That's it for today - and for the week. Thanks all for reading the blog and posting your comments.
Enjoy your Australia Day BBQs! We'll be back on Tuesday.
We mentioned CSL hit 52-week highs today at $71.20 before settling to $70.87 a share.
Also hear year-long peaks are Amcor, which reached as high as $10.86 before closing at $10.73.
Aurizon (the former QR National) went to $5.09 in intra-day trading, and closed at $5.09.
Interestingly, Aurizon Holdings had the largest dollar increase in short positions in the week, according to CBA analysts.
Hitting 52-week lows, on the other hand, were Mermaid Marine (at $2.90) and Karoon Gas, which plunged as low as $3.45 but at last call was $3.68.
It was another good day for a grab bag of mid-cap miners, with iron ore producer Mount Gibson up 8.3 per cent the best of them.
Newcrest Mining bounced back after three days of losses.
Southern Cross Media and Automotive Holdings were the odd stocks out as non-resources plays which were up strongly.
The day got even worse for The Reject Shop - watch out for bad puns in the headlines on the business pages tomorrow. The stock sold down an impressive 32 per cent today.
Commonwealth Bank has followed global rivals including Goldman Sachs in restricting traders and dealers from using chat rooms as regulators probe alleged currency rigging.
Employees in its markets teams will be prohibited from using instant-messaging groups with counterparts at more than one bank from this month, a spokesman told Bloomberg.
Banks are clamping down on traders’ use of chat rooms after regulators used them as evidence in their investigations into the manipulation of benchmark interest rates and foreign-exchange rates.
JPMorgan Chase, Royal Bank of Scotland and Lloyds Banking Group prohibited multidealer chat rooms last month.
The sharemarket has closed at the day's lows, falling 1.2 per cent for the week.
On Friday, the benchmark S&P/ASX200 dropped 22.1 points, or 0.4 per cent, to 5240.9, while the broader All Ords lost 21.2 points, or 0.4 per cent, to 5254.3.
Among the sectors, financials shed 0.7 per cent, while materials added 0.2 per cent, while the gold sub-index rallied 2.5 per cent.Back to top
The Australian dollar has taken another hit, slumping more than half a cent to 87.03 US cents.
The RBA's Heather Ridout has told the Wall Street Journal, saying the currency hasn't fallen far enough yet and that she considers 80 US cents as a "fair deal for everybody” including importers and exporters.
As stock that's doing nicely CSL, which has hit a new all-time high, up 1.4 per cent at $71.10.
US competitor Baxter posted better than expected profit on hemophilia products last night, but Platypus Asset Management chief investment officer Donald Williams says there's no specific company news that's driven the stock’s 6 per cent rise over the past fortnight.
He says it's likely due to investor appetite for defensive stocks at a time when a number of cyclical names have delivered disappointing guidance.
The life-saving nature of CSL’s products and its largely government client base are considered insulation against the ups-and-downs of the economic cycle.
“Like all companies with US denominated earnings, CSL has also been a beneficiary in recent months of a falling exchange-rate,” says Williams who still sees value in holding the stock.
“CSL is currently trading at a forward price-earnings ratio of 20 times, which is slightly above the middle of the 16 to 24 times range we think is appropriate,” he says.
Credit Suisse analyst Saul Hadassin, who is the top ranking analyst on the stock according to Bloomberg, has an “outperform” rating on CSL with a 12 month target price of $74.50.
Everybody loves Nine!
CBA has become the latest broker to initiate coverage of Nine Entertainment Co with an “overweight” rating.
Deutsche Bank, Macquarie Group, Credit Suisse, UBS and Citigroup all have “buy” or “overweight” recommendations on the commercial free-to-air television, digital and events business.
Not bad for a company where the lion’s share of earnings come from old media.
Or perhaps a warning sign for investors to stay away?
What would a long/short strategy based on analyst calls look like?
We're glad you asked. The table below shows the kind of returns you could expect from investing in each of the top 20 stocks using that very approach over the past year.
The research is based on Bloomberg data, so we only get the results of the better analysts (don't know why they limit it to the better analysts, other than discretion).
As you can hopefully see, NAB was the only one of the big four banks where you would have done better following "the call of the Street" versus just buying and holding it for 12 months.
Macquarie was a big miss, as was 21st Century Fox, Brambles, and Telstra.
But BHP, Fortescue and Suncorp were winners on the strategy.
Read more ($).
The ASX200 is oscillating around breakeven level and is down about 50 points for the week, IG's Stan Shamu notes and sums up the session:
- The big banks have lost some ground today and weighed on the overall index. Heading into the long weekend, with markets closed for Australia Day on Monday, activity has been relatively light.
- The healthcare space has seen two contrasting reports with CSL Limited edging higher on the back of a positive Baxter report. However, ResMed is down over 4% after its earnings came in below analyst estimates.
- Overall, the healthcare space is in the black as CSL keeps the sector firm.
Australia’s horror draw in this years’ FIFA World Cup is an opportunity … to explain the strange things going on in the bond markets.
The Socceroos may be a liability on the field, Spain’s liabilities are off the field. But that’s not what the bond markets show. It's been a point of discussion that despite our AAA rating, BBB- rated Spain now has lower 10-year bond yields. So are we headed for defeat in the bond markets too?
Before we concede bond market defeat its worth pointing out that our bond market isn’t driven by how much of a premium investors charge for the risk that we will default which is the case for Spain.
Instead it’s determined by where investors think our interest rates are headed. At the depths of the eurozone crisis, investors thought Aussie interest rates were headed below 3 per cent over 10 years while at the same time fretting that Spain would default, pricing its bonds at a near 8 per cent yield.
Investors are less worried about Spain defaulting – which explains why their bond rates have fallen below 4 per cent. But it doesn’t mean that there’s no risk they would default. If that was the case, their rate would be closer to the AAA-rated Dutch rate of 2 per cent.
In a welcome development, Adidas is hopping aboard the classic sneakers trend (yes, there is such a thing) and re-releasing the Stan Smith shoe - one of the best-selling models of all time, reports Bloomberg Businessweek.
Vans and Converse have had success recently with the "everything old is new again approach".
In any case, as Businessweek notes, Adidas needs all the help it can get against Nike.
Here's an extract from UBS's latest investment strategy note:
While 2014 is going to be the year in which old world economies rise again, it will also be a year of transitions – the US and UK toward conventional monetary policy, Japan toward inflation, Europe toward stability, China toward consumption-led growth.
More countries will be in some kind of transition this year than at any other time in recent history. Each transition carries its own level of risks and probability of success. In this environment, risk management becomes just as important as return management.
In terms of our investment strategy, we remain constructive on risk assets with our key directional positions being long global equities and slightly short US duration. In our balanced funds we are underweight Australian, French and US equities and have overweight positions in Canada, Italy, Taiwan, China, and Japan.
The recent fall in dollar has seen us reduce our short Aussie dollar position.
Echo Entertainment Group will sell its Jupiters Townsville casino to hotel and brewery operator Colonial Leisure Group for $70 million.
The transaction will allow Echo to focus on bidding to build a new casino and entertainment resort in Brisbane.
Chief executive John Redmond has said if the company is successful in Brisbane it will spend more than $1 billion on the development.
Redmond said despite “positive” performance at the Townsville casino, the company’s smallest property was not a natural fit with Echo’s two other Queensland casinos in Brisbane and the Gold Coast, and its flagship property The Star in Sydney.
Investors have been net-short the Australian dollar for months and it looks like they're still betting the currency will fall.
Traders could be holding the short positions as a "low-risk insurance premium against a bigger financial stress event in China", RBS senior currency strategist Greg Gibbs says in a note today:
- The Australian dollar is a risk proxy for China and is exhibiting evidence that fears remain high.
- Even if the risk of financial crisis does not materialise, the market believes that efforts by China to contain credit growth and deal with structural excesses are likely to keep Chinese growth and demand for commodities on a downward trend, so it sees little upside risk for the Australian dollar.
As we noted earlier, an early read on Chinese manufacturing data pointing to a contraction in the sector has sparked a broad-based sell-off in emerging market currencies, which in turn weigh on the Australian dollar.Back to top
Vodafone Hutchison Australia has brought in Vodafone Romania’s chief executive, Iñaki Berroeta, to be its new chief executive.
The Spanish-born executive Berroeta will take over from current CEO Bill Morrow, who quit his post in December to head up the company building the national broadband network, NBN Co.
Berroeta will start the role from March 1 and go through a month-long handover period until Morrow’s departure at the end of March.
Vodafone Australia is currently partway through a three year transformation program to make the company profitable and win back customers. It is a joint venture between UK-telco Vodafone Group and Hong Kong-based Hutchison Whampoa Limit
Sharemarkets around the region are mostly lower, with Japan leading the way down after the yen strengthened overnight:
- Japan (Nikkei): -1.6%
- Hong Kong: -0.6%
- Shanghai: +0.1%
- Taiwan: -0.1%
- Korea: -0.8%
- ASX200: -0.3%
- Singapore: -0.5%
- New Zealand: -0.7%
Investors are concerned earnings growth will miss estimates on signs of weakness in China’s economy.
‘‘A correction could occur,’’ says AMP Capital Investors head of investment strategy Shane Oliver. ‘‘We have to expect more volatility. Shares are no longer dirt cheap, meaning the easy gains are behind us and we are now more dependent on rising earnings coming through.’’
Here’s a nice little lunchtime read getting a lot of traction on the homepage:
Forget about bitcoin. The latest go-to cryptocurrency is called dogecoin, a digital denomination that began life less than two months ago as a jokey tweet made by 26-year-old Australian Jackson Palmer.
Investing in Dogecoin, pretty sure it’s the next big thing. http://t.co/yHR4bNv6OD— Jackson Palmer (@jacksonpalmer) November 28, 2013
But his joke has now taken on a life of its own. The total value of the market for dogecoin (pronounced dough-je coin) has just topped $US60 million ($68 million) and it has spawned a community comprising thousands of buyers, sellers, merchants, beggars, speculators and "miners", the people who mint the money.
This week, transactions worth a total of $US14 million were made, including one Chinese investor who bought $US5 million worth of the virtual currency.
And on a daily basis dogecoin transactions are outstripping those in the more established bitcoin market, albeit for a smaller overall value.
It is one of the ugliest words in financial markets, but one that might start to confront Australian investors in the coming year: “stagflation”, the combination of weak economic growth and rising inflation, the AFR’s David Bassanese writes:
It’s not great news for bond or equity markets, and usually the safest place for the investor to hide when stagflation hits is cash.
Why? Rising inflation usually pushes up long bond yields, which cuts bond market capital returns. And there’s a double whammy for equities: weak growth hurts corporate profits, while rising interest rates dampen equity price-to-earnings valuations.
Stagflation is only a risk, but it’s more elevated after the higher December-quarter inflation result.
The RBA will be keen to see the next set of inflation results, to be assured it’s not the start of a worrying upward trend. So it would be loath to contemplate an interest rate cut in the next few months, even if we see more weak employment results and subdued business confidence.
The Reject Shop's profit warning, which has sent the stock spinning down 24 per cent, is the second from a retailer in a week after Super Retail flagged soft profit growth, raising fears of a weakening outlook for retailers.
The latest warnings indicate the retail sector faces significant challenges, with unemployment tipped to rise, says Sondal Bensan, an investment analyst at BT Investment Management.
The warnings also mean lower-end retailers may struggle to justify heady stock gains that were made in the past year on improved consumer confidence, Bensen says.
Similar to Reject Shop, Super Retail Group blamed an "impacted gross margin" due to increased promotional activity in its first-half performance update.
‘‘A lot of people got really excited last year that consumer spending would really pick up, but if you look at the macro numbers we’re not seeing that,’’ says Evan Lucas, a market strategist at IG. ‘‘We’re still saving rather than spending as a country.’’
In 2013, the Reject Shop jumped 16 per cent and Super Retail Group gained 34 per cent. JB Hi Fi more than doubled in value last year, making it one of the top performers for the year.Back to top