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Reports » Australia

Australian stock market and companies daily report (July 29, 2010)

July 29, 2010, Thursday, 05:05 GMT | 00:05 EST | 09:35 IST | 12:05 SGT
Contributed by Intersuisse


By Intersuisse Research

 

Market Overview


- US stocks fell on Wednesday as a report from the Federal Reserve pointed to signs that the economic recovery may be running out of steam, adding to the market's disappointment over a drop in durable-goods orders.


- The Dow Jones Industrial Average dropped 39.81 points, snapping a four-day winning streak. Boeing was the Dow’s worst performer with a drop of 1.9%, after the defence contractor and airplane maker posted second-quarter revenue below analysts' expectations and warned it is likely to cut jobs in a defence unit facing increasing budget pressures from the Pentagon and overseas customers.


- Among the Dow's other decliners, Pfizer fell 27 cents (1.8%) to $15, Home Depot dropped 50 cents (1.8%) to $28.08, and Alcoa declined 17 cents (1.5%) to $11.04.


- Declines followed data showing demand for durable goods slid for a second straight month in June, another sign of weakness for US manufacturing and the overall economy. In addition, the Fed said in its latest beige book report that economic conditions continued to improve in most of its 12 regional districts, but the advances were modest, with retail sales posting only small gains and housing and construction remaining weak. Bank lending, meanwhile, was still tight.


- Most European shares dropped on Wednesday, breaking a six-session winning streak, as an unexpected decline in US durable-goods orders rekindled worries over economic growth and outweighed positive earnings reports from companies including Infineon Technologies and Deutsche Boerse.


- In Australia, inflation rose less than expected in the second quarter of 2010, supporting the case for the Reserve Bank of Australia to halt its interest rate rise possibly until 2011. The consumer price index rose 0.6% in the second quarter and rose 3.1% from a year earlier, the Australian Bureau of Statistics said.

 


INTERNATIONAL OVERNIGHT NEWS


US stocks fell on Wednesday as a report from the Federal Reserve pointed to signs that the economic recovery may be running out of steam, adding to the market's disappointment over a drop in durable-goods orders.


The Dow Jones Industrial Average dropped 39.81 points (0.38%) to 10,497.88, snapping a four-day winning streak. Boeing was the measure's worst performer with a drop of $1.30 (1.9%) to $67.32, after the defence contractor and airplane maker posted second-quarter revenue below analysts' expectations and warned it is likely to cut jobs in a defence unit facing increasing budget pressures from the Pentagon and overseas customers.


Among the Dow's other decliners, Pfizer fell 27 cents (1.8%) to $15, Home Depot dropped 50 cents (1.8%) to $28.08, and Alcoa declined 17 cents (1.5%) to $11.04.


Declines followed data showing demand for durable goods slid for a second straight month in June, another sign of weakness for US manufacturing and the overall economy. In addition, the Fed said in its latest beige book report that economic conditions continued to improve in most of its 12 regional districts, but the advances were modest, with retail  sales posting only small gains and housing and construction remaining weak. Bank lending, meanwhile, was still tight.


WellPoint slipped $1.97 (3.7%) to $50.83. The managedcare provider's second-quarter profit rose 4% on lower claims costs, but operating revenue came in short of analysts' estimates.


Las Vegas Sands climbed $1.41 (5.6%) to $26.69. The casino and resorts owner swung to a second-quarter profit, topping analysts' expectations due in part to a strong showing by its newly opened Singapore property.


CH Robinson Worldwide jumped $3.67 (6%) to $64.87. The trucking company's second-quarter profit increased 5.4%, topping Wall Street's expectations on higher load volume.


International Paper fell $1.37 (5.4%) to $24.12. The paper and packaging company's second-quarter revenue slightlymissed analysts' estimates, and Chief Executive John Faraci predicted growth would moderate in the second half of 2010.
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US Economic News


In economic news, in its latest beige book report, the Fed said US economic activity rose only modestly in June and the first half of July in another sign that the recovery may be running out of steam.


Demand for US manufactured durable goods slid for a second consecutive month in June in another sign the manufacturing sector expansion is slowing. Economists expected a 1.1% gain.

 


European and Asian Markets


Most European shares dropped on Wednesday, breaking a six-session winning streak, as an unexpected decline in US


durable-goods orders rekindled worries over economic growth and outweighed positive earnings reports from companies including Infineon Technologies and Deutsche Boerse.


A notable exception to the broad-based losses was Portugal, where the PSI-20 stock index ended up 1% after Portugal Telecom agreed to sell its stake in Brazil's Vivo Participacoes to Spain's Telefonica for EUR7.5bn.


The Stoxx Europe 600 index fell 0.4% to 257.21 points. It closed at a level not seen for more than five weeks on Tuesday and started today's session with gains, but disappointing economic news prompted traders to reverse direction.


Orders for new US-made durable goods fell 1% in June, the second straight monthly decline and the biggest drop in 10 months, data showed. Economists had expected 1% growth.


Although shares have been advancing lately, the Stoxx Europe 600 index is still off by around 6% from a twelvemonth closing high of 272.14 hit on April 15.


PSA Peugeot Citroen swung to a first-half net profit of EUR680m, but management warned that the automotive division is expected to be close to breakeven in the second half. Shares of the car maker dropped 4.1%.


Steel giant ArcelorMittal, whose shares fell 2.1%, said that earnings in the coming months will be hit by a slowdown in demand from China.


Supported by the financial sector, the French CAC-40 index eked out small gains, ending up 0.1% at 3,670.36.


Shares of BNP Paribas gained 2.2% and Societe Generale added 1.8%.


Germany's DAX index fell 0.5% to 6,178.94 and the UK's FTSE 100 index declined 0.9% to 5,319.68.


Notable earnings-related advancers included Deutsche Boerse, which ended up 4.1%. Second-quarter net profit at the German exchange operator dipped to EUR160.8m, but comfortably exceeded analyst forecasts for a profit of EUR144m.


Shares of Infineon Technologies climbed 2.5%. The German chipmaker swung to a fiscal third-quarter net profit of EUR126m from a loss of EUR24m in the same period a year ago. It also raised its full-year forecasts.


In a busy day for French corporate news, Safran shares shot up 6.5%. The aerospace firm lifted its fiscal-year outlook after reporting an 8% rise in first-half adjusted net income.


Asian markets ended mostly higher, with Japanese stocks charging ahead as solid corporate earnings from Canon put some extra gloss on the already better outlook for exporters.


Japan's Nikkei Stock Average was the best performer of the region, surging 2.7% as Canon soared 5.7% on the back of its quarterly results on Tuesday.


China's Shanghai Composite climbed 2.3% to finish at a twomonth high and Hong Kong's Hang Seng Index gained 0.6%.


The New Zealand share market closed slightly higher following leads from Australia and Asia, although thin trading volumes amplified the moves. The NZX-50 index closed up 0.5%, or 14 points, at 3,022.181.

 


Commodities


Base metals on the London Metal Exchange closed higher as positive comments from China regarding its economic growth outlook continued to provide upward pressure despite disappointing US data.


Gold futures edged higher on Wednesday, rising above three-month lows on bargain buying but showing little direction as demand for refuge assets remains low.


Crude fell slightly as mixed economic data and a report on US oil inventories kept traders wary about demand in a sluggish recovery.

 


AUSTRALIAN OVERNIGHT NEWS

 


Australian Markets

 

Local shares are expected to open weaker following offshore leads.

 


Companies in the News


Lihir Gold (LGL)


Lihir said that second quarter production was in line with its guidance at 244,000 troy ounces, a 6% rise on the previous quarter. But costs at the company's flagship project on Lihir Island in Papua New Guinea came in ahead of guidance and expectations. Lihir said the three months to June 30 had  been solid and the company was on track for full year production of 1m-1.1m ounces. The company reported a record cash margin during the quarter of US$576/oz and said its planned merger with Newcrest Mining was proceeding on schedule.


The group's cash margin was helped by the generally higher gold price over the quarter and by costs falling to US$461/oz. But gross cash costs at Lihir Island rose 7% to US$118m, marking a second quarter above the group's typical guidance of US$105 a quarter after the March quarter's US$109.6m outcome. Full-year production guidance for Lihir Island remains unchanged at 800,000- 870,000 oz, while Mt. Rawdon, in Queensland, comfortably exceeded expectation to produce 24,500 oz in the quarter. Bonikro, the group's project in Ivory Coast, suffered higher rainfall and mechanical failures during the second quarter, pushing production below plan to 22,500 oz. LGL weakened 3 cents (0.73%) to $4.06.

 


MAp Group (MAP)


MAp said that MAp Airports International is considering selling its 16% stake in Mexican airport operator Grupo Aeroportuario del Sureste, or ASUR, in the near term. MAp said that it is currently considering selling its series B shares and American depositary shares in the operator through vehicle JMEX B.V. A MAp spokeswoman confirmed the shares constitute MAp Airports International's entire stake in the company. MAP rose 3 cents (1.01%) to $2.99.


Whitehaven Coal (WHC)


Whitehaven said it has received planning approval for the second stage of its Narrabri coal project in New South Wales. The approval by NSW Minister for Planning Tony Kelly will allow Narrabri to produce up to 8m tonnes of coal a year. Whitehaven expects full production at the site of 6m tonnes a year of coal for power stations and powdered material for blast furnaces, exporting through the port of Newcastle. Stage two of Narrabri's development will involve about $300m of capital spending with first production during 2011, on top of the $227m spent on the first stage approved in 2007. "Construction will commence as soon as we complete the final steps in the approvals process," Managing Director Tony Haggarty said, adding that permits were still required from the federal government. WHC fell 6 cents (1.09%) to $5.44.


Downer EDI (DOW)


Downer said its mining division has signed contracts worth around $2bn with BHP Billiton Mitsubishi Alliance. Downer said that the contracts, which run until June 2015, were for services at the Goonyella River and Norwich Park mines in Queensland's Bowen Basin. It said new equipment for the contracts totalling approximately $190m will be deployed in the next 12 months. DOW advanced 27 cents (5.93%) to $4.82.


Alesco (ALS)


Alesco posted a full year net loss of $124.3m, compared to a loss of $12.8m in the prior year, after booking a large impairment charge on its water products division.


New chief executive Peter Boyd said the loss, which had been foreshadowed in guidance given last month, was unacceptable but the company is now seeing some signs of recovery in demand and is confident it can get back on track through its Project Restore business improvement program. "While Alesco is generating trading profits and good cash flow, operational focus must be sharpened to restore our revenue base and operating margins," he said. Excluding a $133.1m writedown of the water products business, Alesco said its net profit before items for the year ended May 31 was down 57% at $12.4m, from $29.1m in the prior year.


Alesco paid no final dividend, and Boyd said that while there have been some positive leading indicators on activity in the housing market, the company remains cautious about the outlook for the next 12 months. An improvement in building approvals for detached housing pointed to stronger demand for the company's products in the current financial year, Boyd said, and Alesco is already seeing some signs of improvement in volumes for its B&D garage doors business. But Boyd said the Parbury decorative products range has been losing market share to competitors and needs to update its offering to keep up with changing tastes. Alesco still has a relatively strong balance sheet, with gearing of 23.2%, but Boyd signalled that making acquisitions won't be a priority for now. Revenue for the year fell 10% to $773.2m from $856.1m. ALS firmed 1 cent (0.4%) to $2.52.

 


Australian Economic News


CPI Rise Weak


Inflation rose less than expected in the second quarter of 2010, supporting the case for the Reserve Bank of Australia to halt its interest rate rise possibly until 2011. The consumer price index rose 0.6% in the second quarter and rose 3.1% from a year earlier, the Australian Bureau of Statistics said. Core inflation, which is critical for interest rate decisions, rose 0.5% in the second quarter and rose 2.7% from a year earlier, well within the tolerances of the central bank's 2%- 3% inflation target range. A tobacco tax increase and a strong rise in health costs added to inflation through the quarter. Offsets came in the form of a fall in prices for food, communications and holiday costs, the ABS said.