Overseas Market Report – Stocks Rise in Choppy Trading; China Moves Eyed
Stocks were higher in choppy trading on Monday morning as China unveiled new measures designed to boost growth.
China's central bank cut the reserve requirement for banks by 0.5 percentage points today. The move comes as the Chinese Government looks for ways to increase economic growth. The central bank also guided the yuan lower today, sending it to its lowest level in three weeks.
Pending home sales in the U.S. were down 2.5% in January from December levels according to the National Association of Realtors (NAR). Pending sales were up 1.4% from 2015 levels. The NAR said some of the decline was likely driven by poor weather in the month.
The Chicago PMI, which measures the strength of the Midwest manufacturing sector, fell to 47.6 in February from 55.6 in January. Any reading below 50 indicates a contraction.
At the closing bell, the Dow and Nasdaq were each down 0.7% while the S&P 500 was down 0.8%.
There was little in wide-moat rated Berkshire Hathaway's (BRK.A) (BRK.B) fourth-quarter and full-year results, which were relatively mixed, that would alter our long-term view of the firm. Fourth-quarter pre-tax operating earnings increased 26.4% compared with the prior year's period, as investment and derivative gains/losses increased from $1.1 billion in the fourth quarter of 2014 to $2.1 billion in the current year's period. This contributed to a 24.3% increase in pre-tax operating earnings for the full year. Excluding the impact of the investment and derivative gains/losses (as well as other eliminations and adjustments), the company's pre-tax operating earnings increased 3.3% during the fourth quarter, with the same measure up 2.8% for the full year.
Shares of Valeant (VRX) were down after the firm said it is withdrawing its earning guidance and postponing its fourth-quarter earnings announcement. The company also announced that its CEO Michael Pearson has returned from medical leave and that it is has split the CEO and Chairman role. Robert Ingram was named the new Chairman. Morningstar thinks that Valeant's decision to withdraw its prior guidance and delay its fourth-quarter earnings call suggests there might be more pain ahead as the company continues to struggle with fallout from its discontinued relationship with Philidor and attempts to get its new distribution agreement with Walgreens up and running.
For Australian ADRs listed on the NYSE, BHP Billiton rose 7 cents (0.31%) to $22.61, ResMed lost 82 cents (-1.42%) to $56.91, Telstra Corporation lost 2 cents (-0.11%) to $18.75, Spark New Zealand declined 29 cents (-2.50 %) to $11.30 and Westpac slid 4 cents (-0.2%) to $20.46.
At 8:15 AM (AEDT), the 10-year Treasury note yield was 1.73% and the 5-year yield was 1.21%.
European markets were mixed. The FTSE 100 was up 0.02%, Germany's DAX was off 0.2% while the Paris CAC rose 0.9%.
Asian shares were lower today. The Shanghai Composite was off 2.9% on the day, the Hang Seng closed 1.3% lower while the Nikkei 225 was down 1%. India's Sensex was down 0.7%.
Australian Market Report- Local Market Expected To Open Lower
Ahead of the local open SPI futures were 7 points lower at 4,867.00.
Monday 29 February – close. The Australian market traded higher after open, buoyed by gains from the big banks and mining stocks. However, local stocks were hit by a plunge in China' stock markets, reversing all of early gains in afternoon trade, to finish in the black. Most sectors posted positive results, with only consumer stables and financials losing their ground. The Australian dollar appreciated against the greenback but experienced mixed results against most major currencies.
The All Ordinaries added 2.80 points (0.06%) to 4,947.90 while the S&P/ASX 200 gained 0.90 points to 4,880.90.
In This Issue
Argonaut Research | Paladin Energy (PDN) | HOLD
Paladin Energy (ASX:PDN, TSX: PDN) announced it has reduced debt by US$81.4m, by retiring the remaining US$56.4m Langer Heinrich mine (LHM) secured project finance facility and buying back US$25m of the 2017 convertible bonds (CBs), leaving US$212m CBs outstanding. While this action significantly reduces ongoing financing costs, the date to retire the remaining 2017 CBs is rapidly approaching (due 30 April 2017). PDN is seeking strategic transactions to assist repayment of this debt, which we believe could include; rollover of part of all of the outstanding CBs, an asset sale or a significant cornerstone investment which could result in a change of ownership. Argonaut maintains a HOLD recommendation. Our valuation increases to $0.27 (from $0.25) due to lower finance costs. We apply a 15% discount to NAV to account for balance sheet risk, relating to outstanding 2017 CBs, to attain a $0.23 target price.
Argonaut Research | Austin Engineering (ANG) |HOLD
EBITDA of $3.8m for 1H16 was weak as expected. The focus, however, is the balance sheet, which remained stretched despite a capital raise during the half. In addition to the implementation of a strategic review ANG will most likely require further capital management initiatives to bring a level of comfort to balance sheet metrics. With forecasts for negligible net earnings through FY17, we remain cautious until these initiatives bring results.
CSL announced that the European Medicines Agency (EMA) Committee for Medicinal Products for Human Use (CHMP) has recommended granting marketing authorization for IDELVION (Coagulation Factor IX (Recombinant), Albumin Fusion Protein) for patients with haemophilia B. IDELVION is CSL Behring's long-acting fusion protein, linking recombinant coagulation factor IX with recombinant albumin. IDELVION was designated as an orphan medicinal product in 2010 by the European Commission. CSL lifted 33 cents to $102.72.
Slater & Gordon (SGH)
Slater & Gordon announced that ASIC on 29 February 2016 noted the decision by the Company to reduce asset values in its financial report for the half year ended 31 December 2015. ASIC also noted the Company's earlier decision to reclassify a portion of its work in progress (WIP) and disbursement assets as non-current in its financial report for the year ended 30 June 2015. ASIC had made inquiries of the Company in relation to its financial report for the year ended 30 June 2014 and had subsequently raised questions in relation to the financial report for the year ended 30 June 2015. ASIC's inquiries on revenue recognition and WIP focussed on the appropriateness of accounting policies adopted and the testing of WIP estimates and assumptions against historical data. SGH slumped 25 cents to $0.58.
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