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Australian stock market and companies daily report (September 02, 2010)

Contributed by Intersuisse

By Intersuisse Research

Market Overview

- US stocks rallied on Wednesday, with Bank of America, Caterpillar and JP Morgan Chase leading broad gains in a strong start to September after manufacturing data topped expectations.

- The Dow Jones Industrial Average advanced 2.54%, marking its biggest one-day gain since July 7 and its fifth-largest one-day gain this year. All 30 of the measure's components rose, led by Bank of America, which jumped 6.1%. Caterpillar was also strong, up 4.6%, and JP Morgan added 3.8%.

- The Nasdaq Composite gained 2.97%. The Standard & Poor's 500 index climbed 2.95%, with all of its sectors ending the session higher. The industrial and financial sectors posted the biggest percentage increases.

- The gains followed a report from the Institute for Supply Management showing the US manufacturing sector unexpectedly rebounded in August, with employment rising strongly. The data came on the back of encouraging manufacturing numbers from China. The reports stood in great contrast to more downbeat numbers on the economy recently, and helped feed investors' thirst for a ray of hope following the market's worst August since 2001.

- European stocks rallied on Wednesday, as US data showed an unexpected rise in  the ISM manufacturing index, rekindling hopes of a strong recovery in the global economy. The Stoxx Europe 600 index advanced 2.7%.

- Asian stock markets were mostly upbeat on Wednesday as solid economic data from Australia and China helped investors overcome worries over the health of the global economic recovery. Investors were heartened by China manufacturing data showing growth is stabilising at a moderate but healthy pace, analysts said

- Australia's economy grew at its fastest quarterly pace in three years in the second quarter of 2010 as household spending and a mining boom spurred activity.

INTERNATIONAL OVERNIGHT NEWS

US stocks rallied on Wednesday, with Bank of America, Caterpillar and JP Morgan Chase leading broad gains in a strong start to September after manufacturing data topped expectations.

The Dow Jones Industrial Average advanced 254.75 points  (2.54%) to 10,269.47, marking its biggest one-day gain since July 7 and its fifth-largest one-day gain this year. All 30 of the measure's components rose, led by Bank of America, which jumped 76 cents (6.1%) to $13.21. Caterpillar was also strong, up $3 (4.6%) to $68.16, and JP Morgan added $1.38 (3.8%) to $37.74.

The Nasdaq Composite gained 62.81 (2.97%) to 2,176.84. The Standard & Poor's 500 index climbed 30.96 (2.95%) to 1,080.29, with all of its sectors ending the session higher. The industrial and financial sectors posted the biggest percentage increases.

The gains followed a report from the Institute for Supply Management showing the US manufacturing sector unexpectedly rebounded in August, with employment rising strongly. The data came on the back of encouraging manufacturing numbers from China. The reports stood in great contrast to more downbeat numbers on the economy recently, and helped feed investors' thirst for a ray of hope following the market's worst August since 2001.

There were some weak spots in Wednesday's data. The Commerce Department reported US construction spending declined in July to the lowest level in 10 years, and payroll giant Automatic Data Processing said private-sector jobs in the US fell by 10,000 during August. However, investors overlooked those reports as the manufacturing data seemingly put the market into euphoria.

Burger King soared $2.41 (15%) to $18.86. A newspaper reported that the fast-food company has been in talks with private-equity firms in recent weeks about a possible sale of the second-largest hamburger chain, according to people familiar with the matter.

Electronic Arts climbed 88 cents (5.8%) to $16.11. The videogame publisher estimated sales of its Madden NFL 11 increased 5% in August to become the top-selling videogame in North America. The company also said digital revenue for game has more than tripled from a year earlier. Itron added $3.65 (6.8%) to $57.65, and Cisco Systems advanced 28 cents (1.4%) to $20.26. The companies announced a strategic alliance where the smart-meter company and the network communications giant will work on a new communications platform for smart-grid technology.

Joy Global advanced $3.61 (6.4%) to $60.16. The miningequipment company's fiscal third-quarter profit fell 4.7%, but it raised its profit outlook for the year. In addition, Joy Global said the recent slowdown in demand for mined commodities from China and the US and the threat of higher taxes in some commodity-rich countries aren't diminishing customers' interest in adding new equipment. Shares of rival Bucyrus International increased $4.56 (7.9%) to $62.05.

US Economic News

In economic news, US construction spending in July dipped to the lowest level in 10 years, but the factory sector grew more than expected in August, a sign of hope for the struggling economic recovery. Private-sector jobs, however, unexpectedly fell slightly in August.

European and Asian Markets

European stocks rallied on Wednesday, as US data showed an unexpected rise in the ISM manufacturing index, rekindling hopes of a strong recovery in the global economy.

The Stoxx Europe 600 index advanced 2.7% to end at 258.19 points. The index extended gains after the Institute for Supply Management reported that its manufacturing index rose to 56.3% in August from 55.5% in July. The data was much better than expected, since economists projected a decline.

Among the major European benchmarks, the French CAC 40 index was the top gainer, surging 3.8% to 3,623.84 points. The UK's FTSE 100 index rose 2.7% to 5,366.41 points. In Germany, the DAX 30 index gained 2.7% to 6,083.90 points, with shares of retailer Metro AG up 5.4% on Xetra.

In Paris, shares of French media and communications giant Vivendi SA surged 5% after the group said its full-year earnings outlook has improved and its adjusted secondquarter earnings beat forecasts.

Cement producers in Europe got a boost after a broker upgraded the sector, lifting both Holcim and Lafarge to outperform from underperform. Shares of Holcim gained 3.2% in Zurich and those of Lafarge rallied 5.5% in Paris. In the mining sector, shares of Rio Tinto rose 6.1% and those of Kazakhmys soared 6.9%.

Asian stock markets were mostly upbeat on Wednesday as solid economic data from Australia and China helped investors overcome worries over the health of the global economic recovery. Investors were heartened by China manufacturing data showing growth in the world's second largest economy is stabilising at a moderate but healthy pace, analysts said.

Japan's Nikkei Stock Average ended 1.2% higher, rebounding after touching a new 16-month low earlier. The Shanghai Composite ended 0.6% lower, while Hong Kong's Hang Seng Index added 0.4%.

New Zealand shares ended higher, mirroring regional gains brought about by positive economic data from China and Australia. The NZX-50 closed up 1.4%, or 41.00 points, at 3,077.10.

Commodities

Base metals closed higher on the London Metal Exchange on the back of stronger equities and new figures indicating an unexpected rebound in the US manufacturing sector.

Gold futures finished slightly lower as stronger-thananticipated manufacturing data dulled some of the safehaven shine that had earlier sent the metal to fresh twomonth highs.

Crude-oil settled higher on Wednesday, helped by improving data on US manufacturing and rising equities markets that trumped fears about increasing oil supplies.

AUSTRALIAN OVERNIGHT NEWS

Australian Markets

Shares are likely to open higher after the US market surged overnight on positive data.

Ahead of the local open the September SPI futures were 74 points (1.60%) higher at 4,567.

Companies in the News

QBE Insurance (QBE)

QBE scotched speculation that it is seeking to hire a replacement for its long-standing Chief Executive Frank O'Halloran. "Recent media reports indicating that the QBE board is searching for an external replacement for the CEO Frank O'Halloran are completely false," Chairman Belinda Hutchinson said. "The board hasn't appointed an external recruiter to fill the CEO role." She said the company has a "long standing and successful succession planning process," but that O'Halloran "will remain the CEO for the foreseeable future." QBE increased 28 cents (1.7%) to $16.77.

Leighton Holdings (LEI)

Leighton said that its Middle Eastern joint venture Al Habtoor Leighton Group has won a construction contract for a $220m building project in Dubai. Leighton said the development comprises three towers with an office, hotel and apartment block. Construction will commence immediately with completion due by December, 2011. LEI rose 84 cents (2.74%) to $31.54.

Qantas (QAN) and Jetset Travelworld (JET)

The Australian Competition and Consumer Commission said it won't oppose the merger of two of Australia's largest travel agency businesses, after ruling the proposed acquisition of privately-owned travel agency Stella Travel Services by Qantas controlled Jetset wasn't likely to hurt competition. The ACCC said that following an extensive review, it has concluded that the combined group, which will include Stella's Harvey World Travel and Travelscene American Express alongside Qantas Holidays and Qantas Business Travel is "unlikely to result in a substantial lessening of competition in any of the relevant markets." QAN rose 5 cents (1.99%) to $2.56. JET improved 12 cents (16.79%) to $0.80.

James Hardie (JHX)

James Hardie said it has lost an appeal against a tax ruling over its 1998 corporate restructure that is likely to see it be required to pay around US$168.8m in back taxes. The Federal Court dismissed the appeal by its subsidiary RCI, relating to an amended assessment of tax liability issued by the Australian Taxation Office for the year to March 31, 1999. James Hardie said it is considering whether it will further appeal the decision but is "likely to be required to record a charge," which it estimated at US$330.4m as at June 30, 2009. The company said it will remain in compliance with its debt covenants should a charge be taken. JHX fell 8 cents (1.5%) to $5.25.

Nufarm (NUF)

Nufarm confirmed previous profit guidance for last fiscal year ended July 31 will fall sharply from the previous year, and said debt will be way higher than estimated. Preliminary and unaudited analysis confirms net operating profit will be within the $55m-$65m range indicated by management in a July 14 market update. Profit on this measure in fiscal 2009 fell to $159.7m from $163.9m in fiscal 2008. Net debt at July 31 will be $620m, up by more than one-third from a July 14 estimate of $450m, which reflects increased working capital levels at July 31 mainly due to higher than expected receivables, it said. July sales were largely in line with company expectations but the collection of cash associated with those sales, and most June sales, won't occur until after July 31, it said. The higher than expected debt level at July 31 puts Nufarm in minor breach of its covenant relating to leverage levels, but this breach will also be covered by the waivers now being put in place, it said. NUF fell 26 cents (6.75%) to $3.59.

Australian Economic News

Economy Booming

Australia's economy grew at its fastest quarterly pace in three years in the second quarter of 2010 as a recovery in household spending and a mining boom spurred activity, increasing expectations the central bank will need to raise interest rates again, potentially before the end of the year.

The economy grew by a seasonally-adjusted 1.2% in the second quarter from the first quarter and by a seasonallyadjusted 3.3% from the year-earlier period, the Australian Bureau of Statistics said. The result was based on a 5.6% rise in export volumes, illustrating a rapid transformation being generated by the mining boom. All eyes are now on whether the private sector can step up to take the reins from public spending to keep the economy growing strongly in the year ahead.