US stocks closed a fraction higher overnight, ending a session characterised by some more M&A news, more promises of an impending resolution (albeit temporary) to the Hellenic crisis and some welcomed buyback announcements.
It was a day that indicated a somewhat fatigued market, as earlier gains were modest and eventually equities lapsed into the bell to finish the bee’s proverbial higher than where they ended on Monday.
In contrast, Europe was sharply higher as we lurch towards some form of bailout for Greece et al, with Greece said to be preparing to announce another $5b in cutbacks from its unsustainable budget.
Source: Bloomberg
Roundup
Oil went above $80 once more and now faces the challenge of staying above this key pivot, though obviously the crude drillers lifted in response. Metals were mostly higher, many by > 1%, so there was good support for the usual suspects.
Ford posted a 43% rise in January sales, exceeding GM for the first time since 1998, while GM announced a shuffle to its marketing team to take advantage of Toyota’s latest wobbles. AIG CDS’s retreated almost to pre-bailout levels (when things were fairly bad, you may recall).
Financials edged higher after some analysts decided there was value in the second tier banks.
Movement of Assets a Positive
More M&A in the fertilizer segment was a positive while in IT world Qualcomm plans to buyback a few billion greenbacks worth of its issued stock, but Microsoft and IBM were sold off closer to the bell.
Dow Chemicals will sell its basic plastics unit to private equity mob Bain Capital for $1.6b – that’s a nice sign of private equity starting to get back in the game, which implies that financiers are more prepared to back the better deals.
One Swallow…
The DJIA is now just a touch lower than its last close in 2009, and for it to make this a floor and not a ceiling, the banks need to step up and support further M&A.
The names thus far thrown around have been reasonable ones, but as yet there are precious few signs of a loosening of the purse strings at the commercial and medium sized corporate level.
Apple Tees off on HTC
Apple alleges that rival HTC has infringed around 20 if Apple’s patents related to the iPhone, as the sector’s chief innovator looks to protect its image and keep imitators at bay. I must admit In saw one of the HTC versions in a shop the other day, and the similarities were obvious in both handset and interface.
Holdings in Apple, IBM and maybe Dell would be ample exposure to that industry, for mine.
Europe
A very good night in Europe (for stocks anyway) as the possibility that Greece might try to get out its hole unilaterally (no chance) saw the euro bounce off 10-month lows against the USD and markets liked a range of corporate news.
Lufthansa’s less than anticipated loss put a rocket under its share price and those of many of its neighbours, including BA which leapt almost 5%. The autos did well, too, as Peugeot said the year had started well.
European utility EON was said to be preparing to sell off its US unit – hardly an opportunistic sale, though, as like many sellers the proceeds will be heading straight towards debt reduction.
Australia Takes Rate Rise in its Stride
Our XJO showed some signs of nervous jitters before the 2.30pm announcement by the RBA yesterday.
However, after the widely anticipated hike was revealed there was hardly a murmur from the bourse as a whole and banks ticked up slightly (or in the case of NAB, which ostensibly remains unsightly in the presence of its peers, pared losses).
The notional gains for the day were a refreshingly prudent response to overnight gains enjoyed offshore.
RBA Not Going to Hold Fire
Conspicuously absent from yesterday’s announcement from the Reserve Bank of the increase in the target cash rate to 4% was any hint that this might be the last rise for a while.
Indeed, the lift in the TCR was observed to be “another step” in the return of monetary policy to more normal levels. Thus, Stevens and his cohorts seem determined to push rates higher – to 4.50% by mid-year, I’d say.
RBA Should Wait and See
Pushing up the currency and hurting exports and hence jobs wouldn’t seem to be the most sensible approach in a still very fragile world, but this move seems mostly based on the Board’s review of the Saturday auction results, though the January retail sales numbers released earlier yesterday sealed the deal.
Westpac’s IR Department Asleep At the Wheel
NAB would have loved others to have increased mortgage rates by > 25% basis points yesterday as its determination to cut the cost of banking (I can still hear those Jack Thompson ads, promising me Bank of Melbourne would do the same) hurts its margins for now.
Having pushed its variable rate 0.40% higher last time, Westpac should have had some headroom and after its poor public coverage since it should have released an announcement within 5 minutes saying it would only pass on 25 bps this time. Claim the higher ground, as most mortgagors are pretty lazy folk.
As it is, the majors have passed on just the 0.25%. Some begrudgingly so.
Next Up – GDP
Attention now turns to the nation’s GDP numbers for the December quarter.
Most seem to be expecting 0.9%, but more recent inventories data and the widening CAD should drag, and I’d be surprised if we topped the consensus.
Spin City
The practice of talking up an exploration result or new deal inked is taught in Investor Relations 101, but one caught my eye yesterday.
It’d perhaps be unfair to name the company as it’s so commonplace, but one Brisbane-based energy outfit trumpeted its acquisition of some leases in Alaska as offering the entity the chance to expose itself to the 18billion tonnes of coal said to be located there.
Ummm, that’s in the whole of Alaska, not within the area of your new leases. I might as well dig a hole in my back garden and say I am tapping into Australia’s immense natural resources reservoir.
Being a cynic has its advantages, though that announcement (OK, it was by LNC) goes straight to the poolroom when it comes to ASX Announcements that gild the lily.
Today
A dreary day, I’d suggest with early strength of circa 25-35 points giving way to another gain of 10-20 by 4pm. Hard to see the next catalyst, frankly.
Cheers,
Simon Wallace
Group Relationship Executive
