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Australian stock market and companies daily report (August 30, 2010)

Contributed by Intersuisse

By Intersuisse Research

Market Overview

- US stocks climbed on Friday, with DuPont, Alcoa and Caterpillar leading broad gains. Investors took comfort in Federal Reserve Chairman Ben Bernanke's promise to do what it takes to support an economic recovery, along with a betterthan- feared revision of second-quarter economic growth.

- The Dow Jones Industrial Average rose 1.65%, its biggest one-day gain since Aug. 2. Still, the measure fell 0.62% last week, its third straight week in the red. It is now off 3.01% for the month and it has fallen 2.66% this year. In Friday's session, DuPont added 3.9%, while Alcoa and Caterpillar each gained 3.1%.

- The gains came as Federal Reserve Chairman Ben Bernanke said he is ready to do what it takes to support an economic recovery that has been losing steam. He said the Fed has not yet agreed on what would trigger further action. Bernanke also said he expects the US economy to continue growing in 2011 and subsequent years, signalling further Fed action may not be needed.

- Also providing some relief, the Commerce Department's revision to second-quarter gross domestic product came in at 1.6%, below the previous estimate but better than expected.

- European stock markets ended a volatile session with gains on Friday, lifted by better-than-expected US growth data and Federal Reserve Chairman Ben Bernanke's promise to "strongly resist" deflation.

- European markets reacted positively after the US Commerce Department cut its estimate for second-quarter gross domestic product growth to 1.6% - a sharp reduction from the previous estimate of 2.4%, but still not as bad as the 1.3% forecast of economists.

INTERNATIONAL OVERNIGHT NEWS

US stocks climbed on Friday, with DuPont, Alcoa and Caterpillar leading broad gains. Investors took comfort in Federal Reserve Chairman Ben Bernanke's promise to do what it takes to support an economic recovery, along with a better-than-feared revision of second-quarter economic growth.

The Dow Jones Industrial Average rose 164.84 points (1.65%) to 10,150.65, its biggest one-day gain since Aug. 2. Still, the measure fell 0.62% last week, its third straight week in the red. It is now off 3.01% for the month and it has fallen 2.66% this year.

In Friday's session, DuPont added $1.52 (3.9%) to $41.01, while Alcoa advanced 31 cents (3.1%) to $10.32, and Caterpillar gained $1.95 (3.1%) to $65.90.

The gains came as Federal Reserve Chairman Ben Bernanke said he is ready to do what it takes to support an economic recovery that has been losing steam. Bernanke also said he expects the US economy to continue growing in 2011 and subsequent years, signalling further Fed action may not be needed.

Also providing some relief, the Commerce Department's revision to second-quarter gross domestic product came in at 1.6%, below the previous estimate but better than expected.

Investors even took an optimistic approach to a guidance  cut from Intel, which rose 19 cents (1.1%) to $18.37. The chip giant lowered its third-quarter revenue and gross-margin targets as weaker-than-expected consumer demand for personal computers takes its toll. However, investors said the warning wasn't a surprise, and focused on a bright spot Intel noted: there is "solid" enterprise demand helping offset the impact of lower volume.

Hewlett-Packard was the Dow's lone decliner. The stock fell 22 cents (0.6%) to $38, as its battle with Dell for datastorage company 3Par continued. H-P raised its latest offer 11% above Dell's bid made only hours before, extending a  fight for 3Par that has gone on for a little more than a week.

Dell edged up 14 cents (1.2%) to $11.89, while 3Par surged $6.43 (25%) to $32.46. Dell and 3Par are not Dow components.

The Nasdaq Composite climbed 34.94 (1.65%) to 2,153.63. The Standard & Poor's 500 index added 17.37 (1.66%) to 1,064.59. All of the measure's sectors closed in positive territory, led by the materials sector.

Boeing gained $1.84 (3%) to $63.16, even as the company announced a new delay that will push first delivery of the 787 Dreamliner plane into the middle of the first quarter 2011.

Tiffany slipped $1.33 (3.2%) to $40.71. The jewellery retailer's fiscal second-quarter earnings climbed 19%, though revenue fell short of analysts' expectations.

J Crew fell $2.39 (7.2%) to $31.04. The retailer's fiscal second-quarter profit surged 88%, topping analysts' expectations, but the company issued a weak outlook for the current quarter and trimmed its full-year guidance.

Economic News

In economic news, Fed chairman Ben Bernanke said he expects the US economy to continue growing in 2011, but the central bank is ready to act if needed to bolster the economy and to avoid deflation. He said the Fed has not agreed on what would trigger further action.

European and Asian Markets

European stock markets ended a volatile session with gains on Friday, lifted by better-than-expected US growth data and Federal Reserve Chairman Ben Bernanke's promise to "strongly resist" deflation.

The Stoxx Europe 600 index rose 0.6% to finish at 251.24 points after dipping in and out of positive territory several times during the session. The index has fallen 1.6% so far this month.

European markets reacted positively after the US Commerce Department cut its estimate for second-quarter gross domestic product growth to 1.6% - a sharp reduction from the previous estimate of 2.4%, but still not as bad as the 1.3% forecast of economists.

But gains were largely wiped out after Intel Corp. cut its thirdquarter sales forecast to around $11bn from a range of $11.2bn to $12bn, citing weaker-than-expected demand for consumer PCs.

Subsequently, markets rebounded, as Bernanke said the Fed wouldn't let the US economy sink into a period of deflation.

In the UK, the FTSE 100 index rose 0.9% to 5,201.56 points and the French CAC 40 index advanced 0.9% to end at 3,507.44. The German DAX 30 index gained 0.7% to 5,951.17 points.

Following the news from Intel, some European technology stocks came under pressure, with STMicroelectronics falling 3.9% in Paris and Infineon Technologies losing 1% on Xetra in Frankfurt.

EADS was another big faller on Friday, dropping 3.2% in Paris after French newspaper Les Echos reported the group's Airbus unit has cut production forecasts for its A350 airliner to far below the targets set in 2007. Production plans have been reduced for every year, with the aircraft maker now expecting to make 60 A350s in 2015, compared to the previous target of 83, the newspaper said. The forecasts could be revised down even further if the A350 program suffers further delays, it added.

US rival Boeing was also in the news after it said it will delay the delivery of the first 787 Dreamliner aircraft until the middle of the first quarter of 2011. The company cited delays in the availability of engines from UK supplier Rolls-Royce Group, whose shares dropped 0.6% on the London Stock Exchange.

Some oil stocks came under pressure, with BP falling 1.5% and Tullow Oil dropping 3.8% after further reports of problems for the company in Uganda. It was reported that the country's government has repossessed the Kingfisher oil field after exploration licenses expired. Tullow said earlier in the week it faced delays in Uganda because of a tax dispute between the government and its partner Heritage Oil.

Asian stock markets ended mixed as some investors stayed cautious ahead of 2Q US GDP data and a speech by Federal Reserve Chairman Ben Bernanke, while shares in Tokyo rose amid hopes of possible stimulus measures and potential government action to stem the yen's strength.

Japan's Nikkei Stock Average ended 1.0% higher, Hong Kong's Hang Seng Index was 0.1% lower, while China's Shanghai Composite Index climbed 0.3%.

New Zealand stocks ended weaker, tracking offshore leads in a fairly quiet session as investors digested local company results. The benchmark NZX-50 ended down 0.4%, or 11 points, at 3,007.44. The index gained 0.2% over the week.

Commodities

Base metals on the London Metal Exchange ended the week on a high note, as a rallying euro and mildly positive comments from US Federal Reserve Chairman Ben Bernanke were enough to sweep the metals higher. Investors continue to buy gold as a haven but are reluctant to send it to a new record.

Crude ended the week with a three-day rally, as comments by US Federal Reserve Chairman Ben Bernanke gave investors renewed confidence that the central bank would step in if the US economic recovery is in jeopardy.

AUSTRALIAN OVERNIGHT NEWS

Australian Markets

Local shares are expected to head higher after a positive lead from Wall Street on Friday.

Ahead of the local open the September SPI futures were 41 points (0.90%) higher at 4,389.

Companies in the News

Lihir Gold (LGL)

Lihir said that it swung to a first half net profit of US$87.1m from a US$300.9m loss a year earlier, when it wrote off its Ballarat gold mine. The company said revenues in the six months to June 30 fell 2% to US$544.9m from a restated US$555.3m in the previous year. Lihir didn't propose an interim dividend. On an underlying basis, which excludes one-off items, the company recorded a net profit of US$142.5m, down from A$168m a year before. LGL weakened 9 cents (2.01%) to $4.38.

Harvey Norman (HVN)

Harvey Norman reported full-year net profit of $231.4m, up 8% from $214.4m a year ago. The group said in late July that sales from its outlets, excluding Singapore, for the ye ar ended June 30 were largely flat at $6.08bn, compared to $6.03bn a year ago. The retailer declared a final dividend of 7 cents a share, up from 6 cents a share last year. As for its outlook, the group said the acquisition of 29 Clive Peeters and Rick Hart branded stores in July will "give a positive return" in the current financial year. Management also said it has "positive expectations" for fiscal 2011. HVN fell 1 cent (0.28%) to $3.53.

Intoll (ITO)

Intoll endorsed a sweetened, $3.44bn takeover offer from Canada Pension Plan Investment Board that values its assets at book value. Intoll said the value of its road portfolio at June 30 was $3.43bn, but noted investor frustration over the consistent underperformance of its share price. It said CPPIB's proposal of $1.52 cash per Intoll security is an enhancement of about 2.5 cents to the pension fund's initial proposal on July 15, based on current exchange rates. Although the previous offer was quoted on July 15 at $1.535 per security, the actual offer comprised a combination of Australian and Canadian dollars, so the $1.535 was based on a conversion using exchange rates at the time. The new offer is in Australian dollars only and fixed, meaning it can't be moved around by exchange rate fluctuations. Intoll's directors haven't provided a recommendation on a cash and shares alternative offer, at 1.0237 CPPIB securities and 22.4 cents cash per Intoll security.

Intoll said it swung to an annual net profit of $1.51bn, turning around a $2.40bn loss in the previous year. It said the improvement was largely caused by a gain resulting from the demerger and group restructure announced in February. Intoll said its proportionate earnings for the year to June 30 increased 14.8% to $73.8m from $64.3m, with traffic and earnings before interest, tax, depreciation and amortisation from the 407 ETR and Australia's Westlink M7 "increasing significantly". ITO rose 2 cents (1.37%) to $1.48.

Fairfax Media (FXJ)

Fairfax said that its full-year net profit came in at $282.1m as tight cost control helped to offset falling revenues amid tough advertising markets. Revenue for the year to June 27 slipped to $2.48bn from $2.6bn last year. The group booked a net loss of $380.1m a year ago when it wrote down the value of  its mastheads. On an underlying basis, profit for the year was $278.7m, up 23% on year, including a special preference share dividend, beating market forecasts. The group also said trading for the first seven weeks of the new financial year has been similar to the second half of the last fiscal year, with revenues up more than 5% on year. "Should current market trends continue, we would anticipate high single digit earnings growth for the first half," Fairfax said. Fairfax will pay a final dividend of 1.4 cents a share. It also flagged a new organisational structure to place it better for a new media environment, which will see greater sharing of content across its platforms and more integrated selling. It also said it will transform its city newspaper business to ensure they remain profitable, with a focus on efficiency. FXJ advanced 6 cents (4.41%) to $1.42.

Sims Metal Management (SGM)

Sims posted a full year net profit of $126.7m, up nearly threefold on improvements in many of the company's markets. The result for the 12 months to June 30 reversed a $150.3m loss in the previous year. Sims said revenue for the year fell 14% to $7.46bn from $8.64bn. The group will pay a final dividend of 23 cents a share, up from 10 cents last year. In its various regions, sales revenue from North America, its largest region, was down 21% on the year, up 5% in Australia and Asia, and up 7% in Europe. The group said economic conditions were too uncertain for management to give specific guidance for fiscal 2011. SGM rose 82 cents (5.28%) to $16.36.

Fisher & Paykel Healthcare (FPH)

Fisher & Paykel said it expects its full year net profit will now be slightly lower, largely due to the impact of the strong New Zealand dollar. The company said its full year net profit will be NZ$65m to NZ$70m, prior to a one-off deferred tax adjustment. The deferred tax adjustment, stemming from changes in the government's budget announced May 20, will reduce its net profit by approximately NZ$12m, it said. The tax adjustment will be included in its first half result. Prior to the adjustment, it said net profit for the first half will be approximately NZ$27m. Chief executive Michael Daniell said that its full year operating revenue, allowing for higher current exchange rates, would be approximately NZ$530m. Both the full year net profit and revenue forecasts are lower than the full year 2011 guidance it gave in May. At the time, it said it would achieve operating revenue of approximately NZ$560m and profit after tax of approximately NZ$70m to NZ$75m. FPH firmed 1 cent (0.45%) to $2.25.

Hastings Diversified Utilities Fund (HDF)

Hastings reported first-half net profit rose to $17.1m from $7.6m a year ago. The investment vehicle declared a 6 cent per security distribution for the half. Hastings invests in a range of utility infrastructure assets in Australia and overseas. The fund is managed by Westpac subsidiary Hastings Funds Management. HDF dropped 3 cents (2.24%) to $1.31.

Independence Group (IGO)

Independence said full-year net profit was $28.7m, up 78% from a net profit of $16.1m a year ago. The miner declared a 3-cent-a-share final dividend. Revenue from continuing operations for the year to June 30 rose to $116.7m from $100.1m a year ago. IGO firmed 4 cents (0.74%) to $5.41.

Macmahon (MAH)

Macmahon said its annual profit more than doubled to $37.9m from $17.2m in the previous year. Revenue for the year to June 30 fell 16% to $1.25bn from $1.49bn after clients imposed cancellations and scale-backs on several mining projects in the first half, in the wake of the global financial crisis. Macmahon said it has "now returned to more stable profit margins". It forecast revenue in the current financial year to exceed $1.25bn and declared a final dividend of 1.5 cents a share. Macmahon didn't pay a final dividend in the previous year. MAH remained unchanged at $0.58.