Reports » Australia

Australian stock market and companies daily report (September 03, 2010)

Contributed by Intersuisse

By Intersuisse Research

Market Overview

- US stocks rose on Thursday, with consumer companies including Home Depot,Walt Disney and Wal-Mart Stores leading the gains following better-than-expectedreadings from the housing and retail sectors.

- The Dow Jones Industrial Average climbed 0.49%, marking its third-straight gain. Home Depot jumped 2.6% as the home-improvement retailer was boosted by an unexpected increase in pending-home sales as well as a bigger-than-expected rise in retailers' same-store sales. Walt Disney and Wal-Mart also benefited from improved sentiment around consumer stocks following the reports, with Disney rising 1.2%, and Wal-Mart up 1.1%.

- Hewlett-Packard was also strong, up 1.2% as it won the battle to buy 3Par after increasing its offer for the maker of data-storage products to $2.1bn, prompting rival Dell to withdraw from the nearly two-week bidding war. Dell, which isn't a Dow component, added 2%. 3Par, which also isn't a Dow component, climbed 2.5%.

- International Business Machines kept the Dow's gains in check with a drop of 0.6%. The stock's decline came as investors fretted over whether H-P's deal to acquire 3Par might help the technology company better compete with IBM.

- Retailers led the climb after they delivered a late-summer surprise, with sales for the key back-to-school buying month of August coming in better than expected.

- In economic news, in a mixed picture of a struggling economic recovery, data showed a forecasting gauge of US home sales unexpectedly rose in July but new unemployment claims last week stayed high.

- The Australian Bureau of Statistics reported that the seasonally adjusted balance on trade in goods and services narrowed to a surplus of $1.89bn in July from $3.44bn in June. This was well short of expectations, as exports of coal and iron contracted and the government imported six new fighter jets.

INTERNATIONAL OVERNIGHT NEWS

US stocks rose on Thursday, with consumer companies including Home Depot, Walt Disney and Wal-Mart Stores leading the gains following better-than-expected readings from the housing and retail sectors.

The Dow Jones Industrial Average climbed 50.63 points (0.49%) to 10,320.10, marking its third-straight gain. Home Depot jumped 74 cents (2.6%) to $29.41, as the homeimprovement retailer was boosted by an unexpected

increase in pending-home sales as well as a bigger-thanexpected rise in retailers' same-store sales. Walt Disney and Wal-Mart also benefited from improved sentiment around consumer stocks following the reports, with Disney rising 40 cents (1.2%) to $33.91, and Wal-Mart up 56 cents (1.1%) to $51.76.

Hewlett-Packard was also strong, up 47 cents (1.2%) to $39.68. The technology giant won the battle to buy 3Par after increasing its offer for the maker of data-storage products to $2.1bn, prompting rival Dell to withdraw from the nearly two-week bidding war. Dell, which isn't a Dow component, added 24 cents (2%) to $12.36. 3Par, which also isn't a Dow component, climbed 80 cents (2.5%) to $32.88.

International Business Machines kept the Dow's gains in check with a drop of 73 cents (0.6%) to $125.04. The stock's decline came as investors fretted over whether H-P's deal to acquire 3Par might help the technology company better compete with IBM.

The Nasdaq Composite advanced 23.17 (1.06%) to 2,200.01. The Standard & Poor's 500 index gained 9.81 (0.91%) to 1,090.10.

Retailers led the climb after they delivered a late-summer surprise, with sales for the key back-to-school buying month of August coming in better than expected. Among the sector's gainers, Nordstrom jumped $2.44 (8.1%) to $32.76, Limited Brands added $1.48 (6.1%) to $25.75, and JC Penney advanced 66 cents (3.2%) to $21.41.

Burger King Holdings soared $4.73 (25%) to $23.59, after the fast-food company agreed to be acquired by New Yorkbased private-investment firm 3G Capital Management Inc. for $24 a share. The total deal, including equity and debt, is valued at around $4bn and is expected to close before the end of the year. Burger King said it may solicit better offers through mid-October.

Goodyear Tire & Rubber climbed 60 cents (6.3%) to $10.13. The tire maker plans to raise prices on its consumer tires by 6% in an effort to offset rising raw-material costs. The increase takes effect Oct. 1, and marks the second time the company has increased prices this year.

Google eked out a gain of $2.85 (0.6%) to $463.18, and AOL advanced 15 cents (0.7%) to $23.05. The companies agreed to extend their search partnership for five years and expanded their pact into mobile search and online video. The deal helps Google protect its dominant share of the fastgrowing web search business from smaller competitors. For its part, AOL appears to have used the threat of competition to extract more favourable financial terms from the search giant.

Del Monte Foods declined 33 cents (2.5%) to $12.83. The food company's fiscal first-quarter earnings rose 1.4%, but revenue missed analysts' expectations as sales dropped in its consumer segment. In addition, the company cut its sales-growth target for the year.

US Economic News

In economic news, in a mixed picture of a struggling economic recovery, data showed a forecasting gauge of US home sales unexpectedly rose in July but new unemployment claims last week stayed high.

European and Asian Markets

European stocks finished mixed on Thursday, with some markets eking out small gains after another string of positive US economic data.

The Stoxx Europe 600 index ended unchanged at 258.18 points. It rallied 2.7% on Wednesday, when investors welcomed strong manufacturing data from the US and China.

The German DAX index finished flat at 6,083.85 points. Markets in France and the UK managed to post small gains, as US data showed an increase in pending home sales, a rise in factory orders, and a decline in weekly jobless claims.

The French CAC-40 index rose 0.2% to 3,631.43 points and the UK's FTSE 100 index gained 0.1% to 5,371.04 points. Telecom shares and major banks were leading decliners in Europe.

Deutsche Bank shed 2.5% in Frankfurt and Allied Irish Banks dropped 2.6% in Dublin.

Deutsche Telekom fell 1%. The telecom is reportedly due to lose exclusivity for Apple Inc.'s iPhone in Germany ahead of the Christmas holiday shopping season, according to news sources.

In France, Pernod Ricard, the producer of wines and liquors, reported a marginal rise in fiscal 2010 net income, while sales dipped 1.7%. Shares fell 2.4% in Paris.

Also in the beverage sector, shares of Heineken NV dropped 2.1% in Amsterdam.

Asian stock markets ended mostly higher on Thursday, with exporters in Tokyo getting a boost from better-than-expected US manufacturing data and automakers in China rallying on a report of strong sales in August.

Japan's Nikkei Stock Average finished 1.5% higher, Hong Kong's Hang Seng Index rose 1.2% and China's Shanghai Composite Index advanced 1.3%.

New Zealand shares ended a bit higher following in the heels of global markets which rose on strong manufacturing data from the US and China. The NZX-50 ended up 0.2%, or 5.38 points, at 3,082.48.

Commodities

Base metals extended their gains on the London Metal Exchange, closing higher after a fresh set of encouraging US economic reports kept investors' renewed optimism alive.

Gold futures gained modestly as the US dollar retreated and investors looked toward US payrolls data on Friday.

Crude rose above $75 a barrel on Thursday, rebounding from earlier losses as data on the US economy hinted that the recovery continues despite its slower pace.

AUSTRALIAN OVERNIGHT NEWS

Australian Markets

Local shares are likely to open higher after more positive data emerged out of the US.

Ahead of the local open the September SPI futures were 30 points (0.70%) higher at 4,559.

Companies in the News

Rio Tinto (RIO)

Rio said that it expects fourth quarter iron ore prices to fall around 13.3% from the third quarter of 2010 to more "sustainable" levels after several price hikes. Rio's free-onboard price for iron ore fines - excluding freight costs - will slip to about US$127 a tonne in the quarter ending Dec. 31, Iron Ore Chief Executive Sam Walsh said. Walsh said the new price comes after several quarterly price hikes and reflects a more sustainable level for the iron ore market, which feeds into China's expanding steel industry. "When you look at the big picture, we'll see very robust demand for iron ore going forward," he said, adding that current prices remain "very attractive" for the miner.

Rio said that its new Brockman 4 iron ore mine could double its initial capacity of 22m tonnes a year. Rio officially opened the US$1.5bn mine today and Walsh said the mine features significantly in future expansion plans. The initial output of 22m tonnes a year fits within Rio’s overall 220m tonne capacity in the Pilbara region, he said. The mine has been earmarked for future expansion to double the initial capacity, "and we would expect that additional tonnage to form an important component of our planned expansion of Pilbara capacity to 330m tonnes per annum," Walsh said. RIO advanced 88 cents (1.22%) to $73.12.

Wesfarmers (WES)

Wesfarmers Chief Executive Richard Goyder said that consumers' personal circumstances have improved but they remain cautious and are still seeking out discounts. "We think consumers are probably in a better position now that they've been for a while - they've saved money, they're working longer hours, employment's still strong," Goyder said. Goyder said that Wesfarmers has experienced amixed  environment in its retailing businesses since June 30. Goyder said Wesfarmers' coal mining unit will be no better or worse off under the Labor government's proposed Mineral Resources Rent Tax. WES rose 57 cents (1.74%) to $33.29.

Origin Energy (ORG)

Origin said a partnership with India's Tata Power has been awarded a geothermal exploration concession in Indonesia. Origin said the venture, of which it will hold a 47.5% interest, will test the resource as part of an exploration program over the next 18 months. If a subsequent appraisal program is successful, construction of a generator is expected to begin in late 2012. Estimates indicate the resource could support development of 200-300 megawatts of generation capacity. ORG fell 2 cents (0.13%) to $15.49.

Equinox Minerals (EQN)

Equinox expects to start importing uranium from its Lumwana Copper Mine in Zambia by 2013, a newspaper has reported. Lumwana has stockpiled about 4.2m tonnes of uranium ore, aig Williams, Equinox's president and chief executive said in the report, adding that international uranium prices are expected to make exports of the metal commercially viable in 2013. Uranium and copper ores are embedded in the same rocks at Lumwana, Zambia's largest open-cast mine. EQN increased 28 cents (5.5%) to $5.37.

Metcash (MTS)

Metcash said trading conditions remain difficult but it maintained its guidance for earnings per share growth in the current fiscal year ending April 30, 2011. Chief Executive Andrew Reitzer said first quarter sales "reflect the prevailing market conditions and we expect the subdued sales to continue through to Dec. 10." "Despite this, we retain our guidance of 6%-8% growth in underlying EPS for FY11...". MTS fell 9 cents (2.04%) to $4.32.

Australian Economic News

Trade Surplus Down

The trade surplus fell well short of expectations in July despite a rise in commodity prices through the month, as exports of coal and iron contracted and the government imported six new fighter jets. The Australian Bureau of Statistics reported that the seasonally adjusted balance on trade in goods and services narrowed to a surplus of $1.89bn in July from $3.44bn in June. Imports rose 2% and exports fell 4% in July. Exports of coal, coke and briquettes fell 16%, while exports of metal ores and minerals were down by 7%, the bureau said. Unadjusted data showed big falls in hard coking coal exports to both China and India in July. The purchase of six new Super Hornet fighter aircraft for the Royal Australian Air Force added $477m to the import bill.