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You can read a wrap-up of all the action here.
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Shares advanced after global investors took some disappointing United States employment figures in their stride and instead chose to focus on a strong US company earnings season.
Locally investors were focused on a slew of major Australian companies due to report half-year results this week, including Commonwealth Bank of Australia, Rio Tinto and Telstra.
The benchmark S&P/ASX 200 Index rose 55.6 points, or 1.1 per cent, on Monday to 5222.1, as the biggest banks and miners all lifted. The broader All Ordinaries Index added 1 per cent to 5236.5.
Local shares followed a positive lead from the United Stated where the three major indices all added more than 1 per cent despite official non-farm payrolls data showing the world’s biggest economy created only 113,000 jobs in January, missing expectations for 180,000 new positions.
“People are growing more comfortable with the concept that a freak cold snap in the US has had a real short-term impact on business activity, whereas at first it was difficult to comprehend just how severe the weather conditions have been and it sounded like a bit of an excuse,” Arnhem Investment Management head trader Simon Twiss said.
Major markets around Asia also moved higher this afternoon providing further support for the local bourse.
Economists and investors were eagerly awaiting the first major speech from new US Federal Reserve chair Janet Yellen, due Tuesday night, to hear her view on employment trends and the implications for monetary policy.
Let's see who was hot and who was not among the top 200 names.
As mentioned, gold miners recorded some solid gains - Evolution Mining leading the way up 12.8 per cent. Forge continued to be a day trader's dream (or nightmare), up 11.6 per cent today.
G8 Education jumped 6.4 per cent after it announced the purchase of 63 new childcare and education centres.
Ten Network was the biggest loser, down 4.2 per cent, with rare earths miner Lynas also shedding some serious market weight.
Car maker Toyota is strongly tipped to announce this afternoon it will leave Australia in 2017.
Staff have been assembled at the company’s Port Melbourne plant ahead of the announcement.
Toyota future has been in doubt following announcements from Ford and General Motors Holden they will cease local manufacturing.
Twitter is abuzz with the following:
BREAKING: Toyota expected to announce shutdown of its Australian factory in 2017 at 5pm today. Not yet officially confirmed.— Joshua Dowling (@JoshuaDowling) February 10, 2014
Here's something for the bears: investors should prepare for another global financial crisis where equity markets tank and property bubbles burst in 2014 or 2015, according to ultra-bearish economic forecaster and author Harry Dent.
The US economist argues the global economy is driven by five long-term cycles, which he asserts are all in a downturn. He predicts that against this backdrop, demographic problems in the key economies of China and Germany will tip the world into a recession over the coming 12 to 18 months. His latest book is The Demographic Cliff: How to survive and prosper during the great deflation of 2014-2019.
The five concepts at the heart of the doomsayer’s forecasting model are consumer and government spending cycles driven by demographics, an 18-year geopolitical cycle, alternating periods of inflation and deflation, a 30-year commodity price cycle, and a 10-year boom-to-bust cycle.
Central to Dent’s theories are his belief that the importance of demographic changes in spending habits are grossly underestimated: “Government’s and central banks didn’t cause the boom of the 1980s or the crash of 2008 – the baby boomers did,” he says.
Dent believes bulk commodity prices (iron ore, coal and oil) all reached the peak of a 30-year cycle in 2008 and will continue to decline until about 2023 when he predicts they will revisit the lows of the period from 1998 to 2000.
His outlook for gold prices are even more pessimistic. “As the result of a worldwide crash, sometime between 2015 to 2016 gold will go as low as $US700 to $US740 per ounce. It could go as low as $US250 to $US400 10 years from now.”Back to top
A late rally has pushed the market to finish at the day's high, closing up 1.1 per cent, or 55.6 points, to 5222.1. The All Ords gained 1 per cent to 5236.5.
Gold stocks surged 5.6 per cent, led by the biggest name in the sector, Newcrest, which jumped 7.1 per cent to $11.11.
The IT sector was the next best performing, up 1.7 per cent, while financials (excluding listed property) and metals and mining gained 1.5 per cent.
Listed property and utilities lagged heavily, barely recording gains.
The big four banks outperformed the broader market, while BHP was up 1.1 per cent and Rio added 1.6 per cent.
CSL was up 1.5 per cent.
Origin, Woolworths and Amcor were the biggest individual drags on the market after all lost ground.
Billionaire parliamentarian Clive Palmer said the economy urgently needs a $6 billion-a-month stimulus boost on par with the one delivered in the US by the Federal Reserve’s controversial $US85 billion bond-buying program.
Mr Palmer said he was opposed to European-style “austerity” and said it was vital more money was injected into the economy. “At the moment it’s at rock bottom.”
In a letter sent to federal members of parliament ahead of their return to Canberra on Tuesday, Mr Palmer said the best example to follow was the one shown by the US.
“Following the financial crisis in the United States, President Obama moved decisively to stimulate the US economy. Every month over 85 billion were injected into the US economy for more than two years.
“This is the equivalent to an injection of over six billion dollars a month into the Australian economy.”
Mr Palmer said in his letter there were a “number of simple changes” that could turn Australia’s economy around, none of which “involved borrowing any money of any significance.”
He said unless action was taken, the economy could revert back to the state it was in after World War Two.
There may be some support for Paul Zahra's strategy (see blog post at 1.56pm), but Intelligent Investor's John Addis says David Jones missed the train and the department store era is over:
Online retailing got underway in the dotcom era and to its credit DJs got in early, picking up the assets of three failed ‘etailers’. But three years and $28m later, former CEO Mark McInnes closed the sites down. It was a grievous error.
It took almost 10 years for DJs to right the McInnes’ error. Paul Zahra launched the company’s ‘omnichannel strategy’ – a phrase that almost pleads for failure – in March 2012 but the moment was lost.
A few minutes spent at Asos.com or Theiconic.com.au and the gulf between native online retailers and those migrating from bricks and mortar becomes obvious.
But it’s not just online retailers sniffing out complacent incumbents. International retailers that have honed their skills in hyper-competitive US and European markets see huge opportunity in Australia. Gap, Ladurée, Mui Mui, Paul Smith, Top Shop, Zara, Abercrombie and Fitch, Hollister, H&M and Uniqlo have either already arrived or are coming soon. More will follow.
This makes the lives of department stores even harder, as does Australia’s shrinking middle class from which they’ve traditionally drawn their customers. This is a point not much discussed but of vital consideration.
Australia’s largest honey company Capilano’s half-year profit has more than doubled on the back of escalating honey prices in Australia and overseas.
The strong result saw Capilano’s shares jump 23.7 per cent to a record $4.90 before losing some gains this afternoon to be up 16.8 per cent.
The honey seller, which moved from the Bendigo exchange to list on the ASX in July 2012, says local and international retail markets are driving its profit growth.
Honey prices have risen significantly after drought and adverse weather hampered the Australian crop and limited production.
McAleese’s stock has recovered slightly after this morning hittting a new all-time low after the NSW roads minister ordered the transport company’s Cootes petrol tankers off the road again following the discovery of fresh safety breaches.
McAleese’s shares are down 2.7 per cent at $1.09, after earlier sliding as much as 8.9 per cent to $1.02 after NSW roads minister Duncan Gay said spot checks of Cootes vehicles last week had found “major defects.”
The inspections come several months after one of McAleese’s Cootes tankers was involved in a fatal accident on Sydney’s Mona Vale road, which sparked investigations from safety regulators and the grounding of part of the Cootes fleet.
Ongoing safety concerns have worried Cootes’ customers, with McAleese revealing last month it had lost key haulage contracts with oil and gas groups Shell and BP just two months after the company’s stock floated on the Australian Securities Exchange at $1.47 per share.Back to top
Customer-owned lenders are urging the government to impose $1.4 billion a year tax on the big four banks, a move they claim will help level the playing field and support financial stability.
The lobby group representing credit unions, building societies and customer-owned banks argues in a new submission that the Commonwealth Bank, Westpac, National Australia Bank and ANZ should be forced to pay an annual tax for their ''too big to fail'' status.
Such a tax – which would replace a levy on deposits planned by the former Labor government – would reduce risk in the financial system and increase competition, the Customer Owned Banking Association says.
Smaller lenders argue the big four obtain an unfair advantage via cheaper funding, because investors assume they are ''too big to fail'' and would receive government help if they faced financial trouble.
Growing concerns of a housing bubble are overdone, St George economists write in a note:
- After adjusting for inflation, gains in Australian house prices do not seem excessive on historical and international comparisons.
- There is also little sign that rising house prices is posing a significant threat to financial stability in Australia. Housing credit is well-contained - it grew at a modest pace at 5.4 per cent in the year to November and well below the very strong double-digit growth rates pre-GFC.
- Additionally it appears that households are having few problems financing their loans; arrears rates on housing loans are low and have fallen since 2011.
- We expect growth of around 5-8% for dwelling prices nationally this calendar year. Sydney is expected to continue to outperform other capital cities, but improved affordability across the country points to more broad-based gains.
- Over the long-term, we expect dwelling prices, on average, to rise in step with household disposable incomes. However, there are cyclical factors that point to stronger growth in the near-term.
Big names most likely to disappoint this earnings season are Cochlear, UGL, Sims Metal Management and Fortescue, while among smaller stocks investors should watch out for Horizon Oil, Virgin Australia, Energy World, Mesoblast, Medusa Mining and Whitehaven Coal.
A cocktail of high and increasing interest by short sellers and overly optimistic earnings forecasts is an indicator of a stock that is set to disappoint come earnings season, CIMB analysts reckon.
Going by sector, the analysts’ model suggests pharmaceutical & biotechnology, utilities, capital goods and energy stocks are most likely to underwhelm.
In particular, a rapid build up in the level of shorting in Cochlear has put the medical technology stock on CIMB’s radar, as has Sims Metal Management and UGL, with the added element of some poor share price momentum for the engineering firm leading into earnings season.
The high valuation on Fortescue shares is one of the biggest reasons for the stock looking vulnerable when the iron ore miner reports.
Japan posted its smallest current account surplus on record last year in a worrying sign that sluggish exports and the rising cost of energy imports will hamper economic growth.
The deteriorating external position is also bound to put the spotlight back on Japan's ability to service its huge debt, which at over twice the size of its economy is the worst in the industrialised world.
The Ministry of Finance data also showed the current account balance for December slid to the largest deficit on record as exporters failed to reap the benefits of a weak currency.
"Gains in exports are weaker than I expected, reflecting declining competitiveness," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management. "The current account can remain in surplus, but the surplus will be small. This is an economic headwind that could place pressure on the government and the Bank of Japan to respond."
The Japanese yen slipped as low as 102.65 against the US dollar, its weakest in more than a week, before recovering to currently 102.38. The Nikkei is up 1 per cent.
As David Jones chairman Peter Mason comes under pressure to stand down two non-executive directors and convince departing chief executive Paul Zahra to stay, analysts say the retailer’s earnings outlook is improving.
While group profits this financial year will take a hit from a 50 per cent decline in earnings from David Jones’s credit card business, Morgan Stanley analyst Tom Kierath says Zahra’s turnaround plan is already starting to deliver results in the department store business.
Morgan Stanley believes initiatives including an upgraded point of sale system, a new concession-style model for consumer electronics, store traffic counters, an enhanced private label offer and better category mix will boost gross margins and reduce costs, underpinning 10 per cent compound annual earnings before interest and tax growth over the next five years.
“David Jones is at the beginning of a turnaround phase, in our view,” says Kierath, who increased his 12-month price target to $3.50 compared with the current price of $3.09 (+1% for the day).
David Jones is due to release second quarter sales on Thursday.
Citigroup analyst Craig Woolford expects total sales for the three months ending January to rise 4.9 per cent to $619 millions and like-for-like sales to rise 2.1 per cent, the strongest growth for 13 quarters.
Citigroup believes David Jones’s online store - relaunched by Zahra in November 2012 - will account for about 1.1 per centage points of growth and its 36 bricks and mortar stores 1.1 per centage points. The strong sales growth will help the retailer fractionalise costs, boosting EBIT margins.
No surprise that Forge Group has recorded the biggest drop in analyst enthusiasm over the past three months.
This time in November last year The Street had a consensus "buy" rating on the stock, but all that has changed in the intervening period and now they say "sell".
Not a shock either that Qantas finds itself on this list of stocks who have fallen most out of favour.
George Soros’s Quantum Endowment fund has reclaimed the top spot as the world’s most successful hedge fund of all time, adding $US5.5 billion to the US billionaire investor’s fortune.
Mr Soros is best known for triggering the collapse of the British pound on Black Wednesday 1992, when Quantum made $US1 billion. Last year’s profits did not come from such an aggressive strategy, with the 22 per cent return spread across the different strategies of the fund.
According to a survey by LCH Investments, which is part of the Edmond de Rothschild Group, Mr Soros’s $US28.6 billion fund posted its best return since 2009, after calling an end to the financial crisis, the Financial Times reported.
The Quantum Endowment fund has now edged out American businessman Ray Dalio’s Bridgewater Pure Alpha as the fund that has made the most money for investors. For the past few years, Mr Soros and Mr Dalio have been in a tussled with each other for the top spot.
Building materials company CSR has received the biggest increase in analyst enthusiasm over the past three months, followed by JB Hi-Fi and Sirtex Medical.
Here's a list of the stocks that the analyst community have upgraded the most in the past 90 days.
The views of "the street" have been condensed into a single number representing the consensus recommendation, where "1" is a strong sell, "3" is a hold and "5" is a strong buy.
In a sec we'll post the 10 stocks that have suffered the biggest fall in analyst confidence.
And remember that analysts work on a 12-month investment horizon.
Here are the stocks hitting 52-week highs today:
- G8 Education @ $3.54
- CSR @ $3.08
- Navitas @ $6.92
- Adelaide Brighton @ $3.92
- REA Group @ $47.39
- Aurora Oil & Gas @ $4.13
No new lows!
A leading analyst slammed some of Australia’s biggest and most successful companies for destroying shareholder value through acquisitions.
David Errington, who has covered retail, consumer products and diversified industrials over the past 30 years, launched a stinging attack on Wesfarmers, Woolworths and Coca-Cola Amatil.
He says that in each of these companies diversification has destroyed value.
The Wesfarmers example involves the $20 billion purchase of Coles in July 2007.
“Despite management claiming it has been a successful acquisition for Wesfarmers, the facts are that returns on equity fell from positive 25 per cent pre the acquisition to 6 per cent post the acquisition and remain well beneath 10 per cent six years after the acquisition,” he says in a note to clients.
“In addition, dividends per share were above $2 a share pre the Coles acquisition and six years after, are still well beneath $2 a share.
“Clearly, the Coles acquisition has been (for Wesfarmers shareholders at the time Coles was acquired) a poor decision.”
Woolworths cops it for seeking growth outside of its core business of supermarkets which have very high margins and high cash generation.
The company has looked for growth outside of supermarkets through expansion of NZ Supers, Big W, gaming and hardware.
Coca-Cola Amatil’s expansion into canned fruit making through the purchase of SPC Ardmona is the example used to show diversification has destroyed value.
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