day tomorrow for both index and stock options and will be the last opportunity for institutions to square and rebalance positions prior to the end of the calendar year.

The gold price got hit overnight and the technical backdrop demonstrates that a further slump is likely. Strong data out of the US and a move toward a fiscal resolution is causing gold to lose its safe haven appeal. Spot gold is currently trading at A$1672, 1.5% lower than yesterday’s open. Though more a reflection of continual production downgrades, Newcrest Mining ((NCM)) has been performing woefully since its peak at $30 just 3 months ago. NCM closed today’s trade down 3% to $22.56

Despite a takeover bid actually crystalising for Billabong ((BBG)) at $1.10, the stock fell over 14% intraday after the company cut its earning guidance. BBG closed the day down 13% to close at $0.85.

Miners continued to rise with BHP Billiton ((BHP)) and Rio Tinto ((RIO)) up 1.1% and 1.5% respectively.

Macquarie Bank ((MQG)) followed the positive moves of US investment banks overnight to post a gain of 2.5% to close at $34.82

DOW futures are pointing to a flat opening inline with last night’s close at 13,276.
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

 

The scoreboard:

-          The ASX200 hit a 17-month high intraday to close up 21 points or 0.5% to 4595

-          The AUD is still holding above 1.05. Currently reading 1.054 vs the USD

-          Total volumes were strong at $4.8B despite many brokers and dealers already taking holidays.

Aussies stocks rose strongly on Tuesday closely tracking Wall Street’s session as positive signs from the US toward a fiscal cliff resolution inspired confidence in investors. A 45 minute meeting between Republican House Speaker, John Boehner and president Obama, the contents of which isn’t even known, was enough to get punters believing progress was being made. Boehner on Friday said he may support increasing income tax on those earning more than US$1m per year and this was likely the main topic of conversation as Republican’s are become increasingly conciliatory as they push for a resolution before the new year.

Iron Ore’s stellar run didn’t slow overnight and this was the big supporting factor for our market over the day. 62% Fe on the Spot market was up another 2.2% overnight to $132.20 a metric ton, a 50% jump from its low 6 months ago. The rise augers well for our resources industry and economy at large given our leverage to commodities and is pointing to a stronger 2013 for our market. Mining services companies are starting to move strongly with the likes of Bradken ((BKN)) up 10% in a week – closing today’s session at $5.28. Other notable rises included NRW holdings ((NWH)) up 7.7% in today’s trade.

The obvious beneficiaries of the continued strength in iron ore had strong moves over the day with Rio Tinto ((RIO)), BHP Billiton ((BHP)) and Atlas Iron ((AGO)) up 0.8%, 1.9%, 5.2% respectively. Fortescue was another standout, rising another 2.9% to $4.60.

The election of the pro-growth Liberal Democratic party in Japan over the weekend has pushed uranium stocks globally through the roof as the new party affirmed their support for the Nuclear power industry in Japan. Paladin Energy ((PDN)) rose 12.4%, Energy Resources Australia ((ERA)) also moved strongly, jumping 7.2%

DOW futures are pointing to another positive opening, currently up 36 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

 

The scoreboard:

-          The ASX200 closed lineball with its opening and yesterday’s close to finish down.4 of 1 point or 0.02% to 4583

-          The AUD held gains to climb higher over the session, currently reading 1.055vs the USD

-          Total volume were strong at over $4.2B

The Australian sharemarket see-sawed between small gains and losses mirroring Wall Street’s session as investors globally digested the US Fed’s latest policy meeting from the overnight session. The Fed’s decision to scrap “operation twist” with outright bond purchasing was neither here-nor-there, the main surprise was the announcement that interest rates will be kept at 0 until unemployment falls below 6.5%. The Aussie market had little direction all day with no significant domestic data being released.

Given the Fed news was lineball with what the market was expecting I suspect all eyes will be on a Fiscal cliff resolution, pronto. Whilst it is fairly well assumed that any big cliff fallout will be avoided, US domiciled traders holding capital gains may decide to liquidate positions before being slugged with additional taxes from Jan ‘13, particularly given the DOW’s almost 7% retracement in under a month enticing them to lock in recent gains. A quick look at the chart of DOW shows stiff resistance and a classic head and shoulders in the making at the 13,270 level. The market has hit and failed to break through the 13,270-ish level no less than 6 times this year. This also comes as Chairman Bernanke reminded markets last night of the real risks still remaining with regard to the fiscal cliff, commenting that the full ramifications are “too big” to be avoided.

The defensives continued their listless slide south/south east with the big 4 going no where, National Bank ((NAB)) closed down 0.2%, ANZ Bank ((ANZ)) finished where it opened. Telstra sustained slide continued with the telco closing down 0.5%. Wesfarmers ((WES)) and Woolworths ((WOW)) both dropped close to1%.

BHP Billiton ((BHP)) continued to climb higher thanks to an upgrade to overweight from marketweight by Macquarie Bank. BHP closed up 0.7% to $36.00. Rio Tinto ((RIO)) pushed higher to close up another 0.9% to$62.75.

DOW futures are pointing to a positive opening, currently up 24 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

-          The ASX200 closed on its lows to close up 8 points or 0.2% to 4583

-          The AUD held strong overnight gains, currently reading 1.0528 vs the USD

-          Total volume was strong at over $5B

Shares on the ASX200 continued to climb today, pushing through 4600 to fresh 16-month highs in early trade before closing close on its lows after the defensives dragged the broader index lower. The market opened with conviction across all sectors before a report that the lunatics in North Korea had launched a ballistic missile toward Japan swirled through markets and took the shine off the early move. Bullish economic data out of Germany had the DAX hitting its highest level since early 2008 and helped other European markets and Wall Street push out healthy gains.

A big news story for the morning was the Aussie dollar jumping above 1.05 against the greenback as confidence of a rebounding China got traders confident about prospects for Australian equities in 2013. Improving sentiment in the global growth story pushed the AUD to near three-month highs, despite the negative domestic outlook. The main driver offshore was the German business sentiment index which rebounded strongly to a seven-month high. German’s are traditionally rather conservative, perhaps overly pessimistic and if they seeing bullish signals then they must be seeing something good right? Well that was the way the market interpreted the news at least which bolstered Euro markets and flowed through to strong buying of the AUD which is widely known as a good barometer for confidence surrounding global growth.

Cyclicals again stole the show as the risk-on trade gathered even more momentum. BHP Billiton ((BHP)), Rio Tinto ((RIO)), Fortescue Metals ((FMG)) and Woodside Petroleum ((WPL)) all rose between 1-2%.

Some strength in BHP and WPL can be attributed to BHP’s sale of its stake in the proposed Browse gas-export project in Australia to PetroChina. Browse operator and major stakeholder WPL jumped on the price implications of the deal.  

High-yielding defensive stocks saw more profit taking with Telstra ((TLS)) down 1.4%, ANZ Bank ((ANZ)) down 0.8%.

Everyone is taking notice of our market’s breakout and confident push through the 4550 resistance level to new 16-month highs. Markets generally appear like they will push higher as the Fiscal cliff saga seems to have eroded to a mound and positivity surrounding a rebounding China has investors feeling good.

The big question is whether the move into cyclicals will be from a defined switch out of the defensives OR fresh cash out of term deposits due to a lower interest rate environment. A best guess would be a mix of both.

The reaction of currencies and precious metals will be closely watched ahead of tonight FOMC decision regarding expansion of the current QE plan. Any expansion of QE will likely see gold move higher as has been seen in recent years.

DOW futures are pointing to a negative opening, currently down 11 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

 

The scoreboard:

-          The ASX200 showed good resilience to close up 18 points or 0.4% to 4576

-          The AUD drifted lower over the session... Currently reading 1.0483 vs the USD

-          Total volume for the day was inline with yearly averages at $3.8B.

The Australian share market showed good resilience today, managing to hold onto gains from the prior week’s trade after a very flat night offshore. Positive movement in commodities and metals overnight were the standout feature of the overnight session and further boosted confidence in a resurging Asian growth story. A Wall Street Journal article overnight reported that US politicians had made good headway in budget talks and added to the positive sentiment. Expectations are that this will be resolved, atleast in draft form by Christmas time, which is adding to risk-on sentiment.

The US Fed’s FOMC meeting will conclude on Wednesday and give direction on the central bank’s monetary policy stance for the coming months with expectations of more Treasury bond buying which will likely bolster markets. This will be followed by retail sales, industrial production and CPI out of the US later in the week.

In contrast to positive news out of the US and China, the domestic situation in Australia appears to be deteriorating rather rapidly, despite the positive comments from our Government. The National Bank’s index of business confidence, fell 8 points to -9 in November from October to the lowest level since 2009. The broader community seems rather pessimistic as the reality of a lower growth environment thanks to a stalling mining industry sinks in. The news failed to ruffle feathers in trade as we continued our sideway trend for the session.

We have been taking note of the continued strength in our cyclicals for most of December now. We made note of this when the comments came out but the positive rhetoric out of China should not be ignored. For the uninitiated the comments went something like this: China’s leaders pledged to promote domestic demand with policy support for economic recovery... Ignore this development at your own peril.

A jump in metals prices overnight (China bullishness) pushed our metals higher with OZ minerals ((OZL)) up 4.17%, Western Areas ((WSA)) up 5.91% and Iluka Resources ((ILU)) up 4.6%

The big miners had another stellar run after spot iron ore rallied close to 2% to US$123.40 a metric ton. BHP Billiton ((BHP)) rose 1.32%, Rio Tinto ((RIO)) rose 0.77%, and Fortescue Metals ((FMG)) climbed 3.95%.

Other notable moves included:

Downer EDI ((DOW)) climbed 2.7% after settling a dispute with a Singaporean Power growth for $40m.

Yield stocks continued to firm with Commonwealth Bank ((CBA)) up 0.64% and National bank ((NAB)) up 0.5%.

Lendlease ((LLC)) rose 1.5% after it was chosen as the preferred builder for a $1B revamp of Sydney’s Darling Harbour precinct.

 

DOW futures are pointing to a negative opening, currently down 14 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

-          The ASX200 made small gains up 6 points or 0.13% to 4557

-          The AUD drifted lower over day after climbing on Friday’s trade.. Currently reading 1.0475 vs the USD

-          Total volume for the day was light at $3.1B. This was well below the $4B+ we were seeing for most of last week though largely in-line for a Monday session.

Shares on the ASX took a slight pause to close marginally higher after strong gains on Friday thanks to offshore portfolio buying. The market hit a seven-week high intraday as positive US jobs data on Friday kept sentiment elevated. The XJO has risen 5.4% since mid-November but will run into stiff headwinds at the key 4550 resistance level.

The Monday Report detailed the US employment news on Friday night, which appeared to largely be priced into offshore markets in overnight trade. The biggest driver of stocks appears to be the strength in China following their mid-year slowdown which has helped spark rebounds in the big miners. Weekend data showed China’s industrial output rose 10.1% y/y in November, above October’s 9.6% rise and the strongest move since March. An anomaly in the positive Chinese data of late slowed our market intraday where Chinese exports only rose 2.9% vs expectation of a 9% rise.

RIO Tinto ((RIO)) is up 25% since it’s one year low in September. RIO had another strong day, closing up 1.9% to $61.30.

Positive data flowing from China has pushed Spot Iron Ore prices back through $120/t as optimism over demand grows. This comes as more good news for Fortescue Metals ((FMG)) who announced they will sell 25% of a joint venture back to BC Iron ((BCI)) for $190m. The transaction means BCI will increase its interest in the project from 50% to 75% and fund the deal using debt and existing cash. FMG closed up 6.8% to $4.05.

The high-yield plays also performed well, Westpac ((WBC)) and National Bank ((NAB)) the standout performers closing up 0.6% and 0.3% respectively.

Japan’s GDP growth figures showed the economy contracted 0.9% in the July-September quarter or 3.5% on an annualised basis. Not a good news piece for the start of the Japanese election week where opposition leader Shinzo Abe is widely expected to defeat current Prime Minister Yoshihiko Noda. This could prove to be the kickstart Japan desperately needs as Abe has vowed to ramp up public expenditure and pressure the BoJ into aggressive monetary policy easing measures.

DOW futures are pointing to a flat opening, currently up 2 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)
 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.