Wall Street Edges Higher on No Data
The absence of any economic announcements of note enabled US stocks to varnish recent gains Friday as the Dow recorded its best fortnight of gains since last November.
The bourse spent almost the entire session in the black, and the trading range was very narrow (<60 points) as most investors paused for thought.
Source: Bloomberg
Roundup
Gold’s advance to a new record did give some clues as to the prevailing caution within the global investment community, which translated into another fine day for Barrick and Newmont. Baase metals were softer, though, and resource players lagged noticeably.
Oil also ticked higher, sending the larger suspects north in response. Goldmans may well find higher ground tonight after the SEC looks set to give the company more time to respond to its claims of market manipulation and broader deceit.
Ahead…
This week sees the release of existing home sales information, with consensus pointing to an annual figure of 6.15m homes sold. Another disappointment on Wednesday would further deflate the cases peddalled by the bulls.
The soft numbers I expect should ensure the Fed keeps rates on hold Wednesday, with the impact of the US housing subsidy fading dramatically.
China Revamps Yuan Valuation
Beijing announced yesterday that it would reduce the pegging of the yuan to the USD, which is being seen as a vote of confidence in its future.
Removing the 6.83:1 ratio will see the yuan become a massively traded currency, as punters and investors alike look to place bets on the strength of the Chinese economy. The central bank will, however, continue to limit the yuan’s permitted daily trading range to 0.5%. Hasten slowly, does Beijing.
US futures have risen in response, indicating a decent start tonight.
The move will please Washington, and its inevitable appreciation should limit the inflation of Chinese asset bubbles – that’s the idea anyway.
BP to Raise $50b?
Just chatter at this stage, but word/ rumourtrage is that Tony Hayward (pilloried over the weekend for attending a glitzy yacht race rather than, presumably, washing pelicans in Louisiana) will seek board support for a massive $50b capital raiasing to cover the cost of the GoM spill going forward.
The Sunday Times ran with it yesterday, and perhaps Hayward feels that more weakness in its share price would limit his options and demand asset sales take place at liquidation prices.
If and when BP goes down that route, I’d buy some, and the debt spreads would tighten considerably.
Kiddies at the Cinemas
Disney should have a nice start to trading tonight, with Toy Story 3 on track to record more than $100m in takings on its opening weekend. Expect the Wallace family to throw another $40 on that pile in coming weeks.
The real moneyspinner, though, is the merchandise, with any trip to a Kmart of late likely to have revealed the sheer enormity of the product lines that flow from such popularity amongst the younger ones. The risks are large with movie-making, but one breakeven is reached the upsides are large.
Europe
The emergency budget for the UK should see new chief bookkeeper George Osborne announce a swathe of tax rises as austerity measures aimed at curbing the nation’s deficit inside 5 years. Unlikely, me thinks.
The rebound in broader risk appetite saw the euro advance, with most European markets recording more gains of modest size. The imminent release of the bank stress test results somehow became something to anticipate rather than fear.
Australia Set to Gain on NBN Deal, Gold
Telstra and the miners should see us make a solid start today, with futures indicating gains of over 30 come 10.15.
Sundance is in a trading halt while several employees, including magnate non-executive director Ken Talbot, are missing and feared dead in West Africa.
Thodey and Conroy Seal NBN
The Government and Telstra have finally reached agreement on the National Broadband Network, with the $11b deal finally giving some clarity to the market and rewarding longsuffering shareholders and those who picked up TLS cum-div at $3.10 a couple of months ago.
The arrangement will see TLS transfer its copper line infrastructure to the Givernment in ezxchange for decades of assured revenues that reinforce Telstra as a very boring, but defesnible, holding. The deal was always likely, especially after Sol departed these shores.
Look for Telstra to spike up to 5% this morning.
DJS To Suffer on McInnes Fallout
The very disappointing anniouncements surrounding the conduct and resignation of former DJ’s CEO Mark McInnes has to leave us most uncertain about the company’s immediate direction absent someone who had driven the group to such robust outperformance.
Yes, the new bloke, Paul Zahra, will be OK, and the share price is unlikely to tank, but DJ’s has historically traded at a material premium to its peers on a P/E basis. For the next few months that is unlikely to be the case.
Wouldn’t sell, especially as most holders would trigger a significant CGT event by doing so, but I’d need the price to weaken another 10% before I’d look to buy in any volumes.
Newspoll to Trigger Spill?
I saw plenty of headlines over the weekend suggesting a move against Rudd might come as early as this week with the ALP’s polling and the poor Newspoll out this morning induicating a real risk of failure at the next election. Some think that could come as early as September, although Kevin need not return to the people until next April if he’s still there.
ALP still the clear favourites, in my mind, but at least there’s a clear seperation between the majors now.
Today
Some considerable relief regarding TLS and a generally higher tide should see us move up around 30 by the finish.
Meanwhile, those Tigers just keep on getting better. Giddy stuff…
Cheers,
Simon Wallace
Group Relationship Executive
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