Posts Tagged ‘Rio Tinto’

ASX Company News: Rio Tinto Finalises Iron Ore JV Agreement With Chalco

Friday, July 30th, 2010

Rio Tinto (RIO) and Chalco signed a binding agreement to establish a joint venture (JV) covering the development and operation of the Simandou iron ore project in Guinea.   The binding agreement follows the signing of a memorandum of understanding between Rio Tinto and Chalco’s parent Chinalco announced on 19 March 2010. The agreement covers all aspects of how the JV and project itself will operate and be governed, including planning, construction and management of the mine and associated rail and port infrastructure.

Jan du Plessis, chairman, Rio Tinto and Xiong Weiping, president, Chinalco, and chairman and chief executive officer, Chalco today attended a signing ceremony in the Great Hall of the People in Beijing. Government officials from China, Guinea, the United Kingdom and Australia were represented at the event.

Mr du Plessis said: “Developing our relationship and business links with China is a key priority for Rio Tinto. This agreement takes our relationship with China and our largest shareholder Chinalco to a new level, building on a line of successful partnerships between Rio Tinto and China dating back to the start of the Channar iron ore joint venture in the Pilbara a generation ago. The formation of partnerships is integral to our business engagement with China. We are confident that the knowledge and experience gained from these other ventures will help make this joint venture our most successful yet undertaken with a Chinese partner.”

Mr Xiong said: “The establishment of a joint venture will make use of Chinalco’s advantages in the infrastructure field and its profound understanding of the Chinese market as well as Rio Tinto’s technologies and experience in the operation of large mining projects, so as to form a complementary and powerful union. We believe the successful development of the Simandou project will greatly quicken the pace of local infrastructure construction and economic development. This project can also efficiently balance China’s need for security of supply on the global iron ore market. We expect the two sides will regard cooperation on the Simandou project to be the foundation for further pushing forward the cooperation of these two companies in other resource projects.”

Tom Albanese, chief executive, Rio Tinto said: “We are excited about formalising our partnership with Chinalco through its subsidiary Chalco. Rio Tinto, Chinalco and the IFC together form an extremely strong development team. We expect to realise great economic and social benefits for the people of Guinea from the development of the Simandou project. This is a world-class iron ore project. We firmly believe this agreement will deliver great value for our shareholders. We remain committed to continued engagement with the Guinean Government and other key stakeholders. We continue to invest funds to keep this important project moving forward and anticipate mining operations would start within five years.”

Luo Jianchuan, president, Chalco, said: “This transaction is consistent with the company’s development strategy to seek development opportunities in the mining industry and to seek high-quality overseas mineral projects. We hope Chalco and Rio Tinto can join efforts to enable the Simandou project to be put into production according to the development schedule reached by the two sides, so as to bring huge value to all related parties.”

Under the terms of the agreement, Rio Tinto’s 95 per cent interest in the Simandou project will be held in the new JV. Chalco will acquire a 47 per cent interest in the new JV by providing US$1.35 billion on an earn-in basis through sole funding of ongoing development work over the next two to three years. Once Chalco has paid its US$1.35 billion, the effective interests of Rio Tinto and Chalco in the Simandou project will be 50.35 per cent and 44.65 per cent respectively. The remaining five per cent will be owned by the International Finance Corporation (IFC), the financing arm of the World Bank.

Both Rio Tinto and Chalco are keen to progress the project as soon as possible and are working with all stakeholders to expedite the process. The formation of the JV will be finalised in consultation with the Guinean Government and following satisfaction of various regulatory requirements.

www.riotinto.com

http://www.traderdealer.com.au/Fundamentals/rio

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Stock Market Analysis: Overseas Markets Continue Lower; RBA to Hold Rates

Monday, July 5th, 2010

Stock Market Analysis

Overseas Markets Continue Lower; RBA to Hold Rates
Overseas markets continue to trade lower, with the U.S. giving us a negative lead. The Dow Jones finished at a none month low. European markets also finished a torrid week lower. This all points to a lower ASX today.

The SPI Futures is just above the key level of 4200 the ASX is set to open marginally lower as the SPI closed down 30 points (or 0.6%) at 4,213.  Key levels this week are 4350 and 4000. Expect our market to trade flat to lower again today, given the negative leads from overseas.

US Markets

The U.S. markets were lower for a second week with its first seven day fall since 2008, after economic data is raising concerns of a double dip recession. U.S. employers eliminated jobs in June, adding to concern the economy is falling back into recession. The unemployment rate dropped to 9.5 percent (from 9.7 percent), also manufacturing is expanding at a slower pace due to fewer orders and demand with the ISM manufacturing index fell to 52.6 from 59.7 from the previous month.  The U.S. is closed for Independence Day celebrations tonight.

The Dow down 46 points, or 0.5 per cent, to 9,686 (down 4.4% for week), while in the broader market the S&P 500 index down 5 points, or 0.5 per cent, to 1,022 (down 4.9% for week) and the tech-heavy Nasdaq ended lower 9 points or 0.5 per cent at 2,092 (down 6.1% for week).

European Markets

In Europe stocks declined for a second week on concerns on faultering recovery, and disappointing economic data.  Benchmark stocks indices all fell last week in the EU countries. In the London FTSE 100 index down 32 points, or 0.7 per cent, to 4,838 points (down 4.3% for week). The German DAX pulls back 23 points, or 0.4 per cent, to 5,834 points (down 4.2% for week).

Asian Markets

The key news in Asia continues to point to a slowing economic recovery. The Chinese markets have fallen to 14-month lows on concerns their fiscal tightening will stunt their economic growth and the worst than expected PMI manufacturing data fro a second month falling from 52.1 from 53.9 in May.  Goldman’s has lowered their 2010 growth forecasts for China from to 10.1 percent from 11.4 percent, but have left their 2011 forecasts at 10 percent.

In Japan the Nikkei index of the Tokyo Stock Exchange flat to end at 9,203 (down 5.7% for week). The benchmark Hang Seng Index was down 1.1% at 19,905 (down 3.8% for week) ,  and China was down 0.1%  at 2,383 (down 7% for week).

Commodities Overview

Oil prices dropped 8.4 per cent in the past week.  The benchmark crude NYMEX for July delivery down US$0.81 to settle at US$72.14 a barrel.  Copper prices rose, still below the key $US3.00 a pound, Copper for July delivery up 3.9 cents to settle at $US 2.916 a pound. Gold was up, with August gold down $US1.00 to settle at $US1,207.40 an ounce.

Key News International Drivers Today

US – Response to the weak employment report from last Friday.

EU – Markets fall on continuing debt concerns

CHINA – Chinese markets have fallen to 14-month lows, as the PMI manufacturing data came in worst than expected.

Markets Overview

Overseas Markets Continue Below Key Levels; ASX Set to Trade Lower

SP500: down 0.5% at 1,016 – Below 200 day Moving Average   (down 4.9% for week)
DOW  down 0.5% at 9,686 – Below Key Support Level  (down 4.4% for week)
NASDAQ: down 0.5% at 2,092 (down 6.1% for week)

Dollar Index: Lower at 84.41 on higher Euro
A$ higher at 84.14

FTSE: up 0.7% at 4,838 – Financials & Miners Weigh   (down 4.3% for week)
DAX down 1.8% at 5,834 – Below 6,000 level   (down 4.2% for week)

CHINA: up 0.4% at 2,383 – Slowing Growth Concerns   (down 4.3% for week)
HSI  down 1.1% at 19,905 (down 3.8% for week)

Oil:  up 0.2% ($72.28)   (down 8.4% for week)
Economic Growth Concerns

Gold: up 0.13% at ($1,207.40)   (down 4.0% for week)
Commodities Lower

SPI: At key Level 4200
SPI down 0.6% at 4,213   (down 4.7% for week)

ASX News Today

The SPI Futures is just above the key level of 4200 the ASX is set to open marginally lower as the SPI closed down 30 points (or 0.6%) at 4,213.  Key levels this week are 4350 and 4000. Expect our market to trade flat to lower again today, given the negative leads from overseas.

Resource Super-Profits Tax (RSPT) Deal

The government has given ground to the miners to the tune of $1.5 billion, but miners will pay more tax. The deal is:

* the headline tax rate will be reduced to 30% (from the original 40% rate)
* the trigger point at which the tax cuts in will be the bond rate plus 7 per cent
* existing projects will get concessions
* the tax will be applied to the point of extraction
* the tax gets a new name to “Minerals Resource Rent Tax”
* will only apply to iron ore and coal projects.
* oil and gas projects will fall under the existing Petroleum Resource Rent Tax.

This should give miners some support near term.

In other news:

AUD – higher at 84.14

AQA – Aquila says it is reviewing a decision to allow third party access to rail lines owned by BHP Billiton and Rio Tinto.

CSR – get formal bid from Brightfoods for sugar division for $1.65 to $1.7 billion.

DOW – Downer the engineering group says the potential default of one of its loan guarantors has not put at risk a $357 million funding facility needed to complete the Waratah Train carriages project.

FXJ – Fairfax has extended a $292 million tranche of its existing syndicated bank facility from April 2011 to April 2014.

LEI – signs $597million four year deal with India to build road network.

MOS – Mosaic gets $123 million takeover offer from AGL.  Shares soared 67%, Thursday .

MTS – Metcash will buy the Franklins chain of 85 supermarkets in NSW from South African retailer Pick n Pay for $215 million

NAB – is seeking a second extension for AXA bid.

OILs – the current petroleum resource rent tax regime will be extended to all onshore oil and gas projects, including coal seam gas, at a 40 per cent tax rate.  This impacts AOE, ORG, STO WPL.

RSPT – The watered down tax is now called the Minerals Resource Tax (MRRT). Miners says investments will resume.  This will impact the big miners BHP, FMG, RIO.

Economic Reports:

Australian Performance of Services Index will be reported today.

ANZ – job advertising data
New car sales for June

RBA rate decision is due a 2:30pm Tuesday.  They are expected to leave the interest rate at 4.5% says a consensus survey from Bloomeberg.

Market volatility will continue near term, some speculative accumulation is underway. We the suggest trading strategy is to tighten stops. Be prepared to take profits and open/hold short positions.  U.S. celbrate Independence Day tonight.

Market Summary

ASX – to open flat
US & UK/Europe – Broadly Lower…

US ADRs – Mixed!!!…

BHP up 0.5%  & RIO up 0.2%; AWC down 0.4%
ANZ down 0.4% & NAB up 0.1%
NEM down 0.4%, JHX down 1.4%, NWS down 1.3%

Commodities Stock Index down 0.1%
Gold Stocks Index up 0.1%
Oil Stocks Index upo 0.1%

By Michael Hevern
Head of Research

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Stock Market Analysis: Overseas Markets biggest falls since May; ASX to focus on RSPT

Monday, June 28th, 2010

Stock Market Analysis

Overseas Markets biggest fall since May; ASX to focus on the Resource Super-Profits Tax (RSPT)

U.S. stocks ended the week with the biggest fall since May. GDP growth was trimmed but Financials recovered somewhat after Congress passed a “diluted” FinReg bill.

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 3 points (or 0.1%) at 4,414.  Key levels this week are 4550 and 4250. Expect our market to trade flat today. The proposed RSPT tax will continue to be in focus, with the new PM prepared to negotiate with the interested parties, the G-20 meeting report and FinReg in the US will be key this week.

US Markets

U.S. stocks ended the week with the biggest fall since May.  Stocks generally fell 5 to 7 per cent for the week, with energy and high-tech stocks particularly hit hard. The U.S. economy GDP grew at 2.7 per cent annual rate in the first quarter, lower than previously forecast. However the Financials sector saw some bargain hunting on Friday up 2.7% after Congress passed a “diluted” FinReg bill, designed to curtail risk taking and increase capital reserve requirements. The bill limits rather than prohibits the ability of federally insured banks to trade derivatives and invest in hedge funds and/or private equity funds.

The Dow is down 9 points, or 0.1 per cent, to 10,143 (down 3.0% for week), while in the broader market the S&P 500 index up 3 points, or 0.3 per cent, to 1,076 (down 3.7% for week) and the tech-heavy Nasdaq ended 0.3 per cent higher at 2,223 (down 4.0% for week).

European Markets

European shares again slumped Friday night, as German car makers were downgraded causing the Automakers index falling 2.6 per cent. Spanish utilities weighed when the government said it would suspend any increase in electricity prices. Adding to BP’s worries is a forecast of a hurricane to enter the Gulf, further hampering any cleanup efforts. BP fell to 14 year lows down another 6.4%. The Euro managed to rise to $US1.2375. The G20 meeting was in Toronto this weekend, the security bill alone was over $900 million. G20 members are looking to endorse targets to tackle government deficits.

In the U.K. stocks fells for a fourth day with energy and miners weighing around 3.5%. In the London FTSE 100 index fell 53 points (down 4.0% for the week), or 1.05 per cent, to 5,046 points. The German DAX down 45 points, or 0.7 per cent, to 6,070 points (down 2.7% for the week), while in France, the CAC 40 fell 33 points or 0.9 per cent, to 3,522 points.

Asian Markets

Asian markets traded lower Friday. At the G-20 China is expected to push for a bigger role in reshaping the global economy, post the GFC. In Japan the Nikkei index of the Tokyo Stock Exchange down 1.9% to end at 9,737. The benchmark Hang Seng Index was down 0.2% at 20,691  (up 2.1% for week), and China was down 0.5%  at 2,552  (up 1.8% for week).

Commodities Overview

Oil prices jumped 3% above US$77 a barrel Friday night on hurricane concerns in the Gulf. The benchmark for crude NYMEX for July delivery up 2.6 per cent to settle at US$79.91 a barrel.  Copper prices finished above the key $US3.00 a pound, Copper for July delivery up 4 cents to settle at $US 3.009 a pound. Gold closed higher, with August gold up 0.2% to settle at $US1,256 an ounce.

Key International News Drivers Today

G20 – meeting was in Toronto this weekend. The security bill alone was over $900million. Members are looking to endorse targets to tackle government deficits.

CHINA – At the G-20 China is expected to push for a bigger riole in reshaping the global economy, post the GFC.

GDP -  U.S. GDP for their first quarter 2.7% (lower than previously calculated).

BP – shares fall to 14 year lows as a result of the oil spill in the Gulf of Mexico.

YUAN – China to end its two-year yuan peg to the US dollar.  China has signaled a “more flexible yuan” currency policy, which will allow its currency appreciate in an orderly manner against the US dollar. The yuan has been pegged at 6.83 against the US dollar since mid-2008.  It will not be a one-off revaluation.

OIL – Goldman Sach’s cuts its oil price forecast last week to $US87 for the next few months (vs previous $US96).

Markets Overview

U.S. Markets were Flat; ASX will Focus on G-20 Reports &; RSPT Progress

SP500: up 0.3% at 1,076 – Below 200 day Moving Average  (down 3.7% for week)
DOW  down 0.1% at 10,143 – Above 10,000   (down 3.0% for week)
NASDAQ: up 0.3% at 2,223 (down 4.0% for week)

Dollar Index: lower at 85.13 on Higher Euro
A$ higher at 87.48

FTSE: down 1.05% at 5,046 – Financials & Miners Weigh (down 4.0% for week)
DAX down 0.7% at 6,070 – Off Highs but Still in Outperforming  (down 2.7% for week)

CHINA: down 0.5% at 2,552 – Currency Allowed to Revalue (up 1.8% for week)
HSI  down 0.2% at 20,691 (up 2.1% for week)

Oil:  up 2.6% ($79.91) (up 3.5% for week)
Good Week Ahead of Start of  Hurricane Season

Gold: down 0.2% at ($1,256) (up 2.7% for week)
Commodities Higher

SPI: Below key Level 4500 ASX (down 3.7% for week)
SPI down 0.1% at 4,414

ASX News Today

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 3 points (or 0.1%) at 4,414.  Key levels this week are 4550 and 4250. Expect our market to trade flat today.  The proposed RSPT tax will continue to be in focus, with the new PM prepared to negotiate with the interested parties, the G-20 meeting report and FinReg in the US will be key this week.

AUD – higher at 87.48

AAX – A subsidiary Ausenco the engineering and project management group has won an $8 million contract

AGK – AGL plans to fast track its Macarthur wind farm project following changes to the Renewable Energy Target scheme approved by the Senate on Wednesday.

EXT – Extract is moving its base to London as it seeks to develop the world’s second biggest uranium mine, expecting production in 2014.

FGL – China’s BrightFoods is reported to be interested is selected wine assets, primarily those in NSW.

GFF – Goodman Fielder says NZ’s removal of building depreciation for tax purposes will result in a non-cash write down in deferred tax assets by $13 million.

IRN – in a trading halt, Indophil Resources is seeking a buyer for its stake in the Tampakan copper-gold project in the Philippines after China’s Zijin Mining Group abandoned a $545 million takeover bid for the company.

M&A – activity has been crushed since the proposed RSPT was announced with M&A this quarter at totaling $879million (versus deals worth $9.1billion last year) according to a Bloomberg Survey.

MCC – Chairman calls on New Prime Minister Julia Gillard to remove revenue from a proposed tax on resources from budget forward estimates.

MOS – Mosaic Oil has sold its PNG subsidiary for $12.7 million in cash to an unidentified party described as a major international oil and gas company.

MQG – Macquarie says market conditions are adversely affecting some of its business activity levels for FY11.  This prompted concerns that it may be the next to downgrade earnings. Shares dived 4.7%.

PPT – Perpetual the Funds manager expects the Australian share market to continue on its uncertain trajectory for the
next six to 12 months. Suggesting the ASX200 will trade between 4300 to 5000 for the next year.

RIO – Rio Tinto Ltd has formally opened a high-tech operations center in Perth that remotely controls the mining giant’s vast network of mines, rail systems, infrastructure facilities and port operations in WA’s Pilbara.

RSPT – any compromise reducing the RSPT tax take will constrict government spending budget.

SSN – Samson Oil & Gas has entered into a binding deal to sell 24,166 acres of its 40,240 acre holdings in Wyoming, for up to $91.5 million.

SDL – Sundance shares remain suspended from trading while the company rearranges its corporate governance.

SVW – Seven Group is investing $287.16 million in the IPO which will see the last of China’s big four banks float its shares.  Qatar’s heavy weight investment fund, have stumped up $6.26 billion for the Agricultural Bank of China IPO even before the share sale officially starts.

Economic Reports out today:  New PM – watch out for more commentary on RSPT tax

Market volatility will continue near term, some speculative accumulation may surface in the miners, in anticipation of the resolution of the RSPT. We the suggest trading strategy is to tighten stops. Be prepared to take profits and open/hold short positions.  We are trading into the end of the financial year, so its the last chance to cleanup your portfolios.

Market Summary

ASX – to open flat
US & UK/Europe – Generally Lower…

US ADRs – Mixed!!!…

BHP flat  & RIO down 0.4%; AWC up 2.0%
ANZ down 0.3% & NAB up 0.5%
NEM up 4.6%, JHX up 3.3%, NWS down 1.2%

Commodities Stock Index up 1.2%
Gold Stocks Index up 3.3%
Oil Stocks Index down 0.6%

By Michael Hevern
Head of Research

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Posted in Morning Wrap, Stock Market Analysis | No Comments

Thursday, 10th June 2010 Morning Wrap

Thursday, June 10th, 2010

Morning Market Wrap

Bernanke Upbeat as China considers it’s own resource tax and the ASX to trade Lower.

The markets faded after midday despite positive comments from the Federal Reserve chairman Ben Bernanke that the economic recovery is gaining traction.  Selling in BP weighed on the markets.

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 11 points (or 0.2%) at 4,372.  Key levels today are 4300 and 4450. Expect our market to trade flat to lower ahead of the long weekend.  China is taking steps towards imposing its own resources tax, undermining the miners case against the RSPT tax here.

Overview

The markets faded after midday despite positive comments from the Federal Reserve chairman Ben Bernanke that the economic recovery is gaining traction.  Selling in BP weighed on the markets, as investors showed concerns that BP may not be able to recover from the oil disaster in the Gulf of Mexico, as an energy industry analyst reportedly said that the company could be forced to seek bankruptcy protection in about a month.

The selling was broad-based. The Dow Jones Industrial Average ended down 40 points, or 0.41 per cent, at 9,899 points, while in the broader markets the S&P 500 index, ended down 6 points, or 0.59 per cent, at 1,055 points and the hi-tech Nasdaq index ended down 11 points, or 0.54 per cent, at 2,158.

European stock markets ended higher overnight. This was despite the general feeling in Europe that its efforts to halt the debt crisis will come at the cost of economic growth for years to come, with only some sectors – such as exports – helped by a faster recovery in the US or Asia. European economies are likely to be weighed down for the foreseeable future by governments’ deep spending cuts. Germany and France have called on Europe to urgently speed up efforts to regulate financial markets, particularly crack down on speculative trading.

In the U.K. Fitch Ratings said Britain faced a “formidable” fiscal challenge over its debt issues. The FTSE 100 closed up 57 points, or 1.2 percent, at 5,085 points, while across in Germany the DAX 30 closed up 116 points, or 1.98 percent, at 5,984 points and in France the CAC 40 closed up 66 points, or 1.96 percent, at 3,446 points.

Asian markets were mixed with Japan’s Nikkei 225 index ended down 99 points, or 1.04 percent, at 9,439, its lowest close since late November, but it did manage to close above a key support lie of 9,400 points.  In Hong Kong stocks closed higher as bargain hunters stepped in late, the Hang Seng Index ended up 133 points, or 0.69 percent, at 19,621. In China, the Shanghai Composite Index ended up 70 points, or 2.78 percent, to 2,583 points, as Export data beat forecasts.

Oil prices made strong gains on overnight as relatively upbeat comments by Federal Reserve chief Ben Bernanke and declining US inventories lifted the economic recovery outlook.  NYMEX main futures contract, light sweet crude for delivery in July, rose $US2.39 to settle at $US74.38 a barrel.

Gold for August delivery fell $US15.70 to settle at $US1,229.90 per fine ounce, while July silver settled 28.8 US cents lower at $US18.189 an ounce. Copper for July delivery settled at $US2.85 a pound, down 7.05 US cents.

Key Overseas Drivers

Fed Chairman Ben Bernanke says the US economy is on track to grow 3.5 percent this year as it sees only a “modest” impact from the eurozone debt crisis, undermining the miners case against the RSPT tax here.

China is taking steps towards imposing its own resources tax

BP shares continue to slide as investors feared that intense political pressure from Washington over the Gulf of Mexico oil spill could force the group to axe its prized shareholder dividend.

World Bank expects the global economy to grow between 2.9 and 3.3 percent this year and in 2011 as developing countries lead the recovery from recession.

In the U.K. Fitch Ratings said Britain faced a “formidable” fiscal challenge over its debt issues.
Britain’s trade deficit rose to $5.9 billion in April from $5.72 billion in March.

Markets Overview

Berenanke Upbeat; China Considers Resource Tax; ASX to trade Lower

SP500: down 0.6% at 1,056 – Just Below “Flash Crash” Lows
DOW down 0.4% at 9,899 – Still Below 10,000�
NASDAQ: down 0.5% at 2,152

Dollar Index: higher at 87.95 on Lower Euro
A$ lower at 82.71 (above 10-month Lows)

FTSE: up 1.2% at 5,085 – Fitch Ratings says more severe spending cuts are necessary
DAX down -0.6% – Still in Uptrend

CHINA: up 2.8% at 2,584 – 13-month Lows as Suport becomes Resistance
HSI up 0.8% at 19,621

Oil: up 2.5% ($73.76)
BP Still Under Pressure Over Oil spill in Gulf of Mexico

Gold: down 0.9% at ($1,228.50)
Commodities Mixed

SPI: Below 4500 ASX
SPI down 0.3% at 4372

ASX News

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 11 points (or 0.2%) at 4,372.   Key levels today are 4300 and 4450. Expect our market to trade flat to lower aheaqd of the long weekend.  China is taking steps towards imposing its own resources tax, undermining the miners case against the RSPT tax here.

AUD – holds at 82.71, above 10 months lows.

AXO – Aurox Resources says friendly merger with Atlas Iron Ltd has taken longer than expected but will soon be
completed and submitted to the corporate watchdog for review.

BBG – Billabong says the Supreme Court of Queensland has determined the company validly terminated its Indonesian licence agreement in 2005 .

CSL – Mayo Clinic unexpectedly withdraws multi-million dollar anti-trust law suit, leaving only a 4 litigants (vs 20 originally) to push the case through the U.S. law courts.

FMG – Andrew Forrest prepares for a private meeting with the prime minister today, but has described the process of consultation over the mining tax as a “charade”.

STO – Australia’s FIRB has no objection to Majellan’s acquisition of Stantos’s 40% interest in the Evans Shoal Natural Gas Field, which is off Australian shores.

TLS – is still committed to discuss with the government re the National Broadband Network

WTF- Wotif.com expects FY profit to rise as much as 29 per cent as occupancy levels in Australia remain strong.

Economic Reports out today:

ABS – Australian Bureau of Statistics releases its May labour force report at 11:30am.
RBA – Reserve Bank of Australia’s bulletin for the June quarter.
CPI – Melbourne Institute survey of consumer inflationary and unemployment expectations,
HIAH – Housing Industry Association Housing 100 report for 2009, and
RETAIL – Speakers today at a retail conference in Sydney include: Woolworths Ltd chief executive Michael

Luscombe, Harvey Norman Ltd boss Gerry Harvey and the managing director of the Wesfarmers-owned Coles, Ian McLeod.

Market volatility will continue near term, some speculative accumulation is underway.

We the suggest trading strategy is to tighten stops. Be prepared to open/hold short positions, look for value stocks.

Market Summary

ASX – to trade flat to lower ahead of the long weekend
US & UK/Europe – mixed leads

US ADRs – Broadly Lower!!!…

BHP down 0.1% & RIO down 0.3%; AWC down 1.9%
ANZ down 2.7% & NAB down 0.9%
NEM down 1.3%, JHX up 0.2%, NWS up 0.9%

Commodities Stock Index down 1.0%
Gold Stocks Index down 1.3%
Oil Stocks Index down 2.9%

By Michael Hevern
Head of Research

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Posted in Morning Wrap, Stock Market Analysis | No Comments

BHP recruits shareholder support

Tuesday, May 18th, 2010

BHP is recruiting shareholder support for its opposition to the super-profits tax.

A letter and email drop to 600,000 BHP shareholders and a series of shareholder information sessions will give BHP management the opportunity to state its case, and encourage shareholders to speak out against the proposed 40% tax.

The Australian Shareholders’ Association will be supporting BHP’s program, and is also encouraging Rio Tinto shareholders to raise questions about the tax at the company’s AGM next week.

BHP Share Price

BHP Share Price

BHP Billiton
ASX Code: BHP

Chart source: Rapid Trader
Get free streaming ASX data in Rapid Trader until December 2010!

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Analyst’s Eye: Three Strikes – Short Circuit Recovery

Friday, May 7th, 2010

Global markets have undergone turmoil over the past few weeks, causing investors to re-evaluate their portfolios and trading strategies.

There are three key drivers: 1) “PIGS” cannot fly; 2) Election Season; 3) Resource Revaluations.

“PIGS” Cannot Fly

“PIGS” is the acronym used to describe the combined key ailing economies in the European Economic Union (EU). These countries: Portugal, Ireland, Italy, Spain and Greece combine to contribute 35% of the EU GDP basket. All of these countries are undergoing extreme stress with sovereign debt and have recently had their credit ratings downgraded.

The debt to GDP ratio is a measure of the capacity of a country’s ability to repay its debt. Debts have been ballooning with the debt/GDP ratios for Ireland at 14%, Greece and Spain at 11% and Portugal at 9%.

The EU has approved a $146 billion bailout package for Greece; however the consequential austerity measures of cutting of public spending, salaries and pensions and has caused civil unrest. The other countries in this group are likely to face similar reactions.

Investors fear contagion in this region and understandably the bears are likely to remain in control in these markets until there is some clear direction over how the debt issues can be resolved. The European Central Bank (ECB) met overnight and appears to be taking a “do nothing” approach, which will not help sentiment.

Election Season

Investors hate uncertainty and typically government elections lead to unease for investors. There are two key elections happening in the UK and Germany.

The UK elections are happening now and by all reports, the result is “too close to call”. The consensus is that either a hung parliament or minority government will be the result.

Germany will be undertaking state elections next week. There is uncertainty over the expected results. This result will have an impact on the ruling federal CDU-FDP coalition led by Chancellor Angela Merkel, as it stands to lose its majority in the upper house of the German parliament. This has added to the uncertainty in resolving the Greek sovereign debt bailout package, as the German government does not want to commit until the elections are over.

Given that the results of these key elections are unlikely to be clear cut, investors are likely to continue to choose to park their money in the near term, adding to the pressure on the equities markets.

Resource Revaluations

The Aussie markets have been battered over the past few weeks. The RBA increased interest rates again to 4.5% this week, which puts pressure on consumer spending and the cost of doing business. The financials sector started to feel the pinch this week, with the majors down around 10% from their recent highs and set to fall further today.

The other big news of the week was the much anticipated Henry Tax Review, which recommended a Resource Rent Tax. The new resources rent tax is set to increase the tax take by $9 billion in short order. The government calls this a super normal profits tax and BHP and RIO are set to be the hardest hit by the changes. The 40 percent tax on resource profits will start from 2012 and raise $12 billion in its first two years.

BHP, the world number one resources company with 51 percent of its assets in Australia, said the tax rate on its Australian earnings will increase to 57 percent in 2013 from 43 percent now. Analysts estimate that BHP and RIO will have to pay around $7 billion of the $9 billion tax take, resulting in BHP’s earnings being impacted around 25%, while little brother RIO’s earnings will be hit by around 17%.

Resources companies make up 9 percent of the economy and last week warned that a 40 percent levy and double taxation with payments to states would threaten $108 billion of planned investment. The government said it will compensate companies for the state royalties they have paid. The new regime will also give a tax concession for resource exploration, including geothermal power, affecting 4,300 companies.

The new tax regime will take time to implement, adding to market uncertainty.

Our View

The three strikes have combined to trigger a pullback in our market, after a spectacular recovery from the GFC since 2009. The materials sector is under pressure with: the turmoil in Europe resulting in the US dollar rising to 14-month highs against the Euro, which in turn puts pressure on commodities prices (as they are priced in $US); China’s tightening of monetary policies and the proposed resource rent tax; and now the plunging U.S. markets.

The current pullback will present some value propositions. Focus on stocks with potential M&A prospects. Though investors should be looking for some clarity in the resolution of the aforementioned issues, before considering reversing their bearish stance back to a more bullish view.

By Michael Hevern
Head of Research

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Rio Tinto Production Up 39%

Friday, April 16th, 2010

Rio Tinto’s first quarter iron ore output has increased 39% thanks to surging demand from China.

Despite this, and an optimistic forecast for the year ahead, analysts were disappointed and the Rio share price fell 1.3% on the London Stock Exchange.

Continued Chinese growth has encouraged Rio to boost iron ore production a further 8% this year, and this has the analysts feeling more lively – UBS has lifted its earnings estimate by 20% to $14.5 billion.

Rio Tinto Share Price Chart

Rio Tinto
ASX Code: RIO

Chart source: Rapid Trader. Free trading software and free live ASX data when you trade through Trader Dealer! More…

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Thursday, 15th April 2010 Morning Wrap

Thursday, April 15th, 2010

Presented by Michael Hevern
MDSFinancial

Click here to watch the presentation.

or

Click here to download the mp3 audio recording (1045Kb).

General Advice Only
***********************************************
In this morning’s wrap…

SP500 up 1.1% – above 1200
JPM 1Q Profits up 55%; Financials Higher;
Mar. Retail Sales up 1.6%; DOW 11,000+ Again;

NASDAQ up 1.6%
Intel up 3.3% as 2Q Beats;

Dollar Index: Below 81 Pivot Level
US$ Lower;
A$ up 93.44

CRB: Commodities Index
On the Rise

FTSE: up 0.6% – 22 month highs
Miners Recover
DAX & CAC up 0.7%

CHINA: up 0.2%
China: GDP Estim. 1Q 11.7%
Hang Seng up 0.1%;

Oil: up 2.2% ($86)
Inventory Data
Calms Demand Concerns

Gold: up 0.5% ($1156)
Commodities Higher;
Dollar Lower

SPI Futures up 32 (up 0.6%)
Overseas Markets Lead to Higher

ASX News
MCC – NHC up bid to $14.50 (vs current share price of $15.50); shareholder meeting next week
RIO – meeting in London tonight, BHP JV to fall over
MQG – will pay AIG $US2bn for 53 aircraft for leasing ops
WES – moves to quarterly pricing of its metallurgical coal

US Reporting starts this week.
Mon: Alcoa – inline; Tu: Intel – beats on EPS & sales forecasts; Wed: JPM beats
Th: Google & Fri: GE & BoA

ASX – to open higher
US & UK/Europe – continue higher

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Wednesday, 14th April 2010 Morning Wrap

Wednesday, April 14th, 2010

Presented by Michael Hevern
MDSFinancial

Click here to watch the presentation.

or

Click here to download the mp3 audio recording (1131Kb).

General Advice Only
***********************************************
In this morning’s wrap…

SP500 up 0.1%
Consensus 1Q Earning up 30% for SP500
DOW Closes Above 11,000 Again; Alcoa inline;

NASDAQ up 0.3%
Intel up 3.6% as 2Q Beats; Google up 2.5%; Palm down 15%
Twitter to Roll Out Advertising

Dollar Index: Below 81 Pivot Level
US$ Lower;
A$ up 92.82

FTSE: down 0.3%
Gains on Greek Aid Package Fade; Miners Fall
DAX & CAC down 0.3%

CHINA: up 1%
China: Banks Continue Tightening; GDP Estim. 1Q 11.7%
Hang Seng down 0.6%;

Oil: down 0.3% ($83)
Drifts Lower;
Inventory & Demand Concerns

Gold: down 0.1% ($1151) – Reversal?
Commodities Mixed;
Dollar Lower

SPI Futures up 21 (up 0.4%)
Creeps Higher

ASX News
RIO – $125bn BHP JV likely to fail
TLS – rumours of NBN deal – though Government says talk are “continuing”
WBC – lending growth to fall
ILU – closes Enebba mine in WA
OST – production stoppage at Whyalla
STO – signed 5 year deal with Wesfarmers for supply of 60 petajoules

US Reporting this week.
Mon: Alcoa – inline; Tu: Intel – beats on EPS & sales forecasts;
Th: JPM, Google & Fri: GE & BoA

ASX – to open higher
US & UK/Europe – continue to swing higher

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Monday, 29th March 2010 Morning Wrap

Monday, March 29th, 2010

Presented by Michael Hevern
MDSFinancial

Click here to watch the presentation.

or

Click here to download the mp3 audio recording (1506Kb).

General Advice Only
************************************************
In this morning’s wrap…

SP500: up 0.1% (up 0.7% for week)
4Q GDP at 5.6%pa; Consumer Discretionary leads;
Energy Weighs; S&P500 19 Month Highs

NASDAQ: down 0.1% (up 0.7% for week)
20 Month High;

Dollar Index: Testing Highs
US$ Higher;
A$ down 90.45

FTSE: down 0.4% (up 1.1% for Week)
Financials Lead Higher; Europe Supports Greece;
CAC down 0.2% (1.5% for week)

Germany: down 0.2% (up 2.3% for Week)
Beneficiary of Weakening US dollar

CHINA: up 1.3% (down 0.3% for week)
China: Hu+ Ruling Today; PetroChina to Spend $US60bn O/S
Hang Seng up 1.3% (down 1.6% for week)

Oil: down 0.7% ($80) (down 0.6% for week)
Backs Off Key Resistance;
Naval Ship Sinks off South Korea

Gold: up 1.1% ($1092) (down 1.4% for week)
Commodities Lower;
USD Higher

SPI:Critical Level(s): 4850 to 5000 (up 1% for week)
SPI flat +2; End-of-Quarter this Week
Profit Taking Overseas

ASX News
Banks – 3 of 4 to sign off 1H results
TLS – senior management restructure to regain from NBN

Reports:
Mon: CSR – court appeal
Tues – Shale/Coal Seam Gas Briefing (3 days); MPO; BPT; Brisbane
Wed: ABS Retail Trade, Aurora EGM (AGO t/o)
Thu: Do not be fooled!!
ABS Int’l Trade in Goods/Services
ACCC – AMP/AXA ruling
RBA – Mar. Commodities Index

ASX – to open flat to lower
US & UK/Europe – continue to swing higher

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