Overseas Market Report – U.S. Stocks Fall as Oil Heads Lower
U.S. stocks closed lower Tuesday as oil gave up some of the previous session's big gains.
Home prices in the U.S. rose 5.4% year over year in December, according to the Case-Shiller home price index. That was an acceleration from the 5.2% annual increase seen in November.
Existing home sales rose 0.4% in January from December levels. The seasonally adjusted annual sales rate of 5.47 million was the fastest since the middle of 2015 and was above the 5.31 million expected by economists.
U.S. consumer confidence fell in February to a seven-month low of 92.2 from 97.8 in January, according to data released from the Conference Board.
At the close the Dow was down 1.1%, the S&P 500 had dropped 1.3%, while the NASDAQ was off 1.5%.
For Australian ADRs listed on the NYSE, BHP Billiton lost 120 cents (-4.74%) to $24.09, ResMed dropped 127 cents (-2.14%) to $57.99, Telstra Corporation slipped 59 cents (-3.10%) to $18.60, Spark New Zealand gained 6 cents (0.54%) to $11.14 and Westpac declined 65 cents (-2.98%) to $21.19.
At 8:00 AM (AEDT), the 10-year Treasury note yield was 1.74% and the 5-year yield was 1.22%.
Home Depot (HD) reported better-than-expected results. Same-store sales growth was 7.1% in the quarter as consumers spent more on home improvement projects. Management also boosted the dividend by 17% to 69 cents per share.
Macy's (M) results also came in ahead of expectations. Excluding one-time items, the firm said it earned $2.09 a share in the fourth quarter, down from $2.44 a share in the year-ago quarter but above the $1.89 a share that had been expected. The retailer had a soft holiday season driven by competition and fewer international tourists. Management also gave some hints that it has some deals in the works to unlock the value of some of its real-estate holdings.
European markets were broadly lower on Tuesday.
The FTSE 100, French CAC 40 and Germany's DAX were down 1.3%, 1.4% and 1.6%, respectively.
Asian shares were lower.
The Shanghai Composite fell 0.8%, while the Nikkei 225 was down 0.4% and the Hang Seng was down 0.3%. India's Sensex was down 1.6%.
Australian Market Report- Local Market Expected To Open Lower
Ahead of the local open, SPI futures were 31 points lower at 4,916.
Tuesday 23 February – close. The Australian market opened higher this morning, buoyed by a jump in commodity prices and gains on Wall Street overnight. However, local stocks lost their momentum in afternoon trade as the big banks gave up their early gains, dragging the benchmark index into negative territory. Most sectors closed in the red, with the exception of materials and industrials. The Australian dollar appreciated against the greenback but experienced mixed results against other major currencies.
The All Ordinaries lost 17.50 points to 5,039.10 while the S&P/ASX 200 fell 21.60 points to 4,979.60.
In This Issue
Argonaut Research | Austal (ASB) | Buy
EBIT of $29.0m was in line and cash flow better than we expected, further strengthening the balance sheet (net cash of $30.6m), and providing ASB the firepower to pursue strategic initiatives. We believe ASB can replace work rolling off the order book both in Australia and the US, but that there is also a good opportunity to improve the quality of earnings through margin improvement, building the proportion of recurring revenue streams, and adding scale. The proposed continuous Navy ship build programme in Australia provides a great opportunity. We believe concerns and share price falls are overdone and maintain a buy call on an unchanged blended valuation of $1.90.
Argonaut Research | GR Engineering (GNG) | BUY
Pricing pressure impacted margin, but GNG still delivered 1H16 EBITDA 10% ahead of pcp. This is exceptional when considered against other resource service companies. The balance sheet remains strong (net cash of $42.6m) and should improve as the high receivables balance declines in the 2H. A solid study pipeline provides opportunities for FY17 although timing of conversion to project work will be the key to revenue. GNG is dominating the EPC contracting space, has visibility in the short term, opportunities in the longer term, a solid balance sheet and an attractive yield. Maintain buy.
Nufarm announced the completion of reviews of the manufacturing footprint and product portfolio. The performance improvement program is on track and management remains committed to delivering performance improvement benefits of at least $116m by full year 2018. The manufacturing footprint review, which is completed, has already led to changes. In November 2015, it was announced that the Calgary plant in Canada will be closed, with one-off costs of $9.5m. Underlying EBIT at the half-year is expected to be 8-13% ahead of the prior half-year, off the back of strong trading performance in January 2016. Underlying profit after tax at the half year will be $15m lower than the prior period, largely as a consequence of net foreign exchange losses. NUF added 32 cents to $7.17.
BHP Billiton (BHP)
BHP Billiton announced a new operating model that will create a more agile Company ready to respond to the challenges and opportunities presented by a rapidly changing global marketplace. Under the changes announced, it will become a much simpler organisation focused on geographic operating regions and supported by globalized functional services drawing upon world-class expertise and scale. The Company's minerals production operations will be organised into two regional units – Minerals Australia and Minerals Americas. The Company's oil and gas exploration and production operations will continue to be housed within a global Petroleum unit, reflecting the operating environment in that sector. BHP lifted 45 cents to $17.63.
Qantas Airways (QAN)
Qantas Airways reported an underlying profit before tax of $921m and a statutory profit before tax of $983m for the six months ended 31 December 2015. The Group continues to expand margins through both revenue growth and cost discipline. Revenue increased by 5% to $8.5bn, while total unit costs were down by 7% compared with the first half of last year. The Company Board has approved an on-market share buy-back of up to $500m. The buy-back will start in early March 2016. It has invested in aircraft, product, service and technology as a core principle of its transformation program, enabling the Group to earn record customer satisfaction, maintain its lead in key markets, and grow revenue at the same time as reducing cost. QAN dropped 20 cents to $3.79.
Recent Contacts & Presentations
Troy Resources (TRY), Northern Star Resources (NST), Regis Resources (RRL), Medusa Mining (MML), Doray Minerals (DRM), Beadell Resources (BDR), Red 5 (RED), Kingsgate Consolidated (KCN), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), TFS Corporation (TFC), Paragon Care (PGC), Austal (ASB), Orbital Corporation (OEC),Energia Minerals (EMX), Berkeley Energia (BKY) , Finders Resources (FND), 4DS Memory Ltd (4DS) , Bionomics Ltd (BNO)