Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


IG Markets - Morning Prices Feb 11


On Friday night the S&P 500 closed the week on a high, up 0.57% on the day to finish as 1517 points its highest level for the week, as earnings season took over once more. Over the weekend S&P futures have risen approximately 0.29%, however we are very aware that Google CEO Eric Schmidt sold nearly half of his 2.3% stake in the company. The sale is believed to be worth up to $2.51 billion and we will be watching the Nasdaq futures very closely when they come online at 10am and the effect that has on the wider US markets.
This week however is all about our local market and with our regional partners celebrating Chinese New Year this week, the Aussie market will need to lead itself rather than relying on China and Japan. On Friday we finished at 4971 points, our highest level since April 2011 (the top of the bounce after the Japanese tsunami). This means the ASX has now retraced the full drop of the euro-mess, China’s hard-landing fears, and the impact of the second round take of the Federal Government’s mining tax. What is different from 2011 and 2013 is the reasoning for market to be at this level.

Over the last seven months the market has gained 986 points (or 24.75%) and as is well-known the main driver of this growth has come from seven or eight majors stocks, namely the big four banks, Wesfarmers, Woolworths and Telstra. The question that analysts and strategists alike are asking is; do the stock fundamentals match the movements in these stocks?

This week, parts of this question will start to be answered, with the likes of CBA, CSL and Rio Tinto all reporting their first-half earnings. If earnings from last week are anything to go by, we are expecting indifferent to slightly disappointing results.

Cochlear, for example, reported flat sales volumes and EPS and revenue lines on that came in on the downside. With COH trading at 30-31 times earnings on the figures, the market took this poor result as all it needed to see COH drop almost 15% for the week. The question is; will the market do the same to CSL (which is currently sitting on similar PEs) who report on Wednesday?

NCM also came out last week with a result that showed a 51% drop in revenue, with cash flow looking worse as Cadia East and Lihir continue to strip out funds for their expansions, however on comparison to evaluations by Goldman Sachs and Credit Suisse, the result came in ahead of expectations. The market therefore took the impaired result as factored in and NCM rallied almost 4% at the close on Friday. With RIO having already flagged $14 billion of impairments to its aluminium and coal projects, will an inline profit report see it following NCM’s leads and leg higher?

The main results this week will be CBA, having moved up almost 33.5% since the June low last year, and with analyst expecting a very flat year in banking revenue, will the current yield play in CBA continue to stack up for the bank? Fundamentals will start to kick in sooner or later, with margins and capex the main focus as analyst drill down below headline figures. However our take on it is that in the short term, yield will continue to win out. With rates looking like they will drop in the next three months, a CBA fully-franked dividend of $1.57-$1.59 is a return of 4.84% on extrapolations. Forecasts however believe the full-year yield will be closer to 6%, meaning the second half dividend will come in around $2.25-$2.30 at current share price. That is a major selling point for retail investors hunting for returns. We only have to look at Telstra’s result last week. Where management forested a very low single digit growth for the year, it did however reconfirm its 28 cents full-year dividend and that saw TLS up 1% on the results. It will be a very interesting week to see if fundamentals or trading strategies win out.

Moving to the open, we are calling the ASX 200 down seven points to 4965, with Asian traders away from their desks today. We are expecting to see BHP coming off slightly today, with its ADR pointing to a 0.5% drop to $37.77. However we do note that iron ore is still at $155.1 per tonne. The pause today will give the market time to gear up for the major part of the local reporting season which kicks off in earnest on Wednesday.

www.igmarkets.com

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Tourism: China Southern Airlines To Fly To Christchurch

China Southern Airlines, in partnership with Christchurch Airport and the South Island tourism industry, has announced today it will begin flying directly between Guangzhou, Mainland China and the South Island. More>>

ALSO:

Dodgy: Truck Shops Come Under Scrutiny

Mobile traders, or truck shops, target poorer communities, particularly in Auckland, with non-compliant contracts, steep prices and often lower-quality goods than can be bought at ordinary shops, a Commerce Commission investigation has found. More>>

ALSO:

Auckland Transport: Government, Council Agree On Funding Approach

The government and Auckland Council have reached a detente over transport funding, establishing a one-year, collaborative timetable for decisions on funding for the city's transport infrastructure growth in the next 30 years after the government refused to fund the $2 billion of short and medium-term plans outlined in Auckland's draft Unitary Plan. More>>

ALSO:

Bullish On China Shock: Slumping Equities, Commodities May Continue, But Not A GFC

The biggest selloff in stock markets in at least four years, slumping commodity prices and a surge in Wall Street's fear gauge don't mean the world economy is heading for another global financial crisis, fund managers say. More>>

ALSO:

Real Estate: Investors Driving Up Auckland Housing Risk - RBNZ

The growing presence of investors in Auckland's property market is increasing the risks, and is likely to both amplify the housing cycle and worsen the potential damage from a downturn both to the financial system and the broader economy, said Reserve Bank deputy governor Grant Spencer. More>>

ALSO:

Annual Record: Overseas Visitors Hit 3 Million Milestone

Visitor arrivals to New Zealand surpassed 3 million for the first time in the July 2015 year, Statistics New Zealand said today. The record-breaking 3,002,982 visitors this year was 7 percent higher than the July 2014 year. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news