Daily Market Summary

Market News –Monday, 8 February 2010

Important Note: This commentary is a general account of the day's trading and is not intended to be, nor should it be, taken as a recommendation to buy, hold or sell any particular stock.

Market Update:

 

Mirroring global markets, the Australian S&P/ASX200 Index fell 2.33%. The decline was in triple digits down 107.5pts to 4,514.1pts but kept above the critical support level of 4,500. Fears about the global economy and sovereign credit risks sparked the wave of selling. Credit spreads for Greece, Portugal and Spain have now blown out dramatically. US job numbers were also weak. As a guide the VIX, surged 21% to 26.08 on demand for protection against further losses with markets now looking weak.

At the specific stock level, the news was not as grim, indicating reporting season to date has been okay. Next week will be hectic though with a raft of reports out. Electronics and homewares retailer Harvey Norman fell 10 cents, or 2.69%, to $3.62 after it reaffirmed guidance for a big lift in first-half profit after reporting a 4% increase in sales for the same period. Airport owner MAp Group was steady at $2.92 after it said Brussels Airport recorded a 14% drop in annual earnings but forecast improving traffic levels at the Belgium gateway this year.

In the A-REITs Mirvac Group lost four cents, or 2.62%, to $1.485 after it confirmed that valuations of its property assets declined by 3% in the first half of 2009/10.

Biota lost nine cents  to $2.03 after the anti-infective drug  developer said it expected royalty income of $56.7 million from its flu drug Relenza in the first half. Key out-performer today, ResMed jumped 35 cents to $6.34 after the sleep management company said it was well positioned for the future after booking a  42% rise in first-half net income.

At the sector level, the materials, energy and financial sectors were hardest hit, with Rio Tinto (-5.02%), Santos (-4.07%) and Macquarie Group

(-5.6%) among the worst laggards.

Gold is worth $US1,064 an ounce and the Australian dollar is changing hands at US86.72c.

Ten-year bond yields were down at 5.4545%.

 

Overnight:

 

Index/Security	Close	Chg	%Chg
Dow Jones (US)	10,012	+10.1	+0.1
S&P 500	1,066	+3.1	+0.3
NASDAQ	2,141	+15.7	+0.7

 

US stocks ended slightly higher on Friday after the Dow erased a 167-point drop in the final hour of trading.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of 17 to 13. On the NASDAQ about seven stocks rose for every six that fell. Trading volume was well above last year's daily average.

The market was in negative territory in the middle of the session on concerns over rising debt problems in Greece, Portugal and Spain. But the major indexes turned positive towards the close as investors scooped up shares in the technology and materials sectors.

In economic news, US employers cut 20,000 jobs in January. Economists were expecting employers to have added 15,000 jobs. However a separate report showed that the unemployment rate dropped to a five-month low of 9.7%.

Toyota shares gained 3.5%. The company's CEO apologised Friday for the recall of 8M cars. However, he did not announce a new recall of the Prius Hybrid, despite reports of brake problems.

Cisco Systems and Intel Corp ranked among the Dow's top advancers. Shares in both companies rose over 2%, helping to lead the broader market higher.

Materials stocks also rebounded. Alcoa was up 2.1%.

Industrial shares were among the biggest losers. General Electric and Boeing were both off 1.6%.

For the week, the Dow, S&P and NASDAQ declined between 0.3% and 0.7%.

 

Indices	Close	Chg	%Chg
Eurotop 100	2,064	-45.4	-2.2

 

European shares closed lower on concern efforts by Greece, Portugal and Spain to reduce their deficits will hurt the region's economic recovery.

Greece's ASE Index sank 3.7% for the biggest drop among the 18 western European markets. Spain's IBEX and Portugal's PSI-20 both fell 1.4%. Credit-default swaps on the sovereign debt of the three countries rose to record high levels on Friday.

ICAP, the world's biggest broker between banks, fell 20% after the company said full-year earnings would miss analyst expectations as some of its newer businesses were taking longer than expected to become profitable. Azimut Holding, Italy's largest independent fund manager, sank 8.7%.

Energy stocks were led lower by BG Group, which fell 3.2% after its fourth-quarter earnings missed expectations. Royal Dutch Shell and BP both declined almost 1%.

Miners were under pressure as metals prices retreated. Xstrata and Randgold Resources fell 5% and 2% respectively.

Banks were caught in the sell off, with Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered dropping between 1% and 6%.

Compass rose 5.1% after the caterer said the rate of sales decline is slowing and its pipeline of new business remains strong.

Renault, France's second-biggest carmaker, retreated 4.7% after it was downgraded by analysts.

Bank of England releases its quarterly Inflation Report on Wednesday. Analysts expect the Bank of England to revise down its growth forecasts for this year in its report.

 

Source: Aegis Equities Holdings Pty Limited; ThreeSixty Direct Equities Research, NAB Capital.