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Australian stock market and companies daily report (February 17, 2012)

Contributed by Intersuisse

Market Overview

- The Dow Jones Industrial Average rebounded to end with its highest close in almost four years after strong readings from the labor and housing markets, and progress in Europe toward a second bailout for Greece.

- The Dow Jones Industrial Average advanced 123.13 points, or 1%, to 12,904.08. Blue chips recovered after falling 97 points on Wednesday, the Dow's worst session of the year, ending Thursday with the highest close since May 2008. The Standard & Poor's 500-stock index rose 14.81 points, or 1.1%, to 1,358.04, and the Nasdaq Composite rose 44.02 points, or 1.5%, to 2,959.85.

- Stocks moved higher after US economic data encouraged investors, then extended gains after a reports that euro-zone central banks will swap Greek debt for new bonds by Monday, a move that takes away one hurdle standing in the way of a second Greek bailout.

- European stocks fell as investors digested conflicting information about whether Greece will get its EUR130 billion loan tranche before its March 20 bond redemption payment becomes due, while the prospect of further downgrades for the region's banks weighed heavily on sentiment.

- US crude oil prices settled at a seven-week high, while North Sea Brent traded near an eight-month high as buyers scrambled to line up alternative supplies amid outages in Yemen, South Sudan and worries about near-term flows from Iran.

- Local shares look set to reclaim some of yesterday's losses after Wall Street rose on another round of good jobs and housing numbers and European investors welcomed news that Greece had moved closer to securing a second bailout. Ahead of the local open, SPI futures were trading 42 points higher at 4,183.

INTERNATIONAL OVERNIGHT NEWS

The Dow Jones Industrial Average rebounded to end with its highest close in almost four years after strong readings from the labor and housing markets, and progress in Europe toward a second bailout for Greece.

The Dow Jones Industrial Average advanced 123.13 points, or 1%, to 12,904.08. Blue chips recovered after falling 97 points on Wednesday, the Dow's worst session of the year, ending Thursday with the highest close since May 2008. The Standard & Poor's 500-stock index rose 14.81 points, or 1.1%, to 1,358.04, and the Nasdaq Composite rose 44.02 points, or 1.5%, to 2,959.85.

All 10 sectors in the S&P 500 rose, with materials and financial stocks leading the advance. Among Dow components, Microsoft gained 4.1% and Bank of America rose 4%.

Stocks moved higher after US economic data encouraged investors, then extended gains after a reports that euro-zone central banks will swap Greek debt for new bonds by Monday, a move that takes away one hurdle standing in the way of a second Greek bailout.

In corporate news, General Motors rose 9% after the auto maker reported a record profit of $7.6bn for 2011, but saw losses in Europe and thin profit margins in the fourth quarter.

Clearwire's fourth-quarter loss widened as the company's interest expenses rose, though its subscriber base continued to expand. Shares slid 4.7%.

NetApp tacked on 7.2% and led the S&P 500 despite reporting fiscal third-quarter earnings fell 36% on higher charges and weaker margins. The data-storage company posted double-digit-percentage sales growth.

JM Smucker slid 8.4%, making it the S&P 500's biggest laggard, after the company reported weaker-than-expected fiscal third-quarter results and cut its full-year earnings outlook.

Blue Nile tumbled 10%. The online jewelry retailer reported disappointing fourth-quarter earnings and revenue, and indicated its results for the current quarter will fall short of expectations.

Amazon.com fell 2.5%, after a report warning that Apple's iPhones and iPads sales could take away market share in electronic books. The stock fell even after a report from IHS showed Amazon's Kindle fire and other low-price tablets cut into Apple's market share in the fourth quarter.

Paccar's shares rose 4.9% after the chief executive of Swedish truck maker Scania said the European truck market has bottomed out. Europe's struggling truck market has been weighing on Paccar because its DAF truck brand is a major player in the European market.

Molson Coors Brewing's fourth-quarter earnings climbed 58% amid stronger-than-expected sales growth, and shares rose 2.9%.

For Australian ADRs listed on the NYSE, BHP Billiton rose by $0.83 (1.09%) to $76.90, ResMed rose by $0.01 (0.03%) to $29.41, Telstra Corporation rose by $0.18 (0.99%) to $18.32, Telecom Corporation of NZ fell by $0.03 (-0.34%) to $8.87, Westpac fell by $1.20 (-1.08%) to $110.04.

US Treasurys extended losses as prices tumbled to new session lows after the government attracted only tepid interest at its 30-year inflation-protected bond sale. At 7:45AM (AEST) the 10 year Treasury note was 1.98% and the five year note was 0.86%.

The dollar fell against the euro following reports that some of Europe's national central banks may be willing to swap their Greek debt holdings, and European leaders are on track to approve money aid to Greece next week.

US Economic News

The number of US workers applying for unemployment benefits fell last week to the lowest level in nearly four years.

The Federal Reserve Bank of Philadelphia reported that an index of business conditions for manufacturers in the mid- Atlantic region rose in February from the month before, slightly better than expectations. Moreover, housing starts increased more than expected last month, and issuance of building permits for housing increased in January, in line with expectations.

European and Asian Markets

European stocks fell as investors digested conflicting information about whether Greece will get its EUR130 billion loan tranche before its March 20 bond redemption payment becomes due, while the prospect of further downgrades for the region's banks weighed heavily on sentiment.

The UK's FTSE 100 index closed 0.1% lower at 5,885.38. Germany's DAX fell 0.1% to 6,751.96 and France's CAC-40 closed 0.1% higher at 3,393.25. Just to add more confusion to the session, the Stoxx 600 index slumped 10% in the last minute of trading. Due to technical issues, the closing value for the index has been delayed, the index publisher said.

Investors remained nervous despite assurances from Jean- Claude Juncker, head of the Eurogroup of euro-zone finance ministers, that there had been "substantial further progress" in a telephone conference call between Greece and its troika of international lenders.

German Finance Minister Wolfgang Schaeuble expressed doubt over whether the next Greek government would stay committed to the austerity measures, and the Greek Finance Minister Evangelos Venizelos said Europe's wealthier countries are playing with fire by toying with the idea of pushing Greece out of the euro zone.

Banks suffered the brunt of the selling after Moody's Investors Service placed various ratings of 114 financial institutions in 16 European countries on review for possible downgrade, pointing to banks' vulnerability to the euro-zone sovereign-debt crisis. Among those affected were Barclays, BNP Paribas, Commerzbank, Credit Agricole, Deutsche Bank, HSBC Holdings, ING Groep, Royal Bank of Scotland Group, Banco Santander, Societe Generale and UniCredit.

Commerzbank AG lost 1.7%, while HSBC Holdings PLC lost 0.4%. However, Societe Generale managed to reverse earlier losses to trade up 0.8%, even though its fourthquarter earnings failed to meet expectations.

Elsewhere, defense group BAE Systems fell 2.3% after reporting earnings before interest, taxes, amortization and impairment of intangible assets fell 7.1% in 2011.

French insurer AXA's stock fell 1.3% after its full-year net profit came in below analysts' expectations despite rising 57%.

On the FTSE 100, Rio Tinto fell by 49.5 pence (-1.34%) to 3,633.50 pence and BHP-Billiton fell by 14.5 pence (-0.71%) to 2,039.50 pence.

Asian shares fell, as investors fretted about the possibility of a messy Greek default, although Japanese shares found some support from a relatively weak yen.

South Korea's Kospi fell 1.4% to 1,997.45, Hong Kong's Hang Seng Index lost 0.4% to 21,277.28, the Shanghai Composite Index also declined 0.4% to 2,356.86 and Japan's Nikkei Stock Average declined 0.2% to 9,238.10.

Several officials familiar with the negotiations said that some of Greece's euro-zone creditors were considering delaying Greece's full bailout package until after the country holds elections, expected to take place in April. At the same time, arrangements would be made to help the country avoid disorderly default.

The relatively weak yen helped some major Japanese exporters add to their recent advance: Sharp Corp. climbed 1.1% and Sony Corp. rose 0.9%.

However, Olympus Corp. lost 2.4% after the arrest of exchairman Tsuyoshi Kikukawa and other former executives in connection with the firm's accounting scandal.

Higher crude-oil prices helped lift Japan Petroleum Exploration Co. by 2.8%.

Commodity-exposed firms were also weak in Hong Kong, with Jiangxi Copper Co. down 2.1% and Aluminum Corp. of China Ltd. down 2.8%.

Resource-focused conglomerate Citic Pacific Ltd. fell 2.3%, while Zijin Mining Group Co. fell 3%.

China's central bank said Wednesday in its quarterly monetary-policy report that the country still faces the risk of slower growth and higher inflation and that it can't let its guard down against inflation risks.

Banks trading lower in Hong Kong included Bank of China Ltd., down 1.5%, and HSBC Holdings PLC, off 0.6%. The NZX-50 closed down 0.2% at 3286.45 in light volume trading as investors await results from several blue chip companies next week.

Commodities

Base metals closed lower on the London Metal Exchange, although losses were pared somewhat late in the session after a raft of positive US data deflected some concern about European sovereign debt.

US crude oil prices settled at a seven-week high, while North Sea Brent traded near an eight-month high as buyers scrambled to line up alternative supplies amid outages in Yemen, South Sudan and worries about near-term flows from Iran.

Gold clawed back earlier losses to end in positive territory as hopes for a successful Greek bailout were seen easing the risk of a credit crunch in the euro zone.

AUSTRALIAN OVERNIGHT NEWS

Australian Markets

Local shares look set to reclaim some of yesterday's losses after Wall Street rose on another round of good jobs and housing numbers and European investors welcomed news that Greece had moved closer to securing a second bailout.

Ahead of the local open, SPI futures were trading 42 points higher at 4,183.

Companies in the News

Westpac Banking Corporation (WBC)

Westpac Banking Corp. said that its first-quarter profit fell as movements in credit spreads drove down its markets income and revenue flat lined as customer concerns about the global economy subdued credit growth. Westpac said its unaudited net profit for the three months to Dec. 31 was about $1.4 billion. That's down 5% from the average of the previous two quarters. The bank didn't provide a year-earlier figure. Westpac Chief Executive Gail Kelly said the bank remains concerned about the risks emanating from the sovereign debt crisis in Europe where the "best-case scenario" is a decade of low growth. "The underlying issues remain as problematic as ever, and we can expect continued market volatility and low growth for the foreseeable future," Kelly told analysts. "Here in Australia too, we've got cautious consumers and I think we should all expect that we are going to be in a lower growth environment for some period to come," she said. Cash profit fell to $1.5 billion from $1.55 billion a year earlier, the company said. WBC declined 74 cents (3.53%) to $20.22.

Wesfarmers (WES)

Wesfarmers said its first-half net profit rose 0.3% on year, weighed down by challenging conditions at its retail and insurance businesses and extra costs at its resources division. The conglomerate said net profit for the six months to Dec. 31 rose to $1.18 billion from $1.17 billion in the previous corresponding period. While Coles, which provides the bulk of Wesfarmers' earnings, saw earnings before interest and tax grow by 14% in the first half, its discount department store cousin Target saw EBIT fall by 9.7%. "Consumer confidence is subdued at the moment," managing director Richard Goyder said. Wesfarmers said further growth was expected at Coles, which is in a price discounting war with Woolworths, but "challenging external conditions" remained including fresh produce price deflation to continue in the second half.

The company saw EBIT from its insurance business fall during the half by 74% to $17 million, from $65 million in the previous corresponding period, because of a high level of catastrophe claims and a $26 million increase in reserves needed for the earthquake in Christchurch, New Zealand, in February, along with higher crop claims and reinsurance costs from July 1. First half earnings from its two coal mines at $250 million were the same as last year, as higher coal prices were largely offset by a strong Australian dollar and costs associated with flood recovery efforts at its Curragh mine in Queensland and expansion plans. Goyder said in a statement that although the retail trading environment was expected to remain subdued in the second half, the outlook for the group remained positive. "We anticipate continued improvement from the group's retail businesses, increased export coal sales volumes, following the completion of the current expansions, and a better insurance division result, on the basis of a return to a more normal pattern of claims," he said. Revenue from ordinary activities rose 5.7% to $29.67 billion from $28.07 billion. WES fell 76 cents (2.55%) to $29.09.

QR National (QRN)

QR National reported a 32% fall in first-half net profit partly due to the absence of a tax credit that lifted the corresponding period's results, and said it's still feeling the impact of flooding in eastern Australia on haulage volumes. QR National said coal volumes moved within its core market of Queensland fell 7% in the six months to Dec. 31 as several flood-hit mines operated below full capacity, but this was mostly offset by tonnages rising by a third in neighbouring New South Wales. In a statement, the company said net profit fell 32% in the half year through December to $189.3 million from $277.5 million the year before, when earnings were boosted by a $281 million tax credit. On an underlying basis, earnings rose 11% to $251 million in the first half and QR National reiterated it expects underlying earnings before interest and tax in the full year to the end of June of $578 million. "The company's focus on execution and business reform has delivered solid first half earnings growth despite a tough macro environment dominated by the lingering impacts of the Queensland floods on mine outputs and haulage volumes," said Chief Executive Lance Hockridge. QRN fell 5 cents (1.33%) to $3.71.

ASX (ASX)

ASX posted a 2.1% increase in first-half net profit, as strong growth in derivatives compensated for a sharp decline in listings revenue. Net profit climbed to $175.6 million in the six months ended Dec. 31, up from $172 million in the comparable period the previous year, on revenue growth of $410.5 million, up from $397.5 million, the company said in a statement. The result, broadly in line with analyst estimates,  showed the exchange operator was managing to weather the impact of competition from new entrant Chi-X Australia, which launched in October. ASX said the new market structure that allowed for competition mainly affects its cashmarket trading revenue, which represents about 6.2% of the group total. "Overall, this is a pleasing result," Chief Executive Elmer Funke Kupper told reporters at a postearnings press conference. "ASX has produced a sound result in challenging market circumstances," he said. ASX rose 7 cents (0.23%) to $30.40. ASX rose 7 cents (0.23%) to $30.40.

GrainCorp (GNC)

GrainCorp said it expects net profit for the year ended Sept. 30, 2012 of $165 million-$185 million and gross earnings of $350 million-$380 million. Net profit last fiscal year ended Sept. 30, 2011 was $172 million while earnings before interest, tax, depreciation and amortisation was $365 million. "After a record 2011, financial year 2012 will be another year of high volumes and earnings, demonstrating that the fundamentals and underlying performance of the business are strong," Chief Executive Alison Watkins said in a statement. GNC rose 33 cents (4.19%) to $8.20. GNC rose 33 cents (4.19%) to $8.20.

AMP (AMP)

AMP said that net profit for the year ended Dec. 31 fell 11% to $688 million and revenue dropped 26% to $5.68 billion from the previous year. AMP's underlying profit in 2011 was $909 million including results from AXA, the company said in a statement. The company will pay a final dividend of 14 cents a share. AMP weakened 10 cents (2.28%) to $4.29.

Caltex Australia (CTX)

Caltex Australia has written down the value of its two oil refineries by $1.5 billion, marking another milestone in the decline of Australia's refining sector. The country's biggest refiner said that the results of an operational review due in six months could lead to refinery closures. Its Kurnell facility in Sydney and Lytton refinery in Brisbane together employ about 800 people and make use of a further 650 contractors- -although the number fluctuates according to operational requirements, a spokesman said. Chief Executive Julian  Segal said the big write-down does not necessarily foretell the outcome of the refinery review, which he said may alternatively lead to further investment in its assets. "Caltex supplies over one third of all transport fuels in Australia," Segal said. "Regardless of any decision we might make on the future of our refineries, our commitment to maintaining reliable supply to commercial and retail customers alike is at the very core of our business," he said. Caltex also has a fuel marketing business, which is performing well thanks to Australia's booming resources sector and its positive effects on parts of the wider economy. CTX slid 19 cents (1.52%) to $12.35.

Qantas Airways (QAN)

Qantas Airways said it will close more routes, terminate more jobs and slash spending over the next two years, as it reported a steep decline in first-half profit. Australia's flag carrier said net profit for the six months to Dec. 31 fell to $42 million from $241 million a year earlier, amid soaring jet-fuel costs and industrial action that prompted the temporary grounding of its fleet. Underlying pre-tax profit, a measure  preferred by the airline, fell to $202 million, easily beating the company's own guidance of $140 million to $190 million and analyst expectations of a figure of around $170 million.

To ease pressure on its balance sheet, the airline said it will reduce planned capital expenditure in the current financial year to $2.3 billion from $2.5 billion. Spending next financial year will be cut to $2.3 billion from $2.8 billion, equal to spending cuts of $700 million over the two years. Savings will come from the deferral of Boeing 787-800s due to  manufacturer delays, a reduction in planned domestic capacity growth, and a "capital light" model for any premium airline investment in Asia, Qantas said. The carrier also said it was cutting more routes, including Sinapore-to-Mumbia and Auckland-to-Los Angeles, changing the type of aircraft assigned to remaining routes and retiring two more Boeing 747s early. "Job reductions are expected as a result of aircraft retirements and operational changes," it said, without giving numbers. QAN firmed 10 cents (6.09%) to $1.66.

Brambles (BXB)

Brambles said its first-half profit rose 9% from a year earlier to US$239.5 million, as it grew its US and European pallet sales, including to new customers. The net profit for the six months ended Dec. 31 was built on a 34% surge in revenue from continuing operations, which excludes its Recall unit, to US$2.37 billion, which generated a 23% jump in earnings before interest and tax to US$385.1 million. This earnings measure fell short of a consensus of forecasts by analysts around US$408 million. The company tightened its guidance for the fiscal year ending June 30, with underlying profit now estimated at between US$1.05 billion and US$1.08 billion at June 30, 2011, foreign exchange rates. BXB dropped 27 cents (3.71%) to $7.00.

Billabong International (BBG)

Private equity firm TPG Inc. has made a highly conditional offer for retailer Billabong International that values the company at $765.3 million, a person familiar with the matter said. TPG, advised by Macquarie, tabled the offer of around $3 a share ahead of Billabong's half-year results Friday  when the company is due to update investors on the progress of a strategic review of its capital structure, the person said. The offer represents a 68% premium to Billabong's share price of $1.79/share before trading was halted prior to the market opening. Spokespeople for Macquarie and TPG weren't immediately available for comment.

Australian Economic News

Australian January Unemployment Rate 5.1%

Australia's unemployment rate fell to a lower-than-expected seasonally adjusted 5.1% in January from 5.2% in December, while the number of employed rose 46,300, the Australian Bureau of Statistics said. Economists on average had expected an unemployment rate of 5.3% in January, with the number of employed up 10,000. The number of people in full-time work rose 12,300 to 8.1 million in January, while the number of people in part-time work rose 34,000 to 3.4 million. The bureau said its seasonally adjusted workforce participation rate, or the proportion of working-age persons at work or actively seeking work, rose to 65.3% in January from 65.2% in December.