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Australia's jobs boom continued in January, but the floods in Queensland make it hard to work out the real strength of employment in the month.After December surprised with just 2,300 jobs created, but a fall to 5% for the unemployment rate, there were some analysts who saw another weak month, and others looking for an extra 15,000 to 20,000 jobs.Because of the floods it seems we got all three from the Australian Bureau of Statistics report and a bit more.The unemployment rate remained steady on 5%, the number of people employed rose 24,000, but 32,000 were part time, so there was a fall of 8,000 people in full time work, the number of people unemployed rose by 8,900 to 606,500, the number of hours worked fell 0.8% and the participation rate rose to a new all time high of 65.9 %(up 0.1%).Something for everyone it seems, but the ABS added a bit cautionary note to the release."Due to flooding in Queensland, operational difficulties were experienced in conducting the Labour Force Survey in January 2011. There was a larger than usual number of households in the Queensland sample which could not be interviewed."While the disruption to survey operations will have slightly reduced the quality of some Queensland estimates, the impact on the estimates is not statistically significant for most series. Due to the sample loss noted above, there will be increased volatility in the Queensland estimates, particularly in the original and seasonally adjusted estimates."Given increased volatility, the ABS continues to encourage users to focus on trend estimates in monitoring the underlying level of series."And, what did the trend show?Employment increased by 21,600 to 11,442,800Unemployment fell 5,000 to 610,300Unemployment rate was steady at 5.1%Participation rate at 66.0%, up from 65.9%
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By Chris ShawSpecialist leasing and lending services company FlexiGroup ((FXL)) delivered a better than expected interim profit yesterday, the $25 million result being an improvement of 31% on the previous corresponding period and coming in 8% above the forecast of UBS.Result highlights, according to UBS, were strong settlement and cash flow growth, something the broker suggests shows new funding and product initiatives are delivering and that conditions in the core leasing business have stabilised.The Certegy business was the star performer in the view of Macquarie, delivering 23% volume growth in the period and doubling its profit contribution. The business is now the largest in the FlexiGroup stable in terms of value of assets and offers further growth via the Lay-by market in the broker's view.Also delivering growth were the Vendor Finance operations, Macquarie noting volumes here increased to $26 million from $3 million previously thanks to some large new contracts. Flexirent is also recovering, the receivables book growing by 1% in the period on volume growth of 9%. Macquarie sees this as a sign the company is through the low volume period stemming from the Global Financial Crisis.Along with the interim result, FlexiGroup management lifted full year earnings guidance by 9% to a profit of $48-$52 million. Market forecasts have been increased to reflect the new guidance, UBS lifting its net profit numbers by 10% this year and by 9% in FY12.Macquarie has similarly lifted its numbers by 8%-10%, its new net profit estimate for FY11 standing at the top end of management's guidance range. In earnings per share terms Macquarie is now forecasting 19.1c this year and 20.3c in FY12, while UBS is at 18c and 20c respectively with its forecasts.The increases in earnings estimates mean increases in price targets, Macquarie lifting its target to $2.23 from $1.87 and UBS to $2.40 from $1.75. Both UBS and Macquarie are positive on FlexiGroup, rating the stock as Buy and Outperform respectively. The two brokers offer the only coverage of FlexiGroup in the FNArena database.For UBS, FlexiGroup deserves a Buy rating as the combination of pro-active management, new growth initiatives and a competitive advantage through diversifying its operations makes the company a key pick in the smaller financials space.There is scope for further diversification through acquisitions, as Macquarie points out FlexiGroup's underlying balance sheet is conservatively geared at around 7% and strong cash flows are being generated.Based on its revised forecasts, Macquarie estimates FlexiGroup is trading on an earnings multiple of 9.7 times this year and 9.0 times in FY12, which it sees as a 20-30% discount to the Small Industrials index. Such a discount is excessive in the broker's view given FlexiGroup's earnings growth this year, making the stock attractively priced at current levels.Shares in FlexiGroup today are stronger (in a weaker market) and as at 12.50pm the stock was up 5.5c or 3% at $1.90. This compares to a trading range over the past year of $1.11 to $1.96 and implies upside of around 21% to the consensus price target according to the FNArena database. FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
The Australian sharemarket is falling for the first time in nine sessions with the All Ordinaries index (XAO) off by 0.3 pct or 15.5 pts to 4986.2.
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By Chris ShawTrading in the silver market in 2010 was volatile, with prices struggling to break US$19.00 per ounce for much of the year but racing higher in the final months to push above US$30.00 per ounce on the back of strong investment demand. The actions of investors are continuing to drive the price trajectory of silver according to Barclays Capital, but the group notes when this interest wanes trading in the metal will again be driven by industrial demand.This is important, as on the view of Barclays the current risks presented by silver's fundamentals are likely to outweigh the potential upside drivers. While fabrication demand is likely to increase, Barclays expects the market will continue to remain in surplus as mine supply should also grow.On its numbers, Barclays estimates a surplus for silver in 2011 of 2,804 tonnes, up from its forecast surplus for 2010 of about 2,500 tonnes. Credit Suisse is less bearish, expecting silver to be in a slight deficit this year and through 2014.One part of the silver market that could deliver long-term growth in demand is from an increase in the uptake of solar energy, as Barclays points out silver is used in crystalline silicon photovoltaic (PV) cells, which require highly conductive material on their surface.A cheaper alternative to PV cells are thin-film cells, which are not made of wafers and contain little if any silver. Thin-film cells are also less efficient, delivering 8-12% efficiency against 14-20% for silicon cells.While thin-film cells are gaining some traction in the market, Barclays notes PV cells still represent about 90% of all solar cells produced. If it is assumed around 0.1 grams of silver are used for each watt generated and each panel has the capacity to generate 200 watts, this suggests an average solar panel could contain as much as 20 grams of silver.Barclays estimates this equates to more than 800 tonnes of silver being employed in cells in 2009, which translates to about 8% of silver industrial demand and 4% of global silver supply. On the group's numbers this had the capacity to double in 2010, while Barclays estimates silver usage in solar panels could hit 2,000 tonnes by 2012. This would equate to about 7% of global silver output.At present solar power contributes only around 1% of global electricity generation, this a reflection of relatively high costs. This leads Barclays to suggest that, short-term at least, solar panels are unlikely to drive the demand story for silver.Longer-term the view is more positive, as Barclays suggests the pledges of both China and India to increase solar capacity to 30GW and 20GW respectively by 2020 implies the solar industry could generate some industrial support for silver prices as investment demand takes more of a back seat.In terms of price forecasts for silver, Barclays expects prices will average US$29.10 per ounce in 2011, which would be up from an average of closer to US$20 per ounce in 2010. Citi is a little less bullish in forecasting an average price this year of US$24.90 per ounce, easing to US$23.03 per ounce in 2012 and US$20.53 per ounce in 2013.Macquarie is not far off the Citi forecasts with its estimates of average annual prices for silver this year of US$26.50 per ounce, US$22.50 per ounce in 2012 and US$19.90 per ounce in 2013, while Credit Suisse has forecasts of US$22.00 per ounce, US$21.00 per ounce and US$21.00 per ounce respectively for 2011-2013.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
The AUD is trading lower this morning,weighed down by better than expected US employment data overnight.
The Australian Dollar opens weaker against the greenback this morning at 1.0035.
U.S. stocks erased most of their early losses Thursday amid reports that Egyptian President Hosni Mubarak will soon resign.
US wholesale inventories rose by a higher-than-expected 1pct in December to $430.5 billion - its highest level in almost two years.
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By Greg PeelThe Dow closed down 10 points or 01% while the S&P added less than 0.1% to 1321 and the Nasdaq was steady.Wall Street posted its most significant fall for a while last night on the open as the situation in Egypt boiled over once more. But while the 83 point early drop in the Dow suggested the winning streak on the Street might be well and truly broken this time, such a move a year or two ago would have brought reports of “Wall Street little changed”. And once again the weakness was brief as the US shrugged off problems in the rest of the world and returned to looking inward.The end result was a slight positive for the S&P 500 while the crisis centre du jour hung in the balance waiting to hear wether President Mubarak would this time actually depart. As we speak he remains resolute with some sort of announcement pending.But just as Egypt was erupting once more, the ghosts of 2010 came back to haunt bond markets as Portuguese debt suddenly took a turn for the worse and traded at historically high yields. Traders were stuck for a specific explanation but were reminded that Europe's debt problems are very much still with us.The end result of both ex-US developments was a 0.8% bounce in the US dollar index to 78.23. Yet Wall Street otherwise appeared to stay quite calm, and movements in other markets were equally timid.Gold had barely moved on the close at US$1361.40/oz after initially dipping on the dollar's jump. Base metals were similarly little changed with copper stronger but still sitting just under 10,000/t. Oil rose US2c to US$86.73/bbl. The Aussie slipped 0.7 of a cent to US$1.0044.Were it not for another profit warning from Dow component Cisco, which saw the stock down 14% in the session to almost match the unprecedented 16% drop marked in November on an earlier profit warning, Wall Street would have posted yet another modest but healthy gain. Perhaps the most telling figure was the VIX volatility index. Egypt is in turmoil, Portugal is back to haunt us, yet the VIX ticked up only very slightly and still reads 16.No one on Wall Street seems to care anymore what happens elsewhere. America is strong again, apparently, and that's all that matters.Earlier the Bank of England decided to leave its cash rate at the longstanding 0.5% level despite many in the market assuming maybe a hike was due. Commentators suggest it was a close run thing nevertheless, with policy-makers tossing up between strict austerity measures on the one hand and rising inflation on the other. The lack of change helped the US dollar surge ahead.The SPI Overnight was down 12 points or 0.2%.The highlight today of the local result season will be Newcrest ((NCM)) and RBA governor Glenn Stevens is also due to make a regular testimony to parliament. China is also due to release its monthly round of economic data today, although economic calendar collators are not 100% sure. Beijing is not one for sticking religiously to schedules.Your editor Rudi Filapek-Vandyck will feature on BoardRoomRadio's Friday Afternoon Round Table later today (3pm live).[Note: All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
Shareholders who stuck with OZ Minerals through the dark days of 2008-09, or who bought the shares in 2009 amid considerable scepticism about whether it would survive, will get a nice fat payoff after the boom 2010 financial year result.A huge profit, higher dividend, capital return, consolidation of shares to boost the share price and a buyback.All up more than $900 million in dividends, the capital return and share buyback will have been delivered to shareholders by mid-year.There's the $123 million already paid in the interim dividend and the $223 million to be paid in the final in the next month.The capital return will absorb nearly $390 million and the consolidation will be done in the ratio of ten for one (which should boost the share price considerably.After that is completed the company will run a $200 million share buyback.With the
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How to Have a Sound Financial Plan and Stay Invested for the Long Haulby Marc Lichtenfeld , Investment U’s Healthcare Specialist Wednesday, February 9, 2011: Issue #1446“Even the Roman Empire took 400 years to fall. I assume your investment horizon is a little shorter than that.” So said my colleague, Alexander Green, at The Oxford Club’s recent Private Wealth Seminar in Costa Rica. His words were a warning shot to any investors listening to the investment doom-and-gloomers out there, busily predicting the end of the world. Alex was driving home a point that we’ve made countless times here at Investment U: Markets rise and fall, and trying to time them is an act in futility.So what should you do instead? Simple. Have a sound financial plan and stay invested for the long haul. And the best route to success? See below…Concerned? Let History Ease Your WorriesAlex’s discussion got me thinking about the woes of the past few years and how people are having a tough time envisioning a meaningful recovery . I won’t rehash the myriad problems and ugly statistics here. You know what they are by now. What I will say, though, is that while the climate is undoubtedly tough, is it really so different from previous downturns? I’m not talking about the epic crashes of 1929 and 1987… everyone’s done that. Rather, I’m referring to lesser-known crises. Why? Because while they caused a similar level of panic that we’ve seen today, they not only worked themselves out… but the economy actually prospered afterwards. For example…How Silver and a Railroad Collapse Triggered the Crash of 1873Heard of the Panic of 1873? A worldwide depression was triggered when Germany stopped minting silver thaler coins, used in Europe for over 350 years. The decision sparked a drop in silver demand and set off a ripple effect… American silver mines suffered, as did railroads, which hauled less silver. Like the dotcom boom, railroads were highly speculative and 89 out of 364 went bankrupt. That caused several major banks to fail, too. U.S. policy changed from backing coins with gold and silver to just gold. This was seen as a sign of an instable money supply and investors refused to buy long-term U.S. bonds, which drove interest rates higher.The New York Stock Exchange stopped trading for 10 days. Over 18,000 businesses failed and unemployment shot up to 14% in 1876. Construction was halted, wages were cut, real estate fell and corporate profits disappeared. In response, voters turned against the incumbent Republicans, handing control of the House to the Democrats in 1874. Sound familiar? The crisis lifted in 1879 and the country enjoyed prosperity until the next downturn in 1893…Deja-Vu in 1893In 1893, rampant railroad speculation again sent the U.S. economy off the tracks. As railroads and banks collapsed, unemployment soared from 3% in 1892 to 11.7% in 1893 to 18.4% in 1894. It was the worst depression the United States had ever seen (until the 1930s). In the 1894 elections, the Democrats got hammered at the polls and lost control of Congress. Again, sound familiar? The economy recovered in 1897 and by 1899, unemployment sat at 6.5%, with rapid GDP growth occurring. I’d bet my last dollar that if you’d told an American in 1894 that economies are cyclical and include booms and busts, they’d have responded, “This time it’s different.” They’d have issued the same call in 1907, 1919, 1973, 1987 and 2000. And they’ve been saying it since 2008. Here’s what you need to remember…Different Problems… Different Solutions… And the “Cure All” Investment PhilosophyIn each crisis, a different set of circumstances and problems caused the destruction of so much wealth. Hence, the solutions were different, too. And such fluctuations have occurred since the Declaration of Independence. My guess is that some time in the 23rd century, while people are panicking over the crumbling in value of their lunar real estate, jetpack stocks and the collapse of the banks that funded their speculation, they’ll tell anyone who’ll listen, “This time it’s different.” And the economic Armageddon of 2008 will be consigned to history as just another in a long list of financial panics. And the solution throughout all this upheaval? Want Solid, Steady Investment Returns? Go Fishin’…Regular readers will know that Alex Green recommends The Oxford Club’s “ Gone Fishin’ Portfolio .” Based on his own tried-and-tested investment philosophy, it’s a portfolio of no-load, low-expense mutual funds (mostly index funds) across a variety of asset classes that keeps you diversified and in the market. And most importantly, you don’t have to think about them day in and day out. It’s the foundation on which The Oxford Club’s investing methodology is built and has helped members generate an enormous amount of wealth. It’s also led the independent Hulbert Financial Digest to rank The Oxford Club’s Communiqu
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FNArena has added another video to its Investors Education section on the website.ATW's Jerry Simmons explains why his analysis suggests US equities seem poised for a sizeable correction. This view is further strengthened by a double top formation for copper, traditionally a leading indicator for risk assets and global investor sentiment. Total duration of this video is 53 mins.SummaryIn this educational video, Jerry Simmons, Lead Mentor and Co-Founder of the Advanced Trading Workshop, Inc. explains in detail how ATW tools are used to project completion targets of 5-wave-moves, taking the S&P500 as an example. He goes on to predict a high probability of a turn-around in the 1320 – 1350 area for the S&P500, taking it down to 1230-1250 and possibly as far down as 1200. However, this major reversal is subject to the usual ATW Reversal Confirmation Steps, the most important of which is a weekly RBO (Reversal Break-Out). Conclusion: TIGHTEN YOUR STOPS! If the reversal occurs in the S&P500, it is likely to take down most equity markets and the bonds with it.In copper, a leading indicator, a confirmed break-out below US$4.45 would confirm a Double Top and significantly increase chances for an extended down move; “copper is a bubble”. But there is always the opposite case to consider, and that would be a confirmed break-out above US$4.68. The current level is a “make-it-or-break-it” level. Hic Rhodos, hic salta!CommentsS&P500Jerry analyses the S&P500 cash index (TradeStation: $INX) and concludes:• Any trader, including day traders, should always consider multi-time-frames and not only one time frame, including a weekly and even a monthly chart.• The low in the S&P500 was on 6/3/09 at 666.79; in any market, a 100% move up, i.e. doubling, is a significant milestone. In the case of the S&P500, that corresponds to 1332, a mere 10 S&P500 points from where we are now.• “It is unbelievable, how profitable you can be as a trader, just trading weekly break-outs.”• For the S&P500 and hence most world equity markets, it is “time to tighten stops” and lock-in profits made on the way up in this explosive bull-market since March 2009.CopperWith the price moving back down from the high on Friday, we are still within a Double Top and coming off it. If we get a confirmed break-out below US$4.45 this would confirm the Double Top and significantly increase the likelihood of an extended down move. On the other hand, a break-out above US$4.68, less likely, would send copper much higher.NASDAQ and Russell 2000With the S&P500 having made new highs, and the NASDAQ and the Russell2000 not following suit until recently, a bearish divergence formed, begging the question, who was right, the S&P500 or the NASDAQ/Russell2000? Since then, both the NASDAQ and the Russell2000 have also made new highs; hence, the bearish divergence has disappeared. This sequence of a bearish divergence developing and then disappearing is often the harbinger of a turnaround, another sign in the direction of a significant pull-back in the equities markets developingTo view the ATW Strategic Prep Video (originally from November 29, 2010) titled "Analysis INX_HG_TY_TRAN" click HERE or visit the FNArena Investors Education section of the website.Here's the direct link: http://www.fnarena.com/index2.cfm?type=dsp_front_videosAll views expressed are Jerry Simmons's, not FNArena's (see our disclaimer).Jerry Simmons has over 25 years of full-time trading experience. He is the senior partner and head mentor for the “Masters” Programme within the education system at New York based Advanced Trading Workshop (ATW). ATW recently set up shop in Australia through the establishment of ATW Australia (since mid-2010).FNArena is pleased to have Jerry Simmons as a highly valued contributor to its service which aims at both educating investors and assisting them with their own market analyses.The above mentioned videos can be accessed via the FNArena Investor Education section at http://www.fnarena.com/index2.cfm?type=dsp_minc_education)About ATW AustraliaFounded in June 2010, ATW Australia is a “one-stop-shop for all a trader needs to succeed”: quality education for new traders, superb advanced trading education, fast unfiltered data, a world-leading trading platform, customer oriented competitive brokerage, quality ‘Made in the USA’ specialized trading computers, trading magazines, and the all-important psychological mentoring and coaching for traders. The trading educational products are provided by the Advanced Trading Workshop, Inc. in New York, all other services are provided by a network of partners that were chosen based on their superior products and services in their specific field of expertise. FNArena is one such partner.To learn more visit www.advancedtradingworkshop.com.au.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
The US Federal Reserve chairman Ben Bernanke gave testimony to Congress on Wednesday. While Bernanke is encouraged by recent economic data, he notes that unemployment remains too high.
The AUD appears to be lacking direction ahead of today's employment data release.
U.S. stocks slipped Wednesday, as investors balanced a pair of positive blue chip earnings reports against concerns that the market may be set for a breather after seven straight days of gains.
Domestic consumer confidence data for February came in at 1.9% yesterday which was a major improvement on the January figure (negative 5.7%) however, the Aussie retreated marginally during the Asian trading session touching US101.30 cents.
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By Greg PeelThe Dow closed up 6 points while the S&P fell 0.3% to 1320 and the Nasdaq lost 0.3%.Wall Street had marked seven straight days of consistent gains and a 5% rise in 2011 in the broad market S&P 500 with little volatility, so it surprised no one last night that some profit-taking emerged. The market was higher mid-morning but thereafter tipped into the red. The large-cap Dow managed to nip back into the black only on the death.A notable counterpoint to the rise in stocks has been the fall in bond prices, which has seen the benchmark ten-year yield run from just over 2.5% in November to over 3.7% this week. But yields, too, were in for a correction, and foreign central banks and sovereign funds lent a hand.Continuing with the pattern of late last year, demand for Treasury bonds at the short end and the very long end has waned. But the ten-years have been consistently sought after as a parking station for foreign reserves over this period, and last night was no different. Tuesday's three-year note auction was a fizzer but last night's ten-year auction met with strong demand, forcing the yield down seven basis points to 3.67%. Foreign governments bought a record 71%, well above the running average of 44%.The ten-year yield had already tipped over mid-morning in line with stocks, suggesting a correcting flow-back of money from stocks to bonds. The auction result only served to spike up bond prices. The recent run-up in Treasury yields is all about the recovering US economy, suggested Ben Bernanke to the House Budget Committee last night, and nothing to do with local inflation fears. Bernanke maintained his view that unemployment, although showing some signs of improvement, will remain stronger for longer. He dismissed any notion of inflation being reflected in bond yields and reiterated that US inflation will remain very low for some time. He did, however, confirm that the Fed would abandon QE measures and raise rates as soon as inflation looked like taking off.So deflationary forces in the US are keeping a lid on inflation and as such the Treasury can print as much money as it likes. Never mind that this policy is causing inflation problems around the rest of the globe. It's not the Fed's problem. However, aside from kick-starting the US economic recovery there is little doubt QE2 has another intended purpose. If Chinese authorities won't bow to entreaties to revalue their currency voluntarily, then American authorities can smoke them out. Two recent Chinese rate rises are testament to China's inherited inflation problems.The other news on the Street last night was that (shock, horror) that bastion of American capitalist supremacy – the New York Stock Exchange – is in merger talks with Deutsche Bourse with intentions of forming the world's largest exchange company. Oh the irony. Old soldiers will be turning in their graves. But if the merger is successful, the ASX ((ASX)) will have a stronger case to argue in its attempts to merge with the SGX.[Just as an aside, I was told last week by a more than reliable source that the market monitoring responsibilities taken by ASIC from the ASX rely on “prehistoric” systems and modernisation moves are glacial. SGX systems, on the other hand, are state of the art.]Bernanke's down-play of US inflation was enough to send the US dollar index lower last night by nearly 0.5% to 77.61. But increasingly the relationship between commodities and commodity currencies and the reserve currency is becoming fractured.The Aussie has fallen a third of a cent since this time yesterday to US$1.0114, albeit the Battler seems currently stuck in a US$1.01-02 range. The limited bounce in Westpac's consumer confidence survey for February released yesterday, after the flood affected January survey had shown a big drop, likely added to weakness.Gold stood still last night at US$1364.10/oz despite the greenback's fall and over in London all eyes were on Chinese metal buyers returning from their week-long break. Normally they'd be buyers, but one look at copper over US$10,000/t and they stayed out. Copper thus fell 1% to just under the 10k mark and other metals fell in sympathy. Oil also fell, by US23c to US$86.71/bbl.The SPI Overnight fell 5 points.It will be an interesting next 24 hours. In Australia today the result season highlights include Rio Tinto ((RIO)) and Telstra ((TLS)) while the local unemployment data will be released. China will (in theory) release its January trade balance today, albeit the move on rates has already been made.Tonight the Bank of England will hold a monetary policy meeting. It was only a few months ago that traders were convinced the BoE would also be announcing another round of QE, but in the interim Britain's economic data have been no less than astounding. So tonight there is a strong expectation the BoE will finally lift its cash rate above the longstanding 0.5% level.My esteemed editor will be appearing on the Lunch Money program on Sky Business today at midday. [Note: All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
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By Chris ShawHuman resources and employment services group Talent2 International ((TWO)) reported an interim profit of $3.4 million, a result that was 85% higher than for the previous corresponding period.Stockbroker Moelis suggests Talent2 was a beneficiary of sustained improvement in employment activity across the Asia Pacific region, this trend having been in place since late in 2009. The interim result showed revenue growth of 36% and EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 61%.Talent2 has two main divisions – Recruitment and Managed Services, and both performed well during the period. Recruitment, which accounts for 41% of group revenues, delivered a 58% increase in EBITDA, while Managed Services, which generates the balance of group revenues, recorded a 61% increase in EBITDA.RBS Australia was particularly positive on the performance of the Managed Services division, suggesting it shows a recovery in earnings for that part of the business is now underway. The division also offers good potential for further growth in the broker's view, as there is more upside from client wins via RPO outsourcing operations and via the expansion of existing mandates.As well, RBS Australia points out a reconfiguring of the Payroll business towards small and medium-sized businesses has improved demand for the service, while also generating some scale benefits from an increase in payslips.Talent2 is on a solid footing to finance further growth, Goldman Sachs noting post the December half the group had a strong balance sheet with net debt of $8.5 million and free cash flow of $5.6 million. The latter was an increase of 86%, reflecting good working capital control and the strong earnings growth achieved in the period.International markets are one likely source of further earnings growth in the view of Goldman Sachs, reflected in the fact these operations generated a 61% increase in revenues to $28 million in the December half. The international businesses now account for 19% of Talent2's total revenues.On the back of Talent2's interim, RBS Australia has lifted its earnings per share (EPS) forecasts by 2-6% through FY13, meaning its estimates now stand at 10.6c this year, 14.3c in FY12 and 16.8c in FY13. RBS Australia is the only broker in the FNArena database to cover Talent2.Moelis has made no changes to its estimates, which stand at 10.4c, 13.2c and 15.2c respectively, while Goldman Sachs is forecasting EPS outcomes of 10.2c, 14c and 16.9c for FY11-FY13.Based on its forecasts, Goldman Sachs estimates Talent2 is trading on an earnings multiple of 15.7 times this year and 11.4 times in FY12. The broker sees this as attractive given the earnings growth outlook and to reflect this it has upgraded to a Buy rating, from Hold previously.RBS Australia has also upgraded to a Buy ratingfrom Hold previously, again on valuation grounds. RBS's numbers suggest a FY12 earnings multiple of 11.2 times, which would be in line with the Small Industrials average according to the broker. This implies the stock is relatively cheap given a historical multiple premium of around 25%. Post Talent2's interim, Moelis makes no change to its Buy rating, the broker setting its price target at $2.00. This is broadly in line with the targets of RBS Australia and Goldman Sachs, which stand at $1.95 (up from $1.53) and $2.05 respectively. Shares in Talent2 today are higher and as at 12.35pm the stock was up 5.5c or 3.4% at $1.655. This compares to a trading range over the past year of $1.25 to $1.75 and implies upside of around 20% relative to the average price target for the stock among the three brokers.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
Hearing implant maker Cochlear may have beaten analyst forecasts with a 16% rise in first-half net profit on an 8% rise in sales, but it couldn't win over a suddenly sceptical market yesterday.The shares jumped by more than 1.4%, or $1.10, to $78.60, before losing the lot in the trading from around 11 am to close down $1.32, or 1.7%, at $76.18.The market ignored the better result, positive outlook and an 11% rise in interim dividend to $1.05 a share from 95c in the first half of last financial year.The rise in sales and profits came mostly from higher sales of its new Nucleus 5 device.Cochlear said net profit rose to $87.2 million in the six months to December 31, from $75.25 million a year earlier.The result beat analyst expectations for earnings of $83.6 million, according to the average of three forecasts. But other analysts reckoned the result fell short of their guesses.Stripping out
The consumer sector led U.S. stocks higher Tuesday after McDonald's posted strong January sales, putting the Dow Jones Industrial Average on track for its seventh straight gain.
The People´s Bank of China has lifted interest rates for the second time in just over a month. The 1-year deposit rate will be lifted 25 basis points to 3.00pct while the 1-year lending rate is up 25bps to 6.06pct.
The Australian Dollar was choppy last night following the decision by the People's Bank of China(PboC) to raise benchmark lending rates by 0.25% to6.06%, the second rate hike in six weeks.
The Aussie traded a familiar recent band during local trade on Tuesday between 1.0115, where the currency is finding some support, and a high around 1.0135. Despite a lack of direction, the Aussie has been buoyed recently on the back of firmer commodity markets and improving economic data coming out of the United States.
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By Greg PeelThe Dow gained 71 points or 0.6% while the S&P added 0.4% to 1324 and the Nasdaq rose 0.5%.The People's Bank of China yesterday announced another rate increase, following on from the Christmas Day hike. The PBoC lifted its one year lending rate to 6.06% from 5.81% and this time simultaneously lifted its deposit rate to 3.00% from 2.75%. Inflation is clearly in Beijing's sights. China's latest round of inflation data is due out at the end of this week.Had this hike occurred in 2010, Wall Street would have taken a dive. Last year was a year of panic not just every time a small European nation blew itself up, but every time Beijing threatened, in nervous traders' eyes, to kill the golden goose with monetary tightening. But a new, warm breeze has swept through Wall Street in 2011. Economic data are solid (except for jobs), corporate earnings are healthy, and money grows on trees. QE2 trees.So it was that the reaction to Beijing's move was a small dip at the open that lasted about five minutes. Then it was onward ever upward once more, with Mickey D's leading the charge.Mickey D's (McDonalds, stock code MCD) announced better than expected global like-for-like sales in January and helped send Wall Street to its seventh straight gain. Sales improved everywhere across the planet, including in China, and in Chubby Land Downunder, except for one region – the US. But that's okay. China's been exporting its cheap crap to the US for a decade so now it's “right back at ya”. With a dollar kept in check by the Fed, US exports are finding keen demand.But can the US have too much of a good thing? Mitchell Johnson spent the whole Ashes series warning us that it's best to know when you've had enough. Now that easy monetary policy seems to have served its purpose, and the US economy looks strong, questions are being raised as to whether America should just keep on chugging on those QE2 beers.There was dissent in the ranks of the Fed back in 2010 when QE2 was being considered, but by the time it was implemented the world was already talking about a probable QE3. Last night Richmond Fed president Jeffrey Lacker piped up and suggested that while QE2 should not be halted suddenly, the size and pace of the program should be reconsidered in light of the current situation. It's unlikely Uncle Ben will do any more than listen politely however, given that in his recent “meet the press” he dismissed the notion that QE2 had anything to do with current global inflation. Egyptians may disagree, along with the PBoC.Last night the Fed was in buying US$2.19bn of thirty-year bonds, although most of its purchases are concentrated in the two-ten maturity range. But Fed or no Fed, 2011 has seen a pricking of the supposed US bond bubble as investors have shifted money back into risk assets. And so it was that last night's Treasury auction of US$32bn of three-year notes received a lacklustre response. Foreign central banks bought only 28% compared to the running average of 35%, and the benchmark ten-year yield rose another eight basis points to 3.72%. The Treasury will auction US$24bn of ten-years tonight.A Chinese rate hike by default implies a lower US dollar given the renminbi is pegged in a range and not at a price. But the euro also took a hit last night on a weak German industrial production number for January, but that was put down to the heavy snow. The Aussie also took a hit on the rate hike given Australia's greater sensitivity to the Chinese economy, but as the US dollar index dipped to 77.95, the Aussie ultimately held its ground at US$1.0148.Gold, on the other hand, jumped again on the weaker greenback and on the inflation scare implied by Beijing's policy move. Gold was up US$14.20 to US$1364.00/oz, and silver retook the US$30/oz mark. Oil similarly rose US33c to US$87.80/bbl.Like Wall Street, the LME initially got a scare from the Chinese rate hike but then swiftly recovered, with most metals closing slightly higher on the session. Copper remains above US$10,000/t.The SPI Overnight rose 14 points or 0.3%.With QE2 now causing debate at the Fed, one is reminded that a significant contribution to the GFC came from then Fed chairman Alan Greenspan's policy of dropping the funds rate to 1% in 2004 in the wake of the tech wreck and 9/11. Critics suggest the rate was dropped too low and for too long, and since 2009 now Fed chairman Ben Bernanke has been pushing the “exceptionally low rates for an extend period” mantra of which QE2 is the primary element. Another bubble on the horizon? One presumes that as long as the US unemployment rate remains elevated then QE2 is here to stay. The rest of the world's food and oil inflation woes are not America's concern.Today locally the interim results season steps up a gear with the highlight being Commonwealth Bank ((CBA)). Westpac economists will also inform us just how consumer confidence fared during the January floods. [Note: All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
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By Chris ShawMining, rail and engineering products group Bradken ((BKN)) yesterday reported a below expectations interim profit result of $38.2 million, the number falling about 14% short of the estimate of RBS Australia.According to RBS much of the shortfall can be attributed to increased operating expenditure, while higher than expected interest costs also played a part. Both the Mining Products and Americast operations performed solidly in the period, while a significant positive in the result was the maintenance of full year earnings guidance.Credit Suisse suggests the fact full year guidance has been maintained is indicative of an improvement in underlying business conditions. Supporting this argument, in the broker's view, is the potential for margins to increase in the second half of FY11, as well as the likelihood all divisions of the business, apart from rail, record double-digit revenue growth in the second half.Post the result forecasts across the market have come down, Credit Suisse cutting its earnings estimates by about 3% on average through FY13, while RBS Australia has lowered its estimates by 6-8% across the same period.Deutsche Bank has been more aggressive in cutting its net profit numbers by 16% in FY11 and by 18% in FY12, though the magnitude of the changes reflects the fact the broker was above guidance with its previous estimates. In earnings per share (EPS) terms Deutsche Bank is now forecasting 60c in FY11 and 61c in FY12, which compares to Macquarie at 64.3c and 66.3c respectively and UBS at 68c and 75c. Consensus EPS forecasts according to the FNArena database stand at 61.6c this year and 68c next year.According to UBS, Bradken faces two major headwinds to earnings that are offsetting current strong demand for mining products and consumables out of North America. One is the level of import price competition in the rail division, the second being the upcoming termination of the ESCO licence. The latter will impact on group sales and earnings, but there is some uncertainty in the market at present as to the potential magnitude of this impact.This uncertainty, plus limited earnings growth expectations for FY12, sees Deutsche Bank retain a Hold rating on Bradken. On the broker's numbers the stock is trading on a FY12 earnings multiple of 14.5 times, which simply implies limited value given the growth outlook in its view.Credit Suisse agrees, as despite lifting its price target to $9.90 from $9.35 post the result the broker has downgraded to a Neutral rating. UBS also rates Bradken as Neutral, taking the view the current earnings uncertainty is likely to be enough to limit share price outperformance.But three brokers – RBS Australia, Macquarie and BA Merrill Lynch - continue to rate Bradken as a Buy. For BA-ML there is still value in the stock as its numbers suggest a normalised earnings multiple in FY12 of 12.7 times. BA-ML suggests this makes the stock cheap given the multiple is below the ex-resources average of closer to 15 times.The attraction for Macquarie is Bradken is well managed and has strong market share in its core products. This is a positive given a number of products service the current mining boom and so are experiencing strong demand. This exposure to high growth markets such as the mining sector also underpins RBS Australia's Buy rating, while the broker is also positive on the group's offshore growth strategy over the medium-term.The FNArena database shows a wide range of price targets for Bradken, likely reflecting the current earnings uncertainty surrounding the stock. The consensus price target stands at $9.27, with a range from $8.50 for Deutsche Bank to $9.90 for Credit Suisse.Shares in Bradken today are weaker and as at 1.35pm the stock was down 22c at $8.60. This compares to a range over the past year of $6.18 to $9.60 and implies upside of around 6.6% to the consensus price target in the FNArena database.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
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By Greg PeelThe Baltic Dry Index is an index of freight rates charged by the owners of the massive bulk carriers which traverse the world's oceans with “dry” cargoes such as coal, iron ore and wheat. The ships include the Panamax, which carries coal from eastern Australia and the larger Capesize, which carries iron ore from Western Australia and Brazil.By end-2010 there were 1813 Panamaxes in operation with a net capacity of around 136mt and 1172 Capesizes with a net capacity of around 211mt.As one might appreciate, ship builders don't just knock up a Capesize in a day or two. The lag in orders for new ships placed by owners and their ultimate delivery means that ship owners need to look into the future to assess the global demand for bulk minerals and grains and subsequent need for transport before they rush into ordering. Similar decisions need to be made as to whether now is a good time to scrap older vessels ready to be replaced by new ones. It is a competitive market which at any time can see an undersupply of vessels when demand is strong and an oversupply when demand is weak. As one might appreciate, the past few years of boom, bust and boom again in commodity demand will have had ship owners and builders pulling their hair out. Freight charges are not fixed – they are fluid and operate much like any spot price market operates. The risk is that weak demand sees freight rates fall below ship operating cost on the one side, or that strong demand pushes freight rates to uneconomical levels for commodity buyers on the other.But what the ship owners' dilemma does mean is that the index of freight rates has in past years become a rather reliable lead indicator of commodities prices. Prices rise only after demand rises, and traders of bulk goods need to book in their ships early to secure transport on orders. This means that typically freight rates rise first as the orders flow in, and then commodity prices begin to rise in recognition of increased demand.Prior to last year, the BDI was running ahead of iron ore and coal contract prices which only step-jumped once a year, so it has proven quite a handy lead indicator of mineral price movements with a long lead time. More recently bulk material contract pricing has moved to quarterly contracts and spot deliveries have increased significantly.The following graph compares commodity prices, in the form of the CRB commodity price index, with the BDI. As one can note from 2006 to 2009, the BDI lead the CRB quite reliably. The relationship is close but not quite as close for the Dow Jones Industrial Average, used here as the proxy for share price movements. But the 30-stock Dow is simply not a good proxy for commodity-based share price movements. The S&P 500 would have been more relevant. And even more so the ASX 200.But while the BDI's lead indicator role works well to end-2009 as the graph shows, it completely breaks down in 2010. This is a disappointment for traders and analysts who have come to rely on the predictive value of the BDI. What's gone wrong?Well for starters, the aforementioned shift in coal and iron ore pricing to at least quarterly contracts, with many more deliveries being made at spot, will have dampened the BDI's predictive power. However, the real reason is that one must look at both sides of the equation – the demand for commodities on one side and the supply of ships on the the other. In short, ship building has run amok, and given construction lag times we can look right back to the 2008 commodity boom as the genesis.The above-mentioned “head count” of Panamaxes and Capesizes represent a twelve month increase of 12% for Panamaxes and 17% for Capesizes. Nor are these vessels generic in capacity, such that not only are there more ships on the water the capacity of the bigger ships has been rising. Thus the increased ship numbers actually translate to only an 11% capacity increase for Panamaxes but a 22% increase for Capesizes, according to data prepared by Barclays Capital.While a number of ships do get scrapped each year, as one can imagine they aren't scrapped five minutes after they're delivered. So an increased ocean fleet will remain an increased ocean fleet for some time.As the above graph shows, the CRB index spent 2009-10 returning to levels of the 2008 boom but while the BDI might have picked the turn, it fizzled and waned for the rest of the year. Once upon a time that suggested commodity prices might also be about to turn but the same trend has continued into 2011. Commodity prices keep rising and freight rates keep plunging.There have been other extenuating circumstances. Late last year South Africa suffered a significant coal supply delay due to a derailment, and then was hit by floods. A tropical storm then hit Western Australian and curbed iron ore exports, before the big one came along in Queensland this year and temporarily shut-down 70% of the state's coal mines. Obviously these events disrupted bulk mineral trade, and hence idle ships led to lower freight rates.Barclays therefore sees some room for the BDI to bounce a bit, but the reality is the current oversupply of ships means the bounce will only be mild even if the CRB rises ever upward. To put things into perspective, nineteen new Capesizes hit the water in the second half of 2010 compared to twelve in the same period in 2009 and six in 2008. And the story gets worse for ship owners.Brazil's world-leading iron ore producer Vale has designed and ordered a new ship – the Chinamax. This 400,000dwt leviathan will transport iron ore to China and blow the paltry Capesizes and Panamax runabouts out of the water. It will be like Lasers taking on Wild Oats XI. And there won't be just one. The first Chinamax is due in mid-2011 but by end-2013, thirty are planned to hit the water.It must be a ship owner's nightmare. But for stock market traders, investors and analysts, it likely means the BDI lead indicator is dead forever. Now we'll just have to figure it out for ourselves. See also "Bleak Prospects For Global Shipping", published on 23rd December, 2010.Technical limitationsIf you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
In a shock move, underperforming rail and ports operator Asciano Ltd has replaced its CEO, Mark Rowsthorn with the appointment of the former global head of freight giant, DHL Express, John Mullen.Mr Mullen succeeds Mark Rowsthorn, according to statement.There was no real explanation to the market from either the company or Mr Rowsthorn.Asciano shares rose 4.5c to $1.695, the highest they have been since mid-October.It has to be pointed out that in a statement last Wednesday, February 1, Rowsthorn was extensively quoted as CEO, and five days later he's gone with thanks.So now the two driving forces behind the takeover of Patricks in 2006 by Toll Holdings, and then the controversial splitting of that company in 2007
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By Chris ShawWith oil prices again above the psychologically important US$100 per barrel level (at least in Europe), Barclays Capital suggests questions of whether higher oil prices can derail the economic recovery and therefore oil demand have also returned to the market.In the view of Barclays, current prices are not high enough to put at risk either the economic recovery or growth in oil consumption in the US market. Partly this is because US oil demand is becoming increasingly skewed towards price insensitive sectors, meaning there is limited scope for any immediate reduction in oil usage.Most of any downward adjustment in demand will need to be borne by the transport sector, as this sector offers limited scope for short-term substitution and there are high costs associated with any change in behaviour. This leads Barclays to suggest large oil price increases will be needed to generate any meaningful demand response.Looking at historical data, Barclays notes it is the pace of price inflation rather than the absolute price level that is the most important variable in determining the demand dynamics of the US gasoline market. So while prices are at levels in line with those seen early in 2008, price inflation is currently running at a lower pace.Barclays suggests while steady rises in the oil price are a drag on consumption growth and push headline inflation higher, they are not likely to put at risk any recovery. In contrast, it is sudden spikes in prices that can have a greater impact as such moves are more likely to cause investors to adjust their spending and so slow economic activity. Barclays points out US gasoline consumption increased by 2.5% in January according to preliminary data, which highlights how the consumer response to gradual price changes tends to be more limited. In the group's view this shows how up to a certain level the price of any demand adjustment may exceed any benefits achieved.While it is impossible to point to a particular price or inflation level that would create a change in US oil demand, Barclays takes the view that threshold price is somewhere above current prices. In other words, US$100 per barrel is not a level likely to trigger any significant shorter-term change in US oil demand dynamics.Barclays is currently forecasting a 14% increase in oil prices in 2011 and the group suggests this forecast poses no real threat to the sustainability of the economic recovery and progression along the oil price cycle.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.
The US Conference Board employment trends index lifted for the fourth straight month, up from 100.3 to 100.5 In January. The gauge is a leading index for the job market and it stands 7pct higher than a year ago.
The Australian Dollar is relatively unchangedthis morning at USD 1.0130 after firming slightly duringyesterday's local session.
