Presented by Michael Hevern
Cubefinancial
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Good morning and welcome to Cube Wrap for Thursday 21st of August. I am Michael Hevern for Cube Financial.
The information provided within this presentation is general advice only and you should consult the services of a financial professional in order to ascertain whether the information is applicable to your investment strategies and risk profile. Again, it is general advice only.
Well, the DOW held the support of the recent pullback in the last couple of days, financials still weighing on the market, HP’s result helped with their relatively rosy picture going forward and miners and energy stocks recovered. We saw the DOW up 0.6% and the SP500 up the same.
The key stories for today were continuing stories about Merrill Lynch and Black Rock needing to buy back their auction adjustable rate bond as there is no market for them at this stage. The pullback auction rate securities which both companies sold in the last 18 months and they no longer have any market for them, so the authorities are telling major companies that they need to buy them back on the basis of that not being marketable.
We saw HP helping the NASDAQ, plenty of support there which goes back through, you can see there back to the start of June. That was on the back of Hip’s figures which were up 11% on the third quarter and they also said that their PC sales were up 15%. Fannie Mae and Freddie were still in the news, both being sold down and we saw US mortgage applications plummet 34% year on year. As the figures came out yesterday, they were down 1.5% for the week ending August 15, but if they compare that against 12 months ago, they are down around about 34%, so that is another negative against the financial sector in the US.
In the UK, we saw market hold tentatively there again. We actually saw this happen on thin volume which has been the bang of the market for the last 5 to 10 days. We saw FTSE up 0.9% on the session with the DAX and the CAC in Europe up 0.6% and 0.8% respectively.
The key news in the UK was the fact that the commodities were higher and commodity stocks were up on the session. We saw energy stocks rise with BP up 0.7%, Shell up 2.1%, and BG group up 4.4% on the session and the big miners were also up on the session as well with BHP, RIO, Xstrata, and Anglo America all up between 2% and 7% on the session doing a bit of catch-up with out market as well. That ended a three-day losing streak for the FTSE and we also saw banks mixed as well with Barclays and Royal Bank of Scotland down and Lloyds, HSBC, and HBOS all up.
In the Asian markets, the big theme there is what is going to happen to the Chinese market after the finish of the Olympic Games. Analysts were expecting that the economy might fall off the edge of the cliff, but that does not seem to be happening and on the back of a bit of positive sentiment there, China was up 7% on the session. This helped the other Asian markets with the Nikkei flat for the session, down 0.1% and Hong Kong up 2.2% on the session.
The gains in the Chinese market was the biggest percentage gain in their market for four months, so seeing a bit of a respite to that continued sell off that it has sustained of late. Oil, the big story there was that the inventories are reported to be up significantly overnight. However, the US dollar did ease and also the Fed has come out and said that they do expect oil prices to continue to fall and that will have a negative impact on inflation thereby making their job slightly easier.
Gold was down slightly, but finished at 812, down 60 cents on the session. We saw the US dollar slightly weaker and oil up. Rest of the commodities, we saw silver down 0.5%, copper down 0.7%, lead down 2%, and zinc down 0.03%. Aluminum was down 0.6% and nickel was up 2.8% on the session, so a very mixed story there. On the stock commodities, we saw wheat up 3.5% and corn up 1.8% where Soya beans were down 2% on the session.
On the ASX, we saw a bit of a lackluster day yesterday in volumes here again. SPI is up at 37 points overnight. We would expect miners to continue their recovery. Just note that we do have index options expiry this morning, so you will see a bit of movement or volatility in the market on open.
The reporting season continues, we see that Coca-Cola, ATL, MAP and Sydney Gas have all been upgraded on the back of their reports from yesterday and Crown and Brambles under whelmed in their reporting yesterday and they have been downgraded by analysts. Babcock and Brown reporting today there is a management shakeup there with the CEO and a number of other key management positions up for grabs.
Reporting today, we have Ancor, Qantas, Wrigley, OZ Minerals for the first time since its merger with Zinifex, Santos, Fairfax Wes farmers and Sonic all reporting, so another busy day. Key theme for the reports today are that input costs are increasing and the reports are very much dependent on how well the management are controlling those costs, and growth into 2009 is expected to be below that of the previous 12 months, but again it depends on the management’s ability to manage margins in order to sustain profitability going forward. You should expect a positive open this morning and that should be led by miners, so you see there that that varies from day to day. We had a good day in miners yesterday and we expect that to continue today.
Should you have any questions about the information provided within this presentation, please call the equities options desk and/or the CFD advising desk on the numbers provided and as always trade carefully.
