ASX Stock Report 16-4-10

1. Energy stocks and resource stocks took a beating, leaving our market +0.2% for the week. Commodity & oil prices not helping hopes for another +5000point close. HFA $0.275 +10%, QTM $0.135 +17.39% MCC $16.54 +8.25% PVE 0.80 -31.33%. Info Tech +0.07% on IRESS $8.90 +1.14% speculated merger with ASX, healthcare +0.9% PRY $4.38 +2.82%, SIP -8.33%

• ASX 200 4984.7 -0.34%
• SPI Futures 4998.0 -0.38%

2. Macarthur engages Peabody, pushes back deadlines on other offers with GCL & Noble. Concession given to Peabody for discussions over the deal.

3. Qualified support from POSCO and ArcelorMittal has given Peabody bid legitimacy, welcomes Macurthur’s move to engage them.

4. FGE $2.92 +1.74% & CLO $0.93 +1.64% – IER not fair and not reasonable, recommending shareholders take no action on the proposal, yet execs passing on stock and options for CLO to have 31% interest to solidify relationship.

5. CoalConnect Alliance LEI $37.53 -0.32% Leighton contractors to deliver components of QR’s GAP expansion project $370M contract

6. Intol ITO $1.13 +1.35% 1Q Westlink M7 Average Daily Revenue +8.7% YoY, 407 ETR Average Daily Trips +2.2% YoY, 407 ETR Revenue +9.6% YoY

7. QBE $22.10 -0.45% to buy NAU Country Insurance Co. manages multi-peril crop insurance in U.S. for $US565M 2.6xNTA US$217M

8. QAN $2.98 +0.68% cancels flights from Volcanic Ash covering Europe.

9. Martin Kriewaldt & Cherrel Hirst retire from Board SUN $9.16 +0.11%, Gary Weiss retires as director of WDC $12.55 -0.16%.

10. ECSI $0.018+8.3% HYoHY, -$82K loss.

11. Enebba Gas ENB $0.23 +17.95% & Cougar Energy CXY $0.135 sign MOU to develop Sargon Coal Tenement in WA, 100% owned by ENB. Each to contribute $1M initially once pen is put to paper, Underground Coal Gasification project to fuel. Indicated 74MT, inferred 120MT JORC compliant resource 194MT.

ASX Stock Report 15-4-10

1. Consumer inflation and unemployment survey overshadowed by Chinese greater than expected double digit growth and the equities market down under pushes over the 5000point hurdle.

· ASX 200 5001.9 + 0.14%

· SPI Futures 5012 -0.1%

2. Melbourne consumer inflationary expectations +4.1% April from 3.2% March. Survey from Melbourne Institute, inflation expected to rise. Proportion of consumers expecting RBA CPI target 2-3% fell 2.7% MoM. U/E index -0.8% April, 43.8% below Feb 09 peak.

3. RIO operations review: 1Q Iron Ore production +39% YoY, 1Q results; Refined Copper 95,900 T, -8% YoY; Mined Copper 165,300 T, -16% YoY; Refined Gold 174,000 Oz +62% YoY; Mined Gold 225,000 Oz, +12% YoY; Uranium Production 2.7M Pounds, -20% YoY; US Coal Production 10.1M Tons, -53% YoY; Other Australian Coal Production 4.9M Tons, -8% YoY; Hard Coking Coal Production +1.9M Tons, +35% YoY; Alumina Production 2.21M Tons, +1% YoY; Aluminum Production 937,000 Tons, -1% YoY; Iron Ore Production 43.4M Tons, +39% YoY; Iron Ore Production 43,361 Tons, +39% YoY; Mined Gold Production +12% YoY; Mined Copper Production -16% YoY; Iron Ore Production +39% On Year Still Cautious About Short-Term Volatility; Most Operations Continued To Run At Capacity In 1Q, 2010 Capital Expenditure Expected To Be At Least $5 B; 2010 Share Of Mined Copper Production Expected 680,000 Tons; 2010 Global Iron Ore Production Guidance 234 M Metric Tons.

4. Coal and Allied Industries $98.00 -2%(Subsidiary of RIO $80.05 -0.06%) Q1 production -20% QoQ, equal to 1Q CY09. 1Q Sales 3.9MT -3.7% YoY and -27.6% QoQ, 1Q Production 4.22MT. Reasoning, low in-pit coal inventories, s-term geotechnical issues and higher rainfall.

5. MCC $15.28 -1.42% rec’d revised bid from New Hope $5.22 +1.36%. Scrip 2.7 to 1 offer, or $14.50/share conditional on cash available & capped $950M. Should shareholders elect cash alternative and the cap be reached, cash issued per share will be scaled back and scrip equivalent offered in its place. New Offer rejected by MCC board.

6. Peabody raises bid for MCC $16/share, values MCC $4.1B

7. Beadell resources $0.16 -3.03% finalises sale of Ampari Gold mine resulting vendor New Gold Inc{NGD NYSE &TSX} 19.5% stake.

8. OZL $1.265 +3.69% 1Q Gold output 41572Oz, Copper output 31,909T. Gold Outlook raised from 80-90KT to 110-120KT p.a. copper unchanged outlook.

9. BOQ $12.14 +0.75% increased net interest margins +13bp from 1H CY09. Or 0.13%. +96% HY NP $90.9M. 26c div fully franked. Retail Deposits $16.9B +9% p.a., tier 1 capital +9.2%

10. Property – ALZ $0.57 Chairman’s address @ AGM. Price growth evident in 09, expected to be moderate in ’10 with declining affordability. Operating profit -31.4% FY08 to 09, Paid almost 3x the amount of borrowing obligations from YoY gearing reduced to 25.4% from 36.2%. Despite rental income improving other income -39.76%. Market Cap $1.4B – More a REIT these days than developer with devt earnings ~15-20% of total. FY10 P/E 11.4x, 8.49% yield, 25% gearing, 28% discount to book – best value of the big caps. Temasek Holdings owns ~60% so a corporate angle here also. Target price 63c.

11. Wealth of articles in today’s FIN covering property sector growth. For sales signs up as confidence returns p45, Australia inspires confidence p46, AustSuper to add $500 into a direct property fund p49, yesterday’s FIN Rents surging +1.5% in capital cities 1Q CY10, property leading sector of economy on equities market today +1.61%.

12. GPM $0.215 +4.88% has John Leaver join the register and we are adding to its fundamental characteristics (50% discount NTA, yield 8%, PE 7x) the possibility of corporate activity

13. Retail: Discretionary’s perform again despite prices & interest rate environment. NWS $19.77 +1.8% FLT $21.04 +1.89% BBG $11.69 +0.95% PMV $7.65 +1.73% PBG $1.255 -2.33%

14. SIP $0.54 CEO Elmo De Alwis resigns

15. Tech Stocks: IRE $8.80 +1.85% keeps edging up as speculation arises ASX may move to take over the company after having been relieved of its role as market regulator.

16. Our analysts believe consolidation is always a key growth element of managing the business in the telecos space, however until NBN issues are resolved the competitiveness within the industry is not exposed.

ASX Stock Report 14-4-10

1. Recovering commodity prices, global demand for energy and reporting season in the US. Financial stocks+1.49%, discretionary +0.84% on consumer sentiment index & computer chip maker INTL results, and Utilities +1.3% leading the market. Financial company drivers in greater volume of fees and earnings as all asset classes move out of economic downturn, along with good variable mortgage spreads for the banks.

• ASX 200 4994.7 +0.87%

• SPI Futures 5005.0 +0.83%

2. Consumer sentiment index -1% MoM. Westpac-Melbourne Institute survey 116.1 from 117.3 in March. Since October last year when the RBA starting moving on rates, the index has +2.7%. average SVR +1.35%, market expects cash rate to e be at 5% in twelve months. Expected family finance next 12 months -8% sharpest fall in two years, family finance -0.6% from last year YoY. Economic conditions index next 12 months +1.3%, next 5 yrs +0.7%. Steady employment, improving business sentiment, rising home and commodity prices being key factors underlying the data.

3. Energy – Resources & Energy Minister Martin Ferguson states seismic data sets from gov have become available in an effort to promote oil & gas exploration on Australian shores. This after UN +2.56Mkm² of Australian Continental Shelf in ’08. “Our energy security will be greatly enhanced if we are successful in opening up new oil frontiers and can reduce dependency on imports” Ferguson. Crude deficit at present $16B p.a., will grow to $30B p.a. by 2015.

4. Re-iterating the International Energy Agency forecast for global Oil +2% YoY with increase 1.67Mbarrels/day. There has been a flurry of gas deals, however gas remains an alternative resources and demand for oil continues to > $80/barrel despite the effect this may have throughout the global economy from a cost-push pricing perspective.

Oil stocks: ROC $0.415 +1.22% PPP $0.295 +5.36% CTX $12.60 +0.8% OSH $5.91 +0.17%

5. MEO$0.455 +24.66% shares where +26% after informing market of partnership with Petroleo Brasileiro to drill Artemis WA offshore project. MEO to pay US$31.5mil cash and receive US$7.5M + US$41M drilling costs for first well. Petro takes 50% stake in exploration permit

6. ACCC allows Shell/PetroChina bid for CSG Arrow Energy $5.17 +1.17% acquisition.

7. Beach Energy $0.755 conditional agreement with Lakes Oil LKO $0.009 +28.57% to examine gas potential in Gippsland Basin VIC. Two phase term, possibility for Beach to receive 15% interest with expenditure of $10M first phase and 50% interest with expenditure $40M second. Beach essentially funding exploration.

8. Transfield $3.95 -0.5% HY FY10 sustainability review, NPAT +0.33%, record cash flow $130.1M, 5c div fully franked, Sales stable, Net Debt >-50%; continued contract wins globally TIMEC NSW Housing, North America Transport into Canada ~$1B.

9. Transurban $5.19 +1.37% toll revenue on Australian assets increased Q1 CY10, US revenue & traffic on Pocahantas parkway fell.

10. FGE $2.90 +12.4% target statement and IER for proposed proportional t/o by Clough $0.925 +0.54% deemed not fair and not reasonable.

11. APZ $0.515 +0.98% deal with Port of Brisbane for 1.8hc hopes to build 1,000 new homes. Initially 150 homes will be built for $11.1M & a share of revenue’s during project, options bought for the remaining 850 homes.

12. GPM $0.205 +2.5% has John Leaver join the register and we are adding to its fundamental characteristics (50% discount NTA, yield 8%, PE 7x) the possibility of corporate activity.

13. Rents surging +1.5% in capital cities 1Q CY10, may look to focus on companies who have more residential management books in their business. Depending on housing volumes and prices in rising interest rate environment. MGR

14. Elders $1.335 write down to $0 the $5.7mil investment 13.5% holding of Forest Enterprises FEA who have gone into voluntary administration.

15. NWS $19.42 +2.48% still the best quality content provider.

16. SXL $2.22 +3.74% and Aboriginal TV company Impraja has received government funding to provide to digital services.

17. IIN $2.88 -0.35% AMM $0.35 +4.48% taking profits, prices above Targets. Research see’s at present no real s-term fundamental driver in the teleco’s space until an outcome is reached on the NBN

ASX Stock Report 12-4-10

1. Market was positive across all segments today which follows on from last week as we edge closer to 5000 points, +1.56% over the week. FGE$2.70 (-4.59%) after recommending to shareholders to “take no action” on the Clough Operations Pty Ltd proportional takeover, potential for 3rd party bidder over, FGE in the process of releasing a Target Statement to shareholders. NUF $7.86 (-4.96%); Tender offer for Nufarm shares by Japanese Chemical Company Sumitomo has had 81.45% acceptances. HFA $0.235 (+17.5%), COK $0.565 (+14.14%), DYE $1.30 (+13.04%), AGO$2.98 (+7.19%), MMX $2.93 (+6.55%):

• ASX 200 4984.3 (+0.73%)

• SPI Futures 5007.0 (+0.74%)

2. Materials and Industrials leading the market. DOW $7.65 (+4.08%); AAX $4.79 (+8.86%); TOL $7.47 (+1.22%); BLY $0.355 (+1.43%)

3. Downer speculated to be named preferred contractor for NSW Government $1.2bil electronic ticketing system for greater Sydney transport network. Through Pearl consortium Downer, US Cubic Corp (CUB) & CBA $58.40 (+0.45%). Historically NSW Government has a poor record in attempting to implement an electronic ticketing system, attempted in 2002 and still embroiled in litigations with ERG.

4. Ausenco addresses speculation of contract negotiations over project m’ment services in Australian resources, is in final stages of negotiation although nothing signed. AAX up 3% after 10.30am this morning.

5. Transurban $5.15 having due diligence conducted on failed Sydney tollroad operator Connector Motorways. A review is being launched by the ACCC.

6. Oil prices +$0.50 by midday Singapore time, $85.42/barrel crude May delivery. USD Stronger against the AUD and NZD, however still down on other major trading partners. EUR/USD +0.15%.

7. Consolidation in Resources: Xstrata interest in MacCarthur Coal $16.52 (+6.24%) has been denied by MCC. Newhope $5.49 (+3.58%) committed to participate with MCC board on merger. MCC + again today. GCL $12.11 (-0.74%), NCM $34.93 (-1.96%), LGL $3.98 (-0.25%)

8. MTE $0.315 (+3.28%) Metrocoal, $30mil QLD coal JV with Chinese coal producer still being factored into price. China National Coal group funding production terms min $4mil inflow within first two years with expectations 2.5-3.5BT of thermal coal, 100MT p.a.

9. Energy World $0.485 (+3.19%) looking to list in Hong Kong to broaden investor base.

10. GPT group $0.58 to follow on from Mirvac’s plans last week and undergo a $400mil equity raising for its Wholesale Office Fund. GPT looking to add value to its already established Sydney and Melbourne office asset. Suggests consolidation in the sector again, as MGR $1.43 (-0.35%) was rumoured to move on WOT $0.81 last week.

11. Sigma $0.52 (+10.64%) trading on a PE6.7x FY10. Healthcare getting a lot of fiscal spend focus globally. ISF $0.59 (+0.85%) have global operations and are up 17% over the month. Speculation private equity will move on consolidating SIP with iNova Pharmaceuticals – another Aussie prescription distributor. And re-list.

12. Primary Health Care $4.17 (+4.14%) share overhang from chief executive selling 10% of holding, +15% growth in EBITDA forecast, 2.3x prior distribution. However loosing market share in pathology to competition Sonic $14.26 (-1.52%) & Healthscope $4.53, hurting bottom lines from pathology’s volume leverage to margin.

13. IIN $2.86 (-0.35%) set to deliver digital TV service, partnership signed with Fetch TV. Is a DVR (digital video recorder) competing against Tivo & Foxtel IQ. It will offer free to air TV & subscription content, the combination being its competitive advantage. Content will come from Discovery Networks, National Geographic, MTV Networks, Fox International Channels, E! Entertainment Television, BBC World News, CNBC, ABC, Roadshow Entertainment, Disney Media Distribution, MGM, and Lionsgate. Subscriptions will cost under $30 a month and will be completely unmetered on iiNet.

14. Jetstar (QAN $2.96 (+3.14%) low-cost carrier) joint-venture with Air Canada links Hawaii route with Canadian carrier’s service into the country (Vancouver & Quebec) joint fare single booking. 12th interline deal, Canadian Air joins list of other partner carriers including Qantas, Etihad, Air Calin and Royal Jordanian.

15. Tiger Airways (low-cost carrier for Singapore) looking at moving a portion of flight paths from Tullamarine to Avalon airport in VIC.

ASX Stock Report 9-4-10

1. Strong performing resources & energy sectors lead out in front today as our market early, with the energy sector holding strung up almost 1%. All early gains where sold off throughout the day’s trade.

• ASX 200 4948.1 +0.21%

• SPI Futures  4970 (-)

2. New Hope Corp NHC $5.30 (-0.19%) has bid for MCC $15.55 (+8.29%) prompting further competition for the coal miner’s assets. This comes whilst Peabody has taken its revised bid to the Takeovers Panel after it was rejected by MCC. Offer prices have come from $13.00, $14.00 – Peabody. Now a scrip offer of 2.7shares in NHC for every one share in MCC, which prices the company at $3.71Bil or $14.58/share. The combined entity will have a combined equity market cap of $8bil & a cash resource of $1.5bil.

3. Gold: China’s biggest gold producer, Zijin Mining Group Co. (2899.HK), extends its offer to buy Australia’s Indophil Resources NL (IRN.AU) $1.20 (-0.83%) to May 14 from the original deadline of April 16. DJ

4. NCM $35.63 (+0.37%) to begin construction immediately on approved gold and copper deposit in NSW. Newcrest chief Ian Smith “demonstrates the strength of Newcrest organic growth pipeline” this after the company has had a bid for LGL $3.99 (+0.76%) rejected.

5. Macmahon Holdings Ltd MAH $0.82 (-3.53%) is likely to win a $90mil government contract and is unaware of any T/O moves by Leighton. LEI $38.23 (-1.55%)18.56% stake in MAH, & 901M cash reserves as at 31st December 09.

6. Industrial Services: BLY $0.35 announces May 11th AGM. Stock has rallied two days in a row, ended flat today however good volume and prices coming through VWAP>close.

7. TSE $3.94 (-0.25%) confirms 30-yr road contract worth CAD580mil.

8. LEI hold 49.66% in property developer Devine TP $0.63. DVN $0.30 (+9.09%) trading ~50% discount to book value (54c), with a PE 6x, target yield 10% and gearing comfortable at 30%. DVN project pipeline is ~A$3b vs. mkt cap $175m

9. Property: FKP $0.74 (+1.37%) Property Group TP0.93 book value ($1.27), with EPS 9.3c & PE 8x pipeline is valued ~A43.5b vs. mkt cap $848m.

GEO $0.19 Property Group GPM NTA (37c) and we have a 30c price target. Have a payout ratio of 50%, yielding 8% and PE 7x

10. Retail: no substantial flow on effect to retail figures from US. Early gains for retailers sold off. MYR $3.35 DJS $4.70 (+0.21%) JBH $20.22 (+0.35%) supporting our view that model of high volume low margin product will benefit stockholders value per share & some tech products have become staple KMD $1.94 (+0.52%) PBG $1.335 (-2.55%)

11. Retail auto sellers performing well off the back of rebounding industry. Car sales YoY March +25.2% (from earlier this week). Super Cheap Auto $5.14 (+1.18%) Automotive Holdings $2.65 (-0.38%) ARB Corp $5.65 (+2.73%)

ASX Stock Report 7-4-10

1. Biggest news of the day Macarthur rejects Peabody conditional revised bid, on grounds it is too inflexible. MGR looks to raise capital and fund acquisitional expansion. Surprisingly interest rate pressures seep into sentiment for the property sector despite rising prices, the property sector of the ASX200 worst performing for today -7.1 points. All other sectors finished better aside from the Energy sector which was sold off late afternoon as analysts shift focus onto demand fundamentals ahead of US Energy Information Admin report due out later this week. & after a significant rally in Oil prices over the week.

· ASX 200 4960.9 + 0.15%

· SPI Futures 4980.0 + 0.1%

2. On what is continuing to be a flurry of corporate activity it’s spilling over into the property sector. Mirvac $1.48 revealing today it will go to the market and raise equity in order to sure up balance sheets and fund acquisitional expansion. I suppose there are sceptics to the idea in such means of expansion and there will be two sides to the story. The key thing as it always is will be is the capital structure going into the investment given present circumstances on a stock specific basis and most importantly managing the return. Our analysts see short-term price stag ~10% to MGR share price post the raising with emphasis being on management to add value with a deal, TP l-term $1.55.

3. Iron Ore: AGO $2.82 (+2.17%) FMG $5.04 MGX $2.01 (+0.75%)

Pilbarra shipped 14.8MT of iron ore in March, +13.7% MoM and +13.5% YoY. We would expect the growth to taper off as offshore stock piles mount.

4. Steel: BSL $2.99 (-0.33%) OST $4.09 (+0.74%)

5. Sinosteel {formally SGX however entered into scheme of arrangement with Eldorado Gold Corp EAU. $13.58 (+0.3%)} begin full scale mining Mid-West Australian Ore project. First shipment of hematite ore is due early July. Expected production 1.5MT of hematite p.a. the commencement of production translates into additional trade for local businesses, non of which are listed, and once up and running will enable finalisation of feasibility studies on major project at Weld Range .

6. Energy: Coal – CEY $4.33 (-0.92%) NEC $1.40 (+1.08%) Gas – AOE $5.03 (-0.2%) LNG $0.525 (+0.96%) oil & gas – DLS 0.077 (-1.28%) STO $14.85 (-0.4%) Uranium – ERA $19.51 (-0.86%)

7. Macarthur MCC $14.31 (-5.23%) reject the Peabody offer $14/share on the basis of its inflexibility with other dealings, more to the point its r/t with Gloucester Coal. GCL $11.70 (+25.67%), and encouragement of a deal with Noble over GCL’s assets.

8. Westside Corp. WCL $0.71 (+27.93%) to raise $64.4mil equity funding acquisition of Anglo American AAL.LN coal seam gas acreage in QLD.

9. Property: MGR raising $500M equity institutional placement & SPP. Mirvac is positioning itself to raid some more assets and sure up balance sheets. Westpac office WTO is a suspected target.

TGP $0.81 (-1.22%) BWP $1.96 (+0.26%); CQO $0.28 (-3.45%); DXS $0.82 (-0.61%); SGP $3.95 (-1.25%); to get some real value ABP $0.395 GPM $0.185 TP 30cents; DVN $0.27 (+1.89%) TP $0.33; ALZ $0.54 (+3.85%) TP $0.63; FKP $0.735 (+1.38%) TP 0.93

10. Retail: Following on from what was discussed yesterday we are still very positive on the JBH $20.31 (-0.05%) model in the current market, and circumstances earlier today re-enforcing that fact, however JBH sold of late. MYR $3.34 (-0.6%) and DJS $4.74 (-0.21%)

KMD $1.915 (+0.26%) PBG $1.37 (1.86%) bonds redefining itself as a brand and really gaining market share, BBG 11.29 (+0.44%). HVN $3.69

11. Consumer Spend: Car sales down under reach record highs, +25.2% year to March. Car rentals adding to this as well +331%. VBA $0.72 (-0.69%) have added Hertz and Thrifty as car rental partners and will launch a new online car hire booking site. Partners on the site include already Thrifty and customers will receive velocity points from hiring attracting loyalty. Charlie Aitkin put VBA on a list of possible takeover targets in his note this morning. Something to think about.

Auto retailers: AHE $2.64 (+1.54%); A.P Eagers Ltd APE $12.55; ARP $5.54 (-0.18%) Super Cheap Auto SUL $5.15 (+3%)

12. NWS $18.77 (-0.48%): Twentieth Century Fox declines to comment over DVD release rights to rental movie stores. Blockbuster Inc. being the major deal maker and operating the majority of market share is poised to secure distribution rights for DVD rentals over the major box office hits from this most recent summer including Avatar. Deals are not finalised and Fox is in a powerful positions over negotiations, from the quality of their content.

Rupert Murdoch defends the charges for online content and expects that the online content market will tend to the practice of charging for their content. WSJ

13. Australian Industry group figures; Performances of Services index +0.1points for March, from 48.3 to 48.4. still <50point barrier separating contraction from expansion. Employment sub-index +1point indicating rate of growth of jobs decline easing. Degree of caution on the part of households saw fall in sales, new orders and deliveries for March at industry services. Accommodation, café and other consumer based sectors were particularly soft.

14. Australian Office of Financial M’ment (AOFM) sold $1.0Bil worth of July 2022 bonds with a yield of 5.75%, yet had to raise the yield to attract investment. The weighted average yield of bonds sold was 5.9642% meaning they did pay up for the issue. $2.142mil excluding transaction fees.

ASX 200 Stock Trading Report

ASX 200 4874.8 (+0.92%)

SPI Futures 4899.0 (+0.93%)

1. S&P/ASX 200 +44.6 points today. Largest contributions from Financials +1.5% and materials/energy up >0.9%.

ASX 200 4874.8 (+0.92%)

SPI Futures 4899.0 (+0.93%)

Overseas Headlines:

1. Japanese CPI figures have not fallen as sharply as expected. Deflationary fears will be met with easing Monetary Policy MP below 0.1%. It is not quite clear just what sort of an impact the BOJ expects from prices in their minutes to the MP meeting, however Japan remains the text book example of how MP becomes a blunt instrument.

2. There are mixed signals over the pricing mechanism of the Yuan. Despite a lot of offshore pressure the Chinese do not seem to have a clear picture over their stance on the matter, or at least they are not publicising it. The Americans over the past week have been very vocal about the impact pegging the Yuan has on global financial markets. Within the walls, however, there is misleading indications from the Bank (People’s Bank of China), the ministry (ministry of Commerce) and state councils leading one to believe that they have not sincerely assessed the impact of pricing mechanisms on global demand for Chinese products. Reinforcing their reputation as a very internal looking, corporation influenced macroeconomic policy maker. Not to mention the wealth of empirical evidence on Exchange Rate Mechanisms (ERM) and how they have been attractive for extreme speculation, the perfect example being Soros and the British Pound. ERM over the Yuan pegged to the USD means that not only can China manage the price of exports relative to trading partners but they can mange prices they pay for imports and the value of debt held in foreign dollar terms. Debt held particularly US treasuries.

3. Chinese Steel demand expected to double by 2010. According to Iron Ore chief from RIO Sam Walsh. An important indication for Iron Ore producers. RIO and Chinalco continue to talk of pursuing projects despite Stern Hu being trialed over Iron Ore negotiations in a closed court. The event seems to have become a triviality for corporations. RIO and Chinalco confirmed today talks of a joint development for a copper and gold mine in Mongolia . Aluminium Corp of China announced it is likely to record a 500,000T surplus of Aluminium for this calendar year. Forecast to be 17.5milT in aluminium production and 17milT consumption.

4. US Gaming stocks exposed to Macau have done well overnight. Las Vegas Sands (LVS.NYSE) +7.49% MGM Mirage (MGM.NYSE) confirming what was suspected last week that hotel visits in Macau is encouraging signs for spending in casinos. CWN $8.30 is still recuperating from losses in Vegas however has a foot in Macau . Galaxy Entertainment Group Ltd. (GXYE.Y) (HK:27) Wynn Macau Ltd. (HK:1128) (WYNM.Y) SJM Holdings Ltd. (HK:880) Melco International Development Ltd (MDEVF) (HK:200) Sands China Ltd. (HK:1928) are other direct investments in Macau.

Data Tomorrow:

1. Japan:

Merchandise Trades exports YoY survey 45.7 vs. prior 40.9

Merchandise Trades imports YoY survey 33.0 vs. prior 9.1

Merchandise Trades Balance survey ¥560.6bil vs. ¥prior 63.0B

2. HK:

February exports YoY survey 25.3% vs. prior 18.4%

February imports YoY survey 26.0% vs. prior 39.5%

Trade Balance February survey -32.8bil vs. prior -29.5bil

3. US:

Existing home sales February survey 5.00mil vs. prior 5.05mil

Existing home sales February MoM survey -1.1% vs. prior -7.2%

16-3-10 ASX200 Stock Report

1. Domestic equities market was again relatively flat today, the ASX200 finishing up 13.1 points. Largest contributions where from the teleco’s lead by TLS which ended up 2.3% closing at $3.11 and looks to be in a good position to be trading off; remembering the share price will be sensitive to government intervention on the NBN split up of infrastructure assets.

• ASX200 4797 (+0.27%)
• SPI 4804 (+0.27%)

2. Minutes to the RBA meeting from Tuesday 2nd March, justification for their 0.25bp rate rise:

• International economic conditions remain uncertain. The US reported mixed results; EU remains the weakest of all. Japanese reported relative strong GDP growth, India slightly negative reflecting declining production and China reporting little but evidence of strong property price growth and greater bank lending.

• Global public debt levels remain an issue especially considering the widening of fiscal deficits.
• Domestic economic conditions where faintly better than previously. GDP for Dec09 quarter was expected to be 0.75 – 1%, contributed to by primarily the public sector and household spending.
• Improved business sentiment, improvements in labour market figures where on the upside
• Business credit growth and retail trade improved over January.
• The RBA noted Melbourne as the stronger city from the buoyant domestic housing market.
• Building approvals notably higher from the year previous however loan approvals retracted as expected post MP tightening
• CPI figures where not released, private sector wage growth remained low leading the RBA to suggest underlying inflation will fall further in the short term to 2.5%.
• Sovereign debt issues are not feared by their magnitude but from the possibility of a flow on effect. Greek and German gov. bond spreads had increased, while other major developed nations bond spreads including our own stayed relatively unchanged.
• The RBA admits that if the sovereign debt problems where not resolved this could have implications for our domestic economy.
• Company profits for the 1H FY10 on the aggregate where vastly stronger than the year previous.

3. SEV $8.00 (+0.38%) in trading halt post Federal Court ruling post release of the IER for merger with industrial equipment business owned by Kerry Stokes. NWS $18.16 (+0.83%) is still our strongest content distributor.

4. MOL $0.895 (+1.7%) after Chinese Government approval for $US200mil investment in the company by Hanlong Mining, final approval rec’d today.

5. LNG $0.525 (+2.94%); AOE $5.23 (-0.38%) have signed a limited obligation extension to the terms of the agreement to buy LNG’s Gladstone project. The provisions for the agreement have been extended until June 30th. AOE still developing on an outcome from takeover offer from Shell/PetroChina bid.

6. RIO $75.50 (+0.16%) and Chinalco are entering into a joint-venture to manage political uncertainty and tap into west African country Guinea’s Iron Ore. The Simandou field is set to rival the globe in terms of size and quality of iron ore, comparable to WA Pilbarra mine or Carajas in Brazil . Chinalco has kept the door open for further co-operation between the companies both domestically and abroad.

7. RIO annual report for 2009, experienced difficult period in comparison to the year previous but the company is optimistic on prices going forward. Major highlights:

• Underlying earnings down 38% to US$6.3bil
• Net debt reduced by US$20bil to $US18.9bil
• Cash flow from operations down 33% to US$13.8bil
• Capex US$5.4bil

8. Property market; ALZ $0.515 (-0.96%); SDG $0.80 (+1.91%); DVN $0.28 (+7.69%); CDI $0.53 (-1.85%)

9. Engineering; BLY $0.315 (-1.56%) nature of business may mean that reporting season for them is not in line with their most productive periods for earnings over the year. They are forced to report in February despite a lot of their operations being offshore, especially in the Americas, making their reporting appear conservative and for their quieter months of Jan and Feb. BLY has begun readying rigs and hired more than 1000 employees. The stock will be included in the S&P/ASX 100 from March 19th.

10. UGL $15.02 (+4.23%) we see as overpriced but still an option in the sector with upgrades to industrial services forecasts, FGE $2.51 (+10.09%); DOW $7.48 (+0.13%) & AAX $3.99 (+1.27%) are good plays in the engineering and industrials space.

11. IIN $2.45 (+3.38%) investor presentation 1H FY10 results, focus on low price high bandwidth ISP, differentiating products.

• Revenue $228mil (+11%)
• Underlying NPAT $14.8mil (+30%)
• Underlying EBITDA $37.4mil (+20%)
• Underlying ROE 14% (+3%)

12. Australian Central credit union recorded $6.3mil profit – 55% increase in HY FY10 profit. 120% increase in retail deposits and 107% rise in assets under management.

Overseas Headlines:

1. The beginning of the global financial market descent was marked by the fall of IB Lehman Brothers. Could they also have something to do with the resurrection of global financial markets? The company has announced today that it has come out of receivership.

2. Fears of tightening policy in China entered the commodities market overnight with the majority of traders factoring into prices the effect this will have on domestic demand.

3. European Union officials have confirmed that a mechanism will be put in place to help the Greek government avoid default on debt. They did not confirm how much money would need to be pooled nor who would be contributing and to what extent they would do so, however after meeting yesterday they where protective of their vested interest in the sovereign debt within the region. Greece has committed to cutting their deficit by 4% to bring it below 4% by the end of 2012.

Data Tomorrow:

1. Canada:

• Wholesale Sales month on Jan survey 0.5% vs. prior 0.7%

2. Japan:

• BOJ Target Rate (MP) 0.10%

3. UK:

• Jobless Claims change February survey 6K vs. prior 23.5K

• Average weekly earnings 3months to January (YoY) survey 1.7% vs. prior 0.8%

• U/E rate 3months to January survey 7.9% vs. prior 7.8%

4. US:

• Producer Price Index February survey -0.2% vs. prior 1.4%

• PPO exports Food and Energy survey 0.1% vs. prior 0.3%

Stock Market Report 3-2-10

US stocks rose on Tuesday after United Parcel Service (UPS) and DR Horton released encouraging earnings reports.

Gains were broad based on Tuesday, with 28 of 30 Dow stocks rising.

UPS reported a drop in fourth-quarter profit, but forecast a sharp increase in 2010 earnings. Its stock rose over 1%.

The National Association of Realtors’ pending home sales index rose 1%, in line with expectations. The index fell 16.4% in the previous month. DR Horton, one of the top five US home builders, reported its first-quarterly profit in almost three years and its stock jumped 11%. Pulte Homes and Lennar Corp rose over 7%.

Amazon.com slid for a second straight day, falling 2%, and limited the Nasdaq’s advance.

The S&P 500 industrial sector rose over 1%. Cummins and Emerson Electric rose between 7% and 8%. Cummins is a US manufacturer of diesel engines and other power generation equipment. Emerson is an industrial conglomerate that produces technology used by the oil and natural gas industries.

Major automakers, including Ford Motor, General Motors and Nissan all reported improved January sales. Toyota, however, saw a bigger-than-expected decline in January sales, impacted by a major recall.

Credit card companies rose after analysts upgraded companies within the industry. American Express, Discover Financial Services and Capital One Financial rose between 2% and 3%.

So far, 48% of the S&P 500 companies have reported results. Analysts expect earnings to have tripled from the prior year, although the improvement is mostly due to cost cutting and easy comparisons to the fourth quarter of 2008. The financial sector is expected to lead the advance.

In other news, Moody’s Investors Service said the outlook for the US’ AAA credit rating remains stable even with the effects of the credit crisis and recession on government debt and fiscal flexibility.

Commodities

Stock Market Report 21-1-10

Wall Street suffered its worst slide of 2010 on Wednesday as investors worried that lending restrictions in China could hurt the global economic recovery.

Market breadth was negative. On the NYSE, losers beat winners by more than three to one. On the NASDAQ, decliners topped advancers three to one.

Commodity-related shares were hurt by concerns that China may curb its economic expansion. A stronger dollar also put pressure on commodity prices and commodity-related stocks.

Technology shares were among the biggest decliners after IBM gave a conservative outlook, despite reporting better-than-forecast quarterly sales and earnings. IBM shares fell 3.8%.

Healthcare stocks were down on Wednesday. An index of pharmaceuticals companies fell 1.1%. Healthcare stocks had risen the prior day on speculation that the healthcare system would face new obstacles following a surprise Republican election to the Massachusetts Senate seat.

Several banks reported earnings. Wells Fargo & Co and US Bancorp reported better-than-expected quarterly earnings, helped by recent acquisitions. The Bank of America reported a wider-than-expected loss, but said its credit problems were beginning to stabilise. The Bank of America said losses widened to US$5.2B in the fourth quarter of last year, partly due to the bank paying back government bailout funds. The company said the repayments shaved off $US4B from its bottom line. US Bancorp shares added 2.3% while the Bank of America gained 0.6%. Morgan Stanley reported its second-straight quarterly profit, one year after posting a significant loss. The financial firm said it earned US$617M for the quarter versus a loss of $11B a year ago. The result missed expectations, and shares in the company fell around 1%.

In economic news, building permits, a measure of builder confidence, rose to a 653,000 unit annual rate in December, from a 589,000 rate in November, the government reported. Permits were expected to rise to a 590,000 rate, according to a consensus of economists. However, housing starts fell to a 557,000 unit annual rate, from a 580,000 unit rate in November.

The Producer Price Index (PPI), a measure of wholesale inflation, rose 0.2% after climbing 1.8% in the previous month. Economists expected it to hold steady. The so-called core PPI, which strips out volatile food and energy prices, was flat versus forecasts for a gain of 0.1%.

Overseas Markets

Dow down 137 pts to 10,588 (10,517 – 10,720)

S&P 500 down 14 pts to 1,136 (1,129 – 1,148)

Nasdaq down 33 pts to 2,287 (2,269 – 2,304)

SPI 200 Futures down 31 pts to 4,806 (4,776 – 4,840)

FTSE down 92 pts to 5,421 (5,404 – 5,513)

Nikkei down 27 pts to 10,738 (10,725 – 10,861)

Shanghai SE Comp down 95 pts to 3,152 (3,148 – 3,255)

Commodities

WTI Oil down 2.0% to US$77.43/bbl

Gold down 2.4% to US$1,113/oz

Sugar (NY) up 0.4% to USc29.11/lb

Corn down 0.3% to US$3.32/bushel

Wheat down 0.6% to US$4.67/bushel

Natural Gas (Henry Hub) up 0.6% to US$5.54/MMbtu

Silver down 4.5% to US$17.91/oz

Platinum down 0.9% to US$1,630/oz

Palladium up 0.6% to US$469.25/oz

Copper (NY) down 2.6% to US$3.35/lb

Currency

A$ / US$ down 1.7USc to US$0.91 /A$

EUR / US$ down 2.8USc to US$1.41 /EUR

GBP / US$ down 0.6USc to US$1.63 /GBP

US$ / Yen up 0.5 Yen to 91.24 Yen/US$

Stock Market Report 20-1-10

US stocks rose in a broad-based rally as investors bought healthcare shares on bets that a potential Republican victory in Massachusetts’ Senate race could stall President Obama’s reforms and remove a threat to profits in the sector.

The S&P Healthcare Index climbed nearly 2%. Drug maker Eli Lilly rose 5%. Health insurers Humana and Aetna gained 3.6% and 4%, respectively.

All 10 S&P 500 industry groups traded in positive territory.

The Dow also received a boost from McDonald’s, which gained 2.3% on an analyst upgrade. 3M was another notable mover, rising 2%.

Kraft Foods was the biggest drag on the Dow, declining 1.1% after it agreed to a revised cash-and-stock deal to buy Cadbury for about US$19.6B.

In other deal news, Tyco International agreed to buy Brink’s Home Security Holdings for US$1.9B. Brink’s shares surged almost 31.6%.

Large-cap technology companies buoyed the NASDAQ. IBM is expected to report its quarterly earnings after market close. Apple was up 4.2% while IBM advanced 1%.

Citigroup reported a fourth-quarter loss that met analysts’ expectations as the third-largest US bank took charges linked to repaying government bailout funds. On the upside, the company said consumer credit losses dropped in the quarter and that it also set aside less money for bad loans during the quarter. Shares gained 3%.

The Bank of America and Morgan Stanley will report on Wednesday. Goldman Sachs and Google will report earnings on Thursday.

S&P 500 earnings are expected to have almost tripled versus those a year ago and revenue is expected to have risen 7%. However, the jump is largely due to a spike in financial sector results versus an easy comparison to the fourth quarter of 2008 amid the height of the financial crisis. Without the financial sector, earnings are expected to be down 8% and revenue is expected to decline 1%.

Overseas Markets

Dow up 116 pts to 10,725 (10,592 – 10,730)

S&P 500 up 14 pts to 1,150 (1,136 – 1,150)

Nasdaq up 31 pts to 2,319 (2,291 – 2,320)

FTSE up 19 pts to 5,513 (5,431 – 5,532)

Nikkei down 90 pts to 10,765 (10,749 – 10,867)

Shanghai SE Comp up 10 pts to 3,247 (3,237 – 3,269)

Commodities

WTI Oil up 0.8% to US$78.66/bbl

Gold up 0.7% to US$1,138/oz

Sugar (NY) up 4.9% to USc28.98/lb

Corn down 2.6% to US$3.33/bushel

Wheat down 1.7% to US$4.70/bushel

Natural Gas (Henry Hub) down 2.7% to US$5.51/MMbtu

Silver up 1.0% to US$18.82/oz

Platinum up 1.7% to US$1,650/oz

Currency

A$ / US$ up 0.1USc to US$0.92 /A$

EUR / US$ down 0.9USc to US$1.43 /EUR

GBP / US$ up 1.1USc to US$1.64 /GBP

US$ / Yen up 0.4 Yen to 91.14 Yen/US$

Stock Market Report 19-1-10

US markets were closed for the Martin Luther King Day.

Major US companies reporting later this week include the Bank of America, Citigroup, Morgan Stanley, Goldman Sachs, IBM, General Electric and Google.

European shares rose, lifted by a rally in mining and oil shares on the back of firmer commodity prices.

National benchmark indexes gained in all of the 18 western European markets, except Greece, Iceland and Luxembourg. Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 rose between 0.7% and 0.8%.

Trading was subdued, as US markets were closed for the Martin Luther King Day. Volumes on the European index were just 65% of its 90-day daily average volume.

Miners topped the gainers’ list as commodity prices advanced. BHP, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose between 1% and 4%.

Cadbury rose 1.8% on media reports that the Kraft Foods will increase its offer to at least 820 pence per share. Kraft Foods must make a revised bid for Cadbury by Tuesday. The Hershey Co., which is reportedly working on a possible bid as well, has until Saturday to make a bid under UK takeover rules.

International Power dropped 3.4% after saying talks with GDF Suez on combining some assets are no longer continuing. The biggest UK-based electricity producer had earlier rallied on speculation that GDF Suez is considering a tie up with International Power that may lead to a partnership.

Greece’s ASE Index slid 2.5%. Finance ministers from the 16 nations using the euro are meeting in Brussels as Greece struggles to cut a 2009 budget deficit that may reach almost 13% of GDP. Among notable movers, Titan Cement, Greece’s largest cement maker, sank 7.9%. Alpha Bank, the country’s third-largest bank, tumbled 7.7%.

L’Oreal, Nokia and Zodiac Aerospace advanced on analyst upgrades. L’Oreal added 2.1%, Nokia was up 1.6% and Zodiac Aerospace gained 5.4%.

Overseas Markets

FTSE up 39 pts to 5,494 (5,454 – 5,504)

Nikkei down 127 pts to 10,855 (10,781 – 10,895)

Shanghai SE Comp up 13 pts to 3,237 (3,202 – 3,238)

Rio Tinto plc up 0.89% to A$63.68 eq.; a 19% discount to prev Aust close A$78.32

BHP plc up 1.47% to A$36.54 eq.; a 16% discount to prev Aust close A$43.44

Commodities

WTI Oil down 1.8% to US$78.00/bbl

Gold up 0.3% to US$1,134/oz

Silver up 1.2% to US$18.64/oz

Platinum up 1.4% to US$1,622/oz

Currency

A$ / US$ down 0.5USc to US$0.93 /A$

EUR / US$ down 1.1USc to US$1.44 /EUR

GBP / US$ down 0.1USc to US$1.63 /GBP

US$ / Yen down 0.5 Yen to 90.74 Yen/US$

Weekly Commodity Update – Futures Trading

After the New Year rush to initiate long positions commodity markets ran out of steam this week. The CRB index showing a flat return after a near four percent gain during the first week of trading.

The “frost” premium that helped drive energy prices higher at the beginning of the month has begun to evaporate as forecast for milder weather combined with another rise in inventories has taken prices lower. Market moves caused by weather shocks are by nature temporary but the surge in demand has helped reduce booming inventories somewhat.

The Energy information Administration (EIA) this week released their monthly OPEC surplus oil production capacity data. Excluding Nigeria and Iraq they now have 4.7 million barrels per day of surplus capacity, the highest level since 2002.

Despite robust demand from Emerging markets the slower than expected recovery among the developed economies leaves little room for further upside near term. With the current surplus capacity OPEC has signaled satisfaction with current price levels knowing that higher prices might damage the ongoing slow recovery. On top of this we have the risk of potential overheating of the Chinese economy, something that the government took the first steps to address this week by reining in lending , and raising the cost of funds for lenders.

The long awaited report from the CFTC on how they would curb excessive risk taking in energy markets were released on Thursday. The new rules would affect crude oil, natural gas, heating oil and gasoline but as it turned out the new limits would probably only impact the ten biggest position holders. So a pretty measured response with the main impact being felt by hedge funds and index-funds.

Technically Crude Oil for near month delivery made a new 15 months high at USD 83.95 but the subsequent strong sell off indicates that the market is not currently ready for an attempt on USD 85 and beyond. Considering the 18.5% rally since the middle of December last year a correction was overdue. We are currently looking for USD 78.08 and USD 76.27 as good support levels in a market that increasingly looks like it wants to range trade around USD 80 until we see further reduction in the overhang of supply.

The Gold rush of 2009 was put into perspective this week as a leading precious metals consultancy said that the investment demand for gold had doubled to 1,820 tons last year, while jewellery purchases fell 23% to 1,687 tons. This is the first time in three decades that investment demand exceeded that of jewellery demand and it highlights the huge role that investors played in driving gold to a record high in 2009.

Jewellery demand is expected to stay subdued above USD 1,000 according to traders, which puts the focus firmly on the need for continued investment demand in order to drive prices higher over the coming months. Global mine supply only rose by 6% to 2,553 tons, a six year high while net sales from central banks dropped 90% to 24 tons, the lowest level in more than twenty years.

Overall new net investments into commodities rose by USD 50 billion, a new record according to JP Morgan. It illustrates clearly how this growing asset class is being viewed by investors and currently the expectations are for a similar amount to be invested into the sector in 2010.

Gold like energy prices failed to hang onto the gains made early this week. On one hand it is being supported by continued investment interest but worries about a potential revival of the dollar on the back of European woes could hurt the EUR and thereby potentially gold as well. The economic problems facing countries around the Mediterranean and Ireland is well known and a continuation of the dollars month long slide can no longer be taken for granted.

Gold/silver ratio:

Overall the uptrend is still intact above USD 1,055 but gold looks to be in a consolidation phase for the time being. Look for support towards USD 1,115 followed by USD 1,086 and resistance at USD 1,146 and USD 1,162. Silver meanwhile has managed to hold onto its recent gains showing a near 11% gain so far this month with USD 18 proving to be a major support level. The gold to silver ratio has dropped from 65 to 61.2 currently with additional room for silver outperformance down towards 60.

The major moves of the week took place among grain and oilseeds products which tumbled on Tuesday after the USDA released their WASDE report (World agricultural supply and demand estimates), in which they surprisingly raised yield forecasts to record highs. Planting delays last year which delayed the growth window were more than offset by a mild summer and a warm dry September which helped the delayed crop to maturity.

This surprise change in forecast prompted a dramatic sell off across the board with Corn reaching the allowed down limit for the day and continued lower the following day. Because the US exports half the world’s corn, a third of the world’s soybeans, and a fifth of the world’s wheat, changes in output there have a major impact on global prices.

The reason why the upward revision came as such a surprise is due to the bad weather that the Midwest has experienced during these past few months. For exact this reason some worry that the next figures due in March could be revised lower as a portion of this season’s corn crop remains stuck in the ground due to unusually wet weather.

We see some upside to Corn now after speculative long positions have been reduced but favor a relative value trade versus wheat around the current ratio of 0.72 going for a target towards 0.79. Corn will be supported by the continued use in ethanol production while wheat supplies are abundant.

Corn/Wheat ratio

Stock Market Report 15-1-10

US stocks traded slightly higher on Thursday, led by the technology sector.

Market breadth was positive. On the NYSE, winners beat losers by four to three. On the NASDAQ advancers topped decliners eight to five.

The technology sector led gains on the back of positive brokerage comments on Oracle and ahead of an expected profit report from Intel. Shares of Oracle, the world’s second largest business software maker, gained 2.5% and led gains on the NASDAQ. Dow component Intel Corp, the world’s largest chipmaker, is expected to report a quarterly profit after market close. Its stock advanced 1.6%. Analysts expect the company to report earnings of 30cps, compared with 4cps in the previous year. IBM and Hewlett-Packard shares also advanced.

The KBW bank index was up 1.4%, led mainly by regional and midsize banks. President Obama proposed a fee to make big banks repay taxpayers for bailouts. Bank shares had declined earlier in the week on concern about the fee, but on Thursday the sector was higher.

On the downside, US economic data appeared to cast doubt on the strength of the economic recovery. Sales at US retailers unexpectedly fell in December and applications for jobless benefits rose last week. A government report showed that retail sales fell 0.3% in December. Economists were expecting sales to have risen 0.5%. Retail sales excluding autos fell 0.2% versus expectations of a 0.3% rise. Helping to soften the blow, the National Retail Federation said holiday sales for the November – December period rose 1.1%, which was better than the retail group’s expectations for a 1% decline.

The number of American’s filing new claims for unemployment rose last week to 444,000 from 433,000 the previous week. Economists expected claims would rise to 437,000. Continuing claims, a measure of Americans who have been receiving benefits for a week ore more, fell to 4.596M from 4.897M in the previous week.

On the positive side, business inventories rose slightly more than expected in November, up 0.4% as businesses re-stock.

Overseas Markets

Dow up 34 pts to 10,715 (10,667 – 10,724)

S&P 500 up 3 pts to 1,149 (1,144 – 1,150)

Nasdaq up 11 pts to 2,319 (2,303 – 2,323)

Russell 2000 up 3 pts to 647 (642 – 648)

SPI 200 Futures up 11 pts to 4,890 (4,874 – 4,899)

FTSE up 25 pts to 5,498 (5,473 – 5,522)

Nikkei up 173 pts to 10,908 (10,774 – 10,910)

Shanghai SE Comp up 43 pts to 3,216 (3,166 – 3,219)

Commodities

WTI Oil down 0.3% to US$79.39/bbl

Gold up 0.4% to US$1,141/oz

Sugar (NY) down 1.0% to USc27.76/lb

Corn down 0.9% to US$3.45/bushel

Wheat down 1.8% to US$4.95/bushel

Natural Gas (Henry Hub) up 2.8% to US$5.77/MMbtu

Silver up 0.4% to US$18.71/oz

Platinum up 2.1% to US$1,612/oz

Palladium up 5.3% to US$447.13/oz

Copper (NY) down 0.3% to US$3.38/lb

Currency

A$ / US$ up 1.1USc to US$0.93 /A$

EUR / US$ up 0.1USc to US$1.45 /EUR

GBP / US$ up 1.6USc to US$1.63 /GBP

US$ / Yen up 0.1 Yen to 91.07 Yen/US$

Stock Market Report 14-1-10

US stocks rose on Wednesday as investors bought financial and technology shares ahead of earnings results from Intel Corp and JPMorgan later this week.

Market breadth was positive. Winners beat losers over two to one on both the NASDAQ and the NYSE.

The healthcare sector was buoyed by a brokerage upgrade of drug maker Merck & Co. Shares in Merck & Co rose 4.4%.

The consumer sector was aided by an upbeat outlook from Kraft Foods, gaining 0.4%. Chocolate maker Hershey is still considering a potential bid for Cadbury, but has not decided whether it will proceed with a formal offer.

JPMorgan, up 1.8%, led gains in the KBW bank index. JPMorgan reports its results later this week. In other news in the sector, the White House is debating taxing companies that took bailout funds to make sure they pay the money back. President Obama is expected to announce the plan on Thursday.

Tech shares gained, with Advance Micro Devices up 5.3% and Intel adding 1.5%. The semiconductor index gained 1.2%.

Google fell 0.9% after the company said it may shut down its China operations over censorship and hacking. Google said on Tuesday it may shut down its Google.cn site after discovering an attempt to gain access to Gmail accounts of Chinese human rights activists. The company said it is one of at least 20 companies that have been attacked. Shares of rival Chinese search engine Baidu jumped 13% and had the biggest percentage gain on the NASDAQ 100. According to figures from tracking firms comScore and Analysis International, Baudi currently controls 64% of the search market in China while Google has 31% of the market.

Energy stocks were under pressure as crude prices slipped. Chevron was the biggest drag on the Dow, falling 0.9%.

The Federal Reserve said in its Beige Book report of economic conditions that while economic activity was at a low level, conditions have improved modestly, and those improvements were broader geographically compared with the last report.

The December Treasury budged showed a deficit of US$91.9B versus $120.3B in November, roughly in line with forecasts for a deficit of US$92B.

Overseas markets

Dow up 74 pts to 10,702 (10,614 – 10,709)

S&P 500 up 11 pts to 1,148 (1,133 – 1,148)

Nasdaq up 30 pts to 2,312 (2,274 – 2,313)

SPI 200 Futures up 27 pts to 4,879 (4,826 – 4,879)

FTSE down 25 pts to 5,473 (5,451 – 5,510)

Nikkei down 144 pts to 10,735 (10,730 – 10,867)

Shanghai SE Comp down 101 pts to 3,173 (3,165 – 3,233)

Commodities

WTI Oil down 0.9% to US$80.08/bbl

Gold up 0.7% to US$1,138/oz

Sugar (NY) up 2.5% to USc28.04/lb

Corn down 8.7% to US$3.48/bushel

Wheat down 6.7% to US$5.02/bushel

Natural Gas (Henry Hub) up 0.7% to US$5.61/MMbtu

Silver up 2.1% to US$18.63/oz

Platinum up 0.4% to US$1,577/oz

Palladium up 0.0% to US$424.00/oz

Copper (NY) up 1.5% to US$3.39/lb

Currency

A$ / US$ down 0.6USc to US$0.92 /A$

EUR / US$ down 0.1USc to US$1.45 /EUR

GBP / US$ up 1.7USc to US$1.63 /GBP

US$ / Yen down 0.6 Yen to 91.48 Yen/US$

Stock Market Report 13-1-10

US stocks slid in a broad sell-off on Tuesday. Financials declined on concerns over a potential government levy on banks, and Alcoa delivered disappointing results that further dampened sentiment.

Banks led the financials sector lower. The KBW bank index was down nearly 2%. Shares of the Bank of America, Citigroup and JPMorgan were off by between 3% and 4%. A senior US official confirmed that the government is considering a levy on financial services firms to recoup bailout losses as part of the fiscal 2011 budget. The banking sector faced another potential hit after the Federal Deposit Insurance Corp floated a proposal that banks whose compensation plans encourage risk-taking would have to pay more for deposit insurance.

Shares of Alcoa fell 11% after the company reported weaker-than-expected results. The company reported a profit of 1cps versus a loss of 28cps a year ago. However, analysts expected earnings of 6cps.

Chevron Corp said its fourth-quarter profit would be sharply lower than that in the previous quarter, sending its shares down nearly 1%. Margins have been under pressure, with the rising price of oil not in sync with the weaker demand globally. A variety of oil stocks fell, with the Amex Oil index losing 2.3%.

Shares of big manufacturers retreated, with Caterpillar sliding nearly 3%.

KB Home reported a quarterly profit for the first time in two years, thanks to a tax benefit. However, the homebuilder’s revenue dropped from that a year ago.

Technology shares also fell, including Apple, which was off 1.6%. Electronics Arts cut its fiscal 2010 forecast, citing weak holiday sales in Europe. The video game publisher lost 8.3%.

Intel and JPMorgan report results this week.

The November trade deficit, released in the morning, widened to US$36.4B, from a revised $33.2B in October. The deficit was expected to widen to US$34.5B.

Overseas markets

Dow down 66 pts to 10,598 (10,569 – 10,663)

S&P 500 down 14 pts to 1,133 (1,132 – 1,144)

Nasdaq down 35 pts to 2,278 (2,273 – 2,299)

Russell 2000 down 10 pts to 634 (634 – 644)

SPI 200 Futures down 52 pts to 4,839 (4,828 – 4,906)

FTSE down 39 pts to 5,499 (5,460 – 5,550)

Nikkei up 81 pts to 10,879 (10,764 – 10,905)

Shanghai SE Comp up 61 pts to 3,274 (3,180 – 3,275)

Commodities

WTI Oil down 2.4% to US$80.55/bbl

Gold down 2.0% to US$1,129/oz

Sugar (NY) up 2.3% to USc27.36/lb

Corn down 0.3% to US$3.81/bushel

Wheat down 6.7% to US$5.02/bushel

Natural Gas (Henry Hub) down 3.5% to US$5.57/MMbtu

Silver down 1.7% to US$18.24/oz

Platinum down 1.4% to US$1,569/oz

Palladium down 2.1% to US$425.25/oz

Copper (NY) down 2.7% to US$3.34/lb

Currency

A$ / US$ down 0.5USc to US$0.92 /A$

EUR / US$ up 0.8USc to US$1.45 /EUR

GBP / US$ up 1.4USc to US$1.62 /GBP

US$ / Yen down 1.7 Yen to 90.97 Yen/US$

Stock Market Report 12-1-10

US technology shares fell on Monday as investors took profits after the NASDAQ touched a 16-month high on Friday. Shares of industrials buoyed the broad market following the release of strong Chinese economic data.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers eight to seven. On the NASDAQ, decliners topped advancers seven to six.

China’s strong trade data lifted US companies with large international operations. Constructions machinery maker and Dow component Caterpillar jumped 6%, its largest daily advance in nearly three months. Aluminium producer Alcoa rose 1.2% ahead of its fourth-quarter earnings announcement expected after market close. Analysts, on average, expect Alcoa to show a profit of 6cps compared to a loss in the previous quarter.

Dow components Intel and JPMorgan report results later this week. S&P 500 earnings are expected to have more than tripled in the fourth quarter of 2009, thanks to easy comparisons to the fourth quarter of 2008. A substantial improvement in financial sector results is expected to fuel gains.

McMoRan and Energy XXI shares jumped after the energy companies announced a key discovery at one of their oil exploration wells in the Gulf of Mexico.

Technology shares, however, weighed on the market. Shares in Apple, Dell and Hewlett-Packard all declined.

UPS and Fedex advanced 4.8% and 2.9%, respectively, on speculation that cold weather affecting parts of the US will drive consumers away from stores and into online shopping, increasing shipment volumes.

Among decliners, Dow component Procter & Gamble shares fell 0.4% on concern that Friday’s currency devaluation in Venezuela could hurt sales and revenue as products will be more expensive.

Overseas Markets

Dow up 48 pts to 10,666 (10,592 – 10,676)

S&P 500 up 2 pts to 1,147 (1,142 – 1,150)

Nasdaq down 5 pts to 2,312 (2,302 – 2,326)

SPI 200 Futures up 6 pts to 4,939 (4,916 – 4,958)

FTSE up 4 pts to 5,538 (5,528 – 5,600)

Nikkei up 117 pts to 10,798 (10,678 – 10,816)

Shanghai SE Comp up 17 pts to 3,213 (3,197 – 3,307)

Commodities

WTI Oil down 0.3% to US$82.52/bbl

Gold up 1.2% to US$1,152/oz

Sugar (NY) down 2.8% to USc26.75/lb

Corn up 1.6% to US$3.82/bushel

Wheat up 1.7% to US$5.38/bushel

Natural Gas (Henry Hub) down 12.0% to US$5.77/MMbtu

Silver up 0.8% to US$18.62/oz

Platinum up 1.1% to US$1,596/oz

Palladium up 1.3% to US$433.75/oz

Copper (NY) up 1.2% to US$3.43/lb

Currency

A$ / US$ up 1.4USc to US$0.93 /A$

EUR / US$ up 2.2USc to US$1.45 /EUR

GBP / US$ up 1.7USc to US$1.61 /GBP

US$ / Yen down 1.3 Yen to 92.07 Yen/US$

Richard Russell (Dow Theory Letters): Silver – “poor man’s gold”

“They call it ‘the poor man’s gold’. But don’t turn your nose up at silver. The dollar was originally defined in terms of silver. When precious metals are on the rise (as now), silver tends to be seen as a monetary metal. When times are bad, silver is seen as an industrial metal. Silver has a huge number of industrial uses, silver is the best conductor of electricity. Unlike gold, silver is actually used (and used up) in industry. Thus, a large amount of silver is lost every year. In contrast, 85% of all the gold ever mined in all history is still around; it’s in your teeth or in your sweeties’ bracelet or in that ancient Egyptian ring that you see in your local museum.

“Historically, when silver gets going, it tends to make huge percentage moves. I think you can see that from the long-term chart below. For instance, back in November 2008, silver was selling for 8.65 an ounce. Today an ounce of silver is selling for 18.10 an ounce, more than double.

“Silver is now climbing back from a drastic correction, as you can see via the chart below. In December silver hit a high of over 19 dollars an ounce. Back in 1980 (and I remember this well) silver climbed wildly (limit up day after day), and it hit $50 dollars an ounce around January of 1980.

“Silver is now in an erratic bull market. How high it may go I don’t know, but I would not be shocked to see silver ultimately climb above its 1980 price of $50 bucks an ounce. Historically, once ounce of gold will buy around 15 ounces of silver. Today an ounce of gold will buy 62 ounces of silver. Silver compared with gold is dirt-cheap today.

“How to invest in silver? I like the 100 ounce bars if you can find them (they weigh about 8.5 pounds each). Or buy the 10 ounce bars. Or you can buy the exchange traded fund SLV.

“Yesterday, both gold and platinum closed at new highs for the move. Silver is lagging behind, but when silver finally catches up, it may be a stunner. Over the last year the price of silver doubled; gold didn’t perform that well.

“Below I show a point & figure chart of silver. The white metal is now in a well-established rising trend. The upside target is the 21 box. If silver hits the 22 box, that will light the fuse. If silver hits the 22 box, I will view the whole structure that you see on this chart as one huge base.

“To put it briefly, I like silver. Gold has one advantage over silver, every central bank owns some gold, and most want more.”

Source: Richard Russell

Weekly Commodity Update 11-1-10

Commodity markets kicked off the New Year by making strong gains as exceptionally cold weather across the Northern hemisphere gave energy and other sectors a boost.

This time of year everyone from hedge funds through to the private investors get back into the markets looking for profitable investment opportunities. Given the strong performance of commodities in 2009 where the CRB index rose by 30% and investment flows into the sector rose by more than USD 60 billion it was and is expected that the sector will have another year with positive returns.

Friday’s unemployment data showed another steep drop in unemployment and gave the market a clear indication that the recovery among developed nations could become a long drawn out event and that we have to look towards the emerging economies for support.  

On that note speculation emerged during the week that the Chinese government would begin to tighten their monetary policy to reduce inflationary risks after a record gain in lending. This could lead to a reduced demand for raw materials and will be watched very closely once it occurs.  What it highlights is that the risk of reversals despite the general bullish attitude to commodities is ever present.

These expectations combined with very cold weather this winter have meant that particularly the energy sector began the week strongly with Crude testing the 2009 highs and Heating Oil breaking well clear and making new highs.  Crude Oil began its rally three weeks ago rallying 18% to a new high of USD 83.52 before profit taking occurred before and after the US unemployment data. The weekly storage numbers did not have a major impact but the cold weather no doubt have given market bulls an extra argument for buying the black gold.

Technically WTI Crude Oil for February delivery reached overbought territory during the week which left the market exposed to a correction. Given the current weather situation support should not be far away. Initial support is located at USD 80 which also coincides with the level OPEC has seen as being sustainable and acceptable given the current economic level of activity. Below that next level is USD 77.80 followed by USD 76.05. Resistance can be found at USD 83 followed by the psychological level of USD 85 and trend line at USD 87.10.

Gold began the week with less conviction than the energy sector but the strong correction seen towards the end of 2009 has given new buyers a better level to enter and some upside pressure to prices was seen during the week. Resistance at USD 1,142 ahead of 50% retracement of the recent sell off at USD 1,151 needs to be negotiated before a new attack on the USD 1,200 level can be initiated. Before that happens look for the market to range trade with support coming in at USD 1,171 ahead of USD 1,142.

 HG Copper continued its strong 2009 performance into 2010 reaching USD 350 on weather and a strike at Codelco, the world’s largest Copper producer before profit taking and the news about a potential fiscal tightening in China saw sellers emerge. The impressive rally that began back in March 2009 looks intact as long we stay above the December high at USD 325.

Stock Market Report 11-1-10

US stocks rose on Friday despite weak December jobs data. The S&P 500, Dow Jones and NASDAQ hit their highest level in at least 15 months. Friday ended a strong week, with the S&P 500 rising in all five sessions.

Volume was light on the NYSE. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about three to two, while advancing stocks beat decliners on the NASDAQ by about seven to four.

Data from the Labour Department showed that 85,000 jobs were cut in December. Analysts expected no non-farm job losses in December from the previous month. However, analysts noted that monthly job losses have declined sharply since the height of the recession. In addition, November’s payrolls report was revised to show a gain of 4,000 jobs, versus the initially reported loss of 11,000. The unemployment rate, generated by a separate survey, held steady at 10%, in line with forecasts.

UPS gave support to the market after it boosted its fourth-quarter outlook and said it will cut 1,800 jobs. Its shares rose nearly 5%. The news also sent shares of rival Fedex Corp higher by 2.5%. It also boosted investor optimism for the reporting season, which starts Monday with Alcoa reporting its results.

On the NASDAQ, biotechnology companies were in favour. Teva Pharmaceutical Industries gained 4.4% after the drug maker set a revenue target of 2015 of US$31B, more than double its current annual amount.

Among other biotechnology companies, Genzyme Corp advanced 5.2% on speculation that billionaire investor Carl Icahn was considering a proxy battle at the biotech company.

The first week of the year got off to a positive start. For the week, the Dow rose 1.8% the S&P 500 added 2.7% and the NASDAQ rose 2%.

In other economic news, wholesale inventories rose 1.5% in November after rising 0.6% in October. Economists expected inventories to fall 0.3%. Another report showed consumer borrowing fell by US$17.5B in November versus expectations of US$5B. Borrowing was down US$3.5B in the previous month.

Since the start of the year, analysts have revised up their earnings estimates for all S&P sectors except healthcare, financials and consumer staples.

Overseas markets

Dow up 11 pts to 10,618 (10,554 – 10,619)

S&P 500 up 3 pts to 1,145 (1,136 – 1,145)

Nasdaq up 17 pts to 2,317 (2,291 – 2,318)

Russell 2000 up 3 pts to 645 (640 – 645)

SPI 200 Futures up 30 pts to 4,925 (4,887 – 4,925)

FTSE up 8 pts to 5,534 (5,495 – 5,549)

Nikkei up 117 pts to 10,798 (10,678 – 10,816)

Shanghai SE Comp up 3 pts to 3,196 (3,149 – 3,199)

Commodities

S&P 500 Metals & Mining Index up 5.3pts (2.8%) to 192.4

Sugar (NY) down 1.7% to USc27.53/lb

Corn up 1.6% to US$3.82/bushel

Wheat up 2.1% to US$5.29/bushel

Natural Gas (Henry Hub) down 13.8% to US$6.47/MMbtu

Silver up 1.3% to US$18.48/oz

Platinum up 1.5% to US$1,579/oz

Palladium up 0.4% to US$428.25/oz

Copper (NY) down 0.7% to US$3.39/lb

Currency

A$ / US$ up 0.5USc to US$0.92 /A$

EUR / US$ up 0.0USc to US$1.44 /EUR

GBP / US$ up 0.0USc to US$1.60 /GBP

US$ / Yen up 0.3 Yen to 92.66 Yen/US$