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Australian stock market and companies daily report (January 31, 2012)

Contributed by Intersuisse

Market Overview

- Stocks pared losses on Monday but still finished the day in the red as investors focused on the standoff between Greece and its private creditors, as well as a surge in Portugal's borrowing costs.

- The Dow Jones Industrial Average closed down 6.74 points, or 0.1%, at 12,654. The Standard & Poor's 500-stock index lost 3.32 points, or 0.3%, to 1,313.01, and the Nasdaq Composite Index dropped 4.61 points, or 0.2%, to 2,811.94.

- Stocks got off to a rocky start, with the three major indexes each down by more than 1% in early trading, though they clawed back throughout the day. US equities markets were relatively lightly traded, with just over 3 billion shares traded compared with the daily average of 3.9 billion this month, which some traders said may have contributed to the intra-day turnaround.

- The dollar rose against the euro and other major currencies, regaining some of the ground lost last week, amid ongoing worries over Greece and the region's sovereigndebt crisis and as European leaders gathered for the first summit meeting of 2012.

- European stocks fell as investors grew increasingly nervous about the lack of a Greek debt-restructuring deal.

- Oil pulled back after Iran delayed a vote on an oil export ban to Europe and agreed to host United Nations atomic watchdog officials, moves that eased concerns about an immediate supply disruption.

- Australian Shares are poised for a subdued start amid ongoing worries over Greece and the region's sovereign-debt crisis. Ahead of the local open, SPI futures were trading 10 points lower at 4,235.

INTERNATIONAL OVERNIGHT NEWS

Stocks pared losses on Monday but still finished the day in the red as investors focused on the standoff between Greece and its private creditors, as well as a surge in Portugal's borrowing costs.

The Dow Jones Industrial Average closed down 6.74 points, or 0.1%, at 12,654. The Standard & Poor's 500-stock index lost 3.32 points, or 0.3%, to 1,313.01, and the Nasdaq Composite Index dropped 4.61 points, or 0.2%, to 2,811.94.

Stocks got off to a rocky start, with the three major indexes each down by more than 1% in early trading, though they clawed back throughout the day. US equities markets were relatively lightly traded, with just over 3 billion shares traded compared with the daily average of 3.9 billion this month, which some traders said may have contributed to the intraday turnaround.

Financial companies led stocks lower after a ratings shakeup on the sector from Goldman Sachs. Bank of America dropped 3%, the most among blue chips. Nervousness about European debt also weighed on financials, as European leaders gathered in Brussels amid talk of requirements for greater fiscal discipline among members, and increasing anxiety about the lack of progress on a Greek debt-restructuring deal.

Eight of ten sectors on the S&P 500 pulled back, with only telecommunication and technology stocks in positive territory. Microsoft and International Business Machines were the biggest gainers on the Dow.

In corporate news, Gannett reported a 33% decline in fourthquarter profit as persistent advertising declines at its newspapers and lower television revenue more than offset growth in the publisher's digital businesses. Shares fell 6.9% and led the broad index lower.

Staples was also near the bottom of the S&P 500. Shares fell 4.9%, with fears the office supplier will face pressure due to a long-standing decline in paper consumption and that office supplies will trail behind broader corporate spending.

Elsewhere, shares of Pep Boys-Manny, Moe & Jack rose 24% after it agreed to be purchased by private-equity firm Gores Group in a deal that values the auto-repair company at roughly $803.9 million.

For Australian ADRs listed on the NYSE, BHP Billiton fell by $0.71 (-0.89%) to $79.44, ResMed fell by $0.77 (-2.56%) to $29.29, Telstra Corporation fell by $0.14 (-0.79%) to $17.55, Telecom Corporation of NZ rose by $0.02 (0.23%) to $8.65, Westpac fell by $1.43 (-1.26%) to $112.19,

Treasury prices rose, pushing five-year yields to their lowest levels on record, as investors worried about the prolonged delay of a debt deal for Greece and as European leaders began a major summit to finalize tougher fiscal rules in the euro zone. At 7:45 AM (AEST) the 10 year Treasury note was 1.84% and the five year note was 0.73%.

The dollar rose against the euro and other major currencies, regaining some of the ground lost last week, amid ongoing worries over Greece and the region's sovereign-debt crisis and as European leaders gathered for the first summit meeting of 2012.

US Economic News

Americans' incomes picked up in December but they choose to increase saving instead of spending, showing caution that will likely keep the economy in a slow-growth mode. Income rose more than the expected 0.4% while spending was a tick less than a projected 0.1% increase.

European and Asian Markets

European stocks fell as investors grew increasingly nervous about the lack of a Greek debt-restructuring deal.

The Stoxx Europe 600 Index closed down 1.1% at 252.52. The UK's FTSE 100 Index ended 1.1% lower at 5,671.09, Germany's DAX closed down 1% at 6,444.45 and France's CAC 40 Index ended down 1.6% at 3,265.64.

Banks suffered the brunt of the selling and the Stoxx Europe 600 Index for the sector closed down 3.1%. In London, Royal Bank of Scotland Group dropped 3.5% after its chief executive, Stephen Hester, decided to waive a controversial bonus of just under GBP1 million.

Meanwhile, BNP Paribas declined 7.1% in Paris, KBC Group fell 6.7% in Brussels and Commerzbank and Deutsche Bank lost 4% and 3.8%, respectively, in Germany.

With talks between Greece and its private creditors still unresolved, investors' confidence waned and concerns about debt contagion set in. Against this backdrop, investors shifted their attention to Portugal, worried it may be the next in line for a second bailout package. Portugal's borrowing costs surged, with the 10-year government bond yield reaching euro-era highs. At the time of the European stock market close, the 10-year Portuguese government bond yield stood at 17.39%.

At the same time, Germany's relationship with Greece was in focus, following weekend reports suggesting Germany would like the European Union to have veto powers over the Greek budget.

Earlier in the day, Italy sold a total of EUR7.475 billion of a targeted EUR8 billion of Treasury bonds.

Late Friday, ratings agency Fitch downgraded Italy, Spain, Belgium, Slovenia and Cyprus and cut its outlook in Ireland.

Investors were cautious as a European Union leader's summit was getting underway in Brussels to endorse a permanent bailout fund with a lending capacity of EUR500 billion and to finish details of a fiscal pact aiming at budget deficits. But investors were also hopeful that Greece would be on the agenda.

On the FTSE 100, Rio Tinto weakened 11.50 pence (0.3%) to 3,850.00 pence and BHP Billiton fell 24.00 pence (1.1%) to 2,147.22 pence.

Most Asian markets fell on Monday as investors turned cautious ahead of a key summit of European leaders later in the day and as Chinese stocks were hit by disappointment over a lack of policy easing from Beijing.

The drop on mainland Chinese bourses applied pressure on Hong Kong, where shares fell for the first time in seven trading days. Taiwanese stocks bucked the trend, rising sharply as the market there reopened after a long Lunar New Year holiday.

The Hang Seng Index tumbled 1.7% to 20,160.41 in Hong Kong, while the Shanghai Composite Index lost 1.5% to 2,285.04 as investors returned after last week's Lunar New Year holiday.

Elsewhere, Japan's Nikkei Stock Average finished 0.5% lower at 8,793.05 and South Korea's Kospi fell 1.2% to 1,940.55.

Taiwan's Taiex was a notable gainer in the region, climbing 2.4% to 7,407.41 as trading resumed for the first time since January 18.

Shares of developers and mainland banks fell sharply in Hong Kong and Shanghai amid fears over the property sector's outlook in the absence of policy easing by Beijing.

Industrial & Commercial Bank of China fell 3%, Agricultural Bank of China gave up 3.6% and China Overseas Land & Investment lost 3.1%. In Shanghai, ICBC fell 2.1% and AgBank lost 1.5%, while Poly Real Estate Group slid 4.7%.

Several resource stocks also fell sharply in Hong Kong, with Aluminum Corporation of China or Chalco down 3.4% and Jiangxi Copper 4% lower.

Among exporters, Toyota Motor Corp. dropped 1.7%, and Mazda Motor fell 3.1%, while Fujitsu fell 3.4%.

The NZX-50 ended up 0.4% at 3,307.22 in low volumes due to a holiday in some parts of the country.

Commodities

Base metals closed mostly lower on the London Metal Exchange, weighed down by a stronger dollar and caution over the health of global economy.

Oil pulled back after Iran delayed a vote on an oil export ban to Europe and agreed to host United Nations atomic watchdog officials, moves that eased concerns about an immediate supply disruption.

Gold ended nearly flat, settling with slight losses as a stronger dollar and caution during a series of European debtrelated negotiations outweighed the market's recent upward momentum.

AUSTRALIAN OVERNIGHT NEWS

Australian Markets

Australian Shares are poised for a subdued start amid ongoing worries over Greece and the region's sovereigndebt crisis.

Ahead of the local open, SPI futures were trading 10 points lower at 4,235.

Companies in the News

Woolworths (WOW)

Woolworths said it has appointed Christine Cross, David Mackay and Michael Ullmer as non-executive directors. "They bring a tremendous array of skills, knowledge andexperience to the table and we look forward to their contribution," Chairman James Strong said in a statement. Cross is a former executive with UK grocery retailer Tesco PLC, Mackay is the former chief executive of Kellogg Co. and Ullmer is the former deputy chief executive of National Australia Bank Ltd. WOW dipped 32 cents (1.29%) to $24.45.

Transurban (TCL)

Transurban said Chief Executive Chris Lynch will step down in July after more than four years at the company. Transurban has identified some internal candidates as potential replacements, but will also consider external alternatives, Chairman Lindsay Maxsted said in a statement. Lynch, a former Chief Financial Officer of BHP Billiton who recently joined the board of fellow miner Rio Tinto, said Transurban was in excellent shape, and that he considered it the right time to leave. Transurban didn't say where Lynch plans to go next. "I look forward to playing my part in a smooth transition process over the next few months before moving on to the next stage in my professional journey," Lynch said in the statement. TCL fell 7 cents (1.26%) to $5.50.

Leighton Holdings (LEI)

Leighton Holdings said a joint venture with Belgium's BESIX SA has won a $260m development contract for the Chevronoperated Wheatstone gas export project in Western Australia. The joint venture will develop the project's breakwater and materials offloading facility for lead contractor Bechtel, Leighton said in a statement. It's the second Wheatstone win for Leighton, which was also awarded a separate tunnelling contract for the project. LEI fell 28 cents (1.18%) to $23.45.

Monadelphous Group (MND)

Monadelphous Group said it has received construction contracts together worth more than $180m from Rio Tinto and Chevron Corp. The contracts take the value of new work secured by Monadelphous this financial year to more than $1.5bn, Monadelphous said in a statement. The company said it will build a potable water supply system in Western Australia's Pilbara region for Rio Tinto that will deliver 10 gigalitres a year. Work is due to begin this quarter and is set for completion in the first half of next year, it said. The second contract is for the construction of a CO2 injection pipeline and well sites on the Gorgon Project, on Western Australia's Barrow Island. Monadelphous said the work will include seven kilometres of underground pipeline, five well sites and associated facilities. Work will begin immediately and is set for completion in the first quarter of 2013, it said. MND declined 10 cents (0.44%) to $22.50.

Coalspur Mines (CPL)

Coalspur Mines said that its proposed C$1.23bn Vista mine in Canada may produce 24% more coal than previously thought, as the company moves to lock in project financing with offtakers. Coalspur said a detailed study showed that the Vista project, near Hinton in Alberta province, could have an annual production capacity of 11.2m tonnes of thermal coal versus a previous estimate of 9m tonnes. "The growing demand for thermal coal in the Asian Pacific economies continues to support the underlying fundamentals required to proceed with the development of Vista," Gene Wusaty, chief executive of Coalspur, said in a statement. Coalspur expects construction to begin in early 2013, once regulatory approvals are in place and detailed engineering has been completed. CPL rose 1 cent (0.27%) to $1.86.

OneSteel (OST)

OneSteel said it will receive a $64m advance from the federal government under the government's Steel Transformation Plan. The company said in a statement it had been eligible to apply for the advance to enhance the competitiveness and economic sustainability of the company's Australian steel-making business. "We are pleased with the government's interest in steel manufacturing in Australia and welcome this advance," said chief executive Geoff Plummer. OST weakened 2 cents (1.92%) to $0.77.

Australian Economic News

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