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Australian stock market and companies daily report (September 01, 2010)

Contributed by Intersuisse

By Intersuisse Research

Market Overview

- US stocks eked out a tiny advance on Tuesday, with AT&T, JP Morgan and Merck among the gainers in the conclusion of a bruising month for the market.

- The Dow Jones Industrial Average edged up 0.05% on Tuesday but tumbled 4.31% on the month, marking its first August drop in five years. August turned out to be the second-worst month of the year for the Dow Jones Industrial Average behind May, and the measure is now off 3.96% for the year.

- The Dow's technology components were the biggest weight on the Dow for August, with Hewlett-Packard dropping 16%, Intel sliding 14% and Cisco Systems declining 13% in the month.

- The swoon has come on a steady trail of disappointing economic data that have got investors increasingly worried about whether the economy could be headed toward a double dip.

- European stocks erased significant losses to finish higher on Tuesday after data showing a rise in US consumer confidence allayed near-term concerns over the pace of the economic recovery.

- Asian stock markets mostly declined with Japanese shares finishing at a fresh 16- month low as investors fretted over the adverse impact of a rising yen on the nation's economy and exporters.

- Australia posted its narrowest current account deficit in more than 20 years in the second quarter as a once-in-a-century mining boom continues to reshape the economy, putting it on the path of virtually unrivalled prosperity among developed economies even as the global backdrop remains murky. Retail sales rose a higherthan- expected 0.7% to a seasonally adjusted $20.4bn in July and discretionary spending grew sharply, with cafes and restaurants spending up 5.3% over the month.

INTERNATIONAL OVERNIGHT NEWS

US stocks eked out a tiny advance on Tuesday, with AT&T, JP Morgan and Merck among the gainers in the conclusion of a bruising month for the market.

The Dow Jones Industrial Average edged up 4.99 points (0.05%) to 10,014.72 on Tuesday but tumbled 4.31% on the month, marking its first August drop in five years. August turned out to be the second-worst month of the year for the Dow Jones Industrial Average behind May, and the measure is now off 3.96% for the year.

The Dow's technology components were the biggest weight on the Dow for August, with Hewlett-Packard dropping 16%, Intel sliding 14% and Cisco Systems declining 13% in the month.

The swoon has come on a steady trail of disappointing economic data that have got investors increasingly worried about whether the economy could be headed toward a double dip.

Still, with the Dow managing to edge up slightly on Tuesday, its gainers were led by AT&T, which rose 40 cents (1.5%) to $27.03, while JP Morgan Chase advanced 51 cents (1.4%) to $36.36, and Merck added 43 cents (1.2%) to $35.16. The Standard & Poor's 500 index rose 0.41 (0.04%) to 1,049.33, with gains in its telecommunications and financial sectors offsetting declines across its health-care and technology categories. The S&P 500 dropped 4.74% for the month, with its financial sector hit the hardest over the period. Just two sectors rose in August: telecommunications and utilities.

The Nasdaq Composite declined 5.94 (0.28%) to 2,114.03, on Tuesday, and it dropped 6.24% for the month of August. Monsanto dropped $3.25 (5.8%) to $52.65. The agribusiness giant warned it expects fiscal-year earnings to come in at the low end of its prior view.

Donaldson declined 98 cents (2.3%) to $41.90. The industrial filter maker's fiscal fourth-quarter profit surged on higher world-wide sales and continued progress in improving margins, but its fiscal-year revenue target missed analysts' expectations.

InterOil Corp. rose $1.89 (3.3%) to $58.75. The company said it will issue 199,667 shares to settle a 2005 Texas lawsuit by a partnership that bought a refinery that was ultimately acquired by a unit of the oil and natural-gas producer.

US Economic News

In economic news, US consumer confidence rose more than expected in August, boosted by expectations about future economic activity. The Conference Board's consumer confidence index rose to 53.5, topping the 51.0 reading economists were expecting.

US home prices were up for the third-straight month in June, pushing prices up 4.4% during the second quarter, according to the S&P Case-Shiller home-price indexes, thanks to boosts from a winding-down government tax credit for homebuyers.

US business activity showed growth in August, but at a slower-than-desired pace, according to the Institute for Supply Management-Chicago. The barometer checked in at 56.7 - barely on the recovery side - from 62.3 in July.

European and Asian Markets

European stocks erased significant losses to finish higher on Tuesday after data showing a rise in US consumer confidence allayed near-term concerns over the pace of the economic recovery.

The Stoxx Europe 600 index finished up 0.1% at 251.31 points, rebounding from an intraday low of 247.82. The index dropped 1.6% for the month.

The UK's benchmark FTSE 100 index closed up 0.5% to 5,225.22 points. The French CAC 40 index gained 0.1% to 3,490.79 and Germany's DAX 30 climbed 0.2% to 5,925.22. European stocks had traded lower for most of the session after Tokyo's Nikkei Stock Average dropped 3.6% on continued worries about the strength of the yen.

In Paris, shares of French retailer Carrefour had a see-saw session, losing 0.8%, having earlier gained as much as 2% after the retailer said it swung to a profit in the first half of the year.

Elsewhere in Paris, Hermes International dropped 2.7% after reporting its first-half results.

In the technology sector, shares of ASML Holding NV fell 3% in Amsterdam after analysts lowered their rating on the stock to hold from buy.

Shares of Infineon Technologies AG fell another 0.9%, extending losses made on Monday after the chip maker agreed to sell its wireless division to Intel Corp. for $1.4bn. Asian stock markets mostly declined with Japanese shares finishing at a fresh 16-month low as investors fretted over the adverse impact of a rising yen on the nation's economy and exporters.

The Nikkei Stock Average tumbled 3.6% to 8,824.06 for its lowest close since late April 2009. The benchmark shed 7.5% in August to become the worst performer among major Asian indexes. Hong Kong's Hang Seng Index fell 1.0%, resuming its decline a day after it snapped a six-session losing streak, while China's Shanghai Composite slipped 0.5%.

New Zealand shares ended flat, outperforming offshore markets although many investors stayed on the sidelines due to volatility. The NZX-50 ended down one point at 3,036.10.

Commodities

Base metals on the LME finished down.

Gold futures crept closer to record highs, rising on continued insecurity about the economic recovery as global equity markets struggle.

Crude tumbled on Tuesday, settling below $72 a barrel as investors turned their attention toward increasingly high US oil supplies and the slowing economy.

AUSTRALIAN OVERNIGHT NEWS

Australian Markets

Local shares may trade sideways today after a lacklustre night in overseas markets.

Ahead of the local open the September SPI futures were 41 points (0.90%) higher at 4,428.

Companies in the News

New Hope Corp (NHC)

New Hope said it produced 1.7m tonnes of saleable coal in its fiscal fourth quarter ended July 31. This compares with 1.4m tonnes of saleable coal produced a year before. The company said that it sold 1.6m tonnes of coal in the fourth quarter, up 30% on year. New Hope expects to report full year profit, after tax but before non-recurring items, of $175m-$185m. NHC rose 1 cent (0.22%) to $4.63.

Minara Resources (MRE)

Minara said it swung to a first-half net profit of $39.7m from a loss of $3.1m a year earlier and confirmed its production guidance. The company said revenue rose 23% to $233.7m in the six months to June 30 from $190.1m a year earlier. Affected by a pipeline failure, production at Murrin Murrin fell to 14,512 tonnes of packaged nickel in the first half from 15,604 tonnes a year ago. Cobalt production fell to 1,008 tonnes from 1,084 a year ago. The company didn't propose an interim dividend. However, the company is planning to return $111m to shareholders next month. The company said Murrin Murrin production guidance for the 2010 full year remains unchanged at the lower end of 30,000-34,000 tonnes of nickel, taking into account a scheduled maintenance shutdown in October. MRE fell 1 cent (0.67%) to $0.74.

Southern Cross Media (SXL)

Southern Cross reported an $82.7m net loss after it booked a $102.6m loss from its divested regional US newspaper operations. The annual loss was a 2.2% improvement on an $84.6m loss recorded in the previous year. Net profit for the year to June 30 from continuing operations increased 6.8% to $19.9m from $18.6m as revenue rose 2.8% to $406.9m from $395.7m. Southern Cross declared a final dividend of 6.2 cents per share, up from 3.2 cents in the previous year. SXL rose 6 cents (3.11%) to $1.83.

Centro Properties (CNP)

Centro signalled its recovery is far from complete, reporting a $652.7m annual loss and acknowledging its debt load remains unsustainable. Centro still has a portfolio of 600 shopping malls in the US and 112 in Australia owned in disparate units of what is still a complex business. With $18.6bn of investment properties and $18.4bn of related debt, net equity stands at negative $2.1bn. "This is clearly an unsustainable capital structure," it said. Underlying profit - which excludes the impact of revaluations, impairments, currency fluctuations and the value of derivative investments - fell 24.2% to $173.8m from $229.2m. Property investment revenue was hit by lower rental income in the US and increased interest rates raising debt costs in Australia. Group revenue fell 16.9% to $1.81bn from $2.17bn.

The group reiterated comments made in July that it is talking to its lenders about a sweeping restructure that will probably take until the end of 2011 to complete. Chief Executive Robert Tsenin said options include separating the US business from the Australian business, combining assets from various funds and syndicates into large, liquid Australian or US real estate investment trusts, or REITs, or separate trade sales. Combining assets could attract capital by creating liquidity in vehicles where assets are 100% owned by the vehicle, Tsenin said. Any such aggregation, though, would be difficult to execute, he added. "Because of the co-ownership vehicles in which our assets are held, we will require consents from various stakeholders on pretty much anything material that we do," Tsenin said. CNP declined 1 cent (5.71%) to $0.17.

Australian Economic News

Current Account Deficit Narrows

Australia posted its narrowest current account deficit in more than 20 years in the second quarter as a once-in-a-century mining boom continues to reshape the economy, putting it on the path of virtually unrivalled prosperity among developed economies even as the global backdrop remains murky. The current account deficit narrowed to a seasonally adjusted $5.6bn in the second quarter of 2010 from a shortfall of $16.46bn in the first quarter, the ABS said. It was the narrowest deficit since the first quarter of 1989, the ABS said. Coal exports grew in value by $4bn as prices rose 25% and volumes grew by 22%. Metal ore exports rose by $5.6bn on the back of a 39% price spike. The improvements drove a $9.7bn turnaround in trade of goods and services, the ABS said. Surging exports will add 0.4 percentage point to economic growth in the second quarter, it said.

Retail Sales and Housing Approvals Up

Retail sales rose a higher-than-expected 0.7% to a seasonally adjusted $20.4bn in July and discretionary spending grew sharply, with cafes and restaurants spending up 5.3% over the month. Meanwhile, the total number of houses and apartments approved for construction rose a seasonally adjusted 2.3% in July from June, the ABS said. Also, capital city house prices rose a seasonally adjusted 0.4% in July from June, according to the RP Data-Rismark Hedonic Home Value Index. Prices fell in June for the first time in 17 months.