Morning Market Report

The market is up 9 points. ASX 200 Futures were up 23 this morning.

The Dow Jones finished up 19 –– it was up 50 at best and down 14 at worst. The intra-day all-time high of 15542 was hit in May. Now 15471.

Ben Bernanke’s testimony added some new rhetoric — quantitative easing reduction is not “preset” but is “data dependent” and could actually be increased if the data demanded. It was a reiteration of the general message that the Fed is only going to cut quantitative easing if it can do it without upsetting the markets and in particular the bond market.

Housing starts disappointed –836,000 versus consensus of 958,000. Weekly mortgage applications fell 2.6%, having fallen 4% the week before. They have fallen in nine of the last 10 weeks. The Beige Book said pricing pressures remain contained and housing continues on a “moderate to strong” pace. Wage growth was also described as “modest”. US 10-year bond yield fell another 4bp to 2.493% as the tapering fear is tempered by the “infinite stimulus if needed” message from Bernanke.

European markets up — UK FTSE up 0.24% (BoE minutes released), Germany up 0.65%, France up 0.55% (Fitch downgraded several French banks), Spain up 0.19%, Italy up 1.06%, Greece up 1.75%.

Japan up 0.11% yesterday after the Bank of Japan said the Japanese economy was seeing gradual improvement. China down 1.1% yesterday.

Resources up — BHP and RIO up 1.36% and 1.46% in the US overnight. BHP closing up 14c on the close here last night. Production numbers from BHP and RIO over the last couple of days have been reassuring but not dazzling.

Best sectors — basic materials (+1.0%), telecoms (+0.5%) and financials (+0.5%). Worst sectors — utilities (-0.1%)

ANNOUNCEMENTS & STORIES

• NAB’s business confidence index fell from 2 in the first quarter to -1 in the second quarter. Business conditions also softened and were poor in mining, manufacturing and retail sectors
• Woolworths (WOW) — Market update — Has admitted that its original plans for a nationwide roll-out of its Masters chain was optimistic. It has been forced to rein in forecasts and now expects Masters to record an EBIT loss for 2012-3 of $119 million. The higher losses were due to overly optimistic sales budgets, relatively higher wage and lower margins due to the sales mix. Despite this, WOW is still forecasting that Masters will break even during financial 2016. Woolworths has increased their 2013 financial year profit growth outlook to 5%-6% from 4%-6%.
• Woodside Petroleum (WPL) — second quarter report — Expects to book an impairment charge of between $US120 million to $US140 million for the six months to June 30 due to the temporary closure of one of its facilities. Revenue was down 6% to $1.35 billion in the June quarter compared with pcp. Production was down 8.6% compared to the pcp as a result of planned maintenance at their Pluto LNG Plant and North West Shelf Gas Plant as well as an unplanned shutdown at the Pluto plant. Production and revenue results were slight better than expected – Production was 20mmboe which was 6% better than the broker consensus of 18.8mmboe. Revenue was $US1.345bn which was 11% better than broker expectations of $US1.207 billion.
• Aurizon Holding (AZJ) — Plans to cut more than $230 million in costs over the next two years. The former QR National hauled almost 194 million tonnes of coal in the year to June, which was within its latest guidance.
• Coca-Cola Co in NY has for revealed a 22% increase in soft drink volumes in Indonesia in the June qurter. It is the first time that the US company disclosed volume figures separately for Indonesia. Coca-Cola Amatil (CCL) — Is currently in blackout mode ahead of the release of the FY results on August 20 and could not confirm the increase in numbers. Analysts had forecast volume growth between 10%-12% in Indonesia.
• News Corp (NNC 1665c) — Credit Suisse has initiated coverage with an outperform recommendation; target price 2530c. It says the company has a diverse mix of strong growth assets in pay TV and digital TV. There is also potential for further growth not captured in the current valuation. It also expects a good dividend.