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

 

Finance: Major Campaign To End "Gross Overtaxation Of Savings"

The campaign – which includes a special web site through which New Zealanders can e-mail their own and other MPs and party leaders – is backed by Age Concern, Consumer NZ, the Financial Services Council and the Taxpayers’ Union. More>>

ALSO:

Scoop Business: Leighton-Led WGP To Build, Manage Transmission Gully

The Wellington Gateway Partnership, led by a unit of ASX-listed Leighton Holdings, has won the $1 billion contract to build the Transmission Gully road north of Wellington. More>>

ALSO:

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news