Australian Markets Weekly Wrap

Provided by The Australian Investor

Saturday 7th July 2001

Global Worries Overshadow Good Local Performance

This week's official data helped solidify an image of an Australian economy that is passed the worst of its slowdown, but isn't immune to slowing economies around the world. Japan seems to be heading back into the recession it must love, it's done so little to get out of it. Worse news came from Europe, which had thought itself immune to the problems plaguing the American economy, but now seems to be heading into its own trough. American data was mostly positive, indicating their economy has started to mend, but a barrage of profit warnings is still hitting their stock market each day, and that's likely to be the case for a while.

Fears about foreign earnings hurt most Australian companies with significant offshore operations, including the banks and leading miners.

Monday opened with good news for the local economy: Access Economics, BIS Shrapnel and the Chamber of Commerce all painted a rosy picture of a strong national economy with good prospects.

The Bureau of Statistics announced trade in goods and services in May was in surplus to the tune of $248 million, well above expectations.

An overzealous Tax Office seems to have scared investors away from plantation businesses. Forestry company Australian Plantation Timber issued a profit warning, and fell 10c to 68c. Timbercorp warned too, and dropped 38c to 54c.

Lion Nathan launched its takeover for Montana Group. The picture got complicated, though rosier for Montana shareholders, on Thursday.

Rio Tinto settled its Pilbara railway dispute with its Japanese partners and by the end of the week was up 56c at $34.70.

On Monday in the US, the National Association of Purchasing Management Index for June rose to a seven-month high. The surge suggests the troubled American manufacturing sector has pulled out of its stall. The rise to 44.7 percent - the strongest since early 1999 - was well ahead of the expected 42.7 per cent. A level of 50 per cent indicates an upturn.

On Tuesday , Billabong International announced the purchase of skatewear business Element, which the market liked, and over the week it rose 41.4c to $5.714.

Tuesday also saw the week's second bit of sizzling news from the Bureau of Statistics: housing starts jumped 25.9 per cent in May, startling the experts, who had anticipated a number less than half this size. Retail trade in the same month fell 0.5 per cent, but economists seem mystified by the persistent strength of this series of data, and weren't worried by this slight setback.

In the US, May durable goods orders gained 2.5 per cent to $US344 billion, according to their Commerce Department. The data confirmed the good news from the June National Association of Purchasing Management index of industrial activity.

On Wednesday , the Bureau of Statistics confirmed the wine industry is booming, though that doesn't mean every wine company's a winner.

Pacific Hydro launched its Victorian wind farm. The market likes a profitable green business, and by the end of the week, it was down 5c at $4.09.

Woodside Petroleum took an 11 per cent stake in Hardman Resources, one if its partners in exploration off the coast of Mauritania, which helped Hardman but by the end of the week it was up just 1c to 96c.

So Natural Foods popped out a profit warning but rose 5c to close Friday at 65c.

On Wednesday in Europe, the European Commission's June business climate indicator was negative for the first time in two years, indicating worsening conditions for Euro-zone manufacturers. Marconi, a British telecommunications equipment firm warned and telcos around the world suffered.

On Thursday , NAB announced the write-down of its American home mortgage business HomeSide and caught the market completely by surprise, and by the end of the week, the bank's shares were trading at $31.70 down $3.352.

Tesltra had some bad news too. The reports, run in the media, suggested all was definitely not well at partner Pacific Century Cyberworks. Telstra closed the week down 33c at $5.05.

Millstream, for Allied Domecq, launched an opposing bid for Montana. Montana ended the week at $3.90, up 3c and Lion Nathan ended at $.35 down 6c.

In the US, the National Association of Purchasing Management index of non-manufacturing activity for June hit its highest level for the year - 52.1 - indicating the worst of the US slowdown may be behind them. American claims for State unemployment insurance benefits rose 7,000 to 399,000 for the week, worse than the expected rise of 1,000.

On Friday , Woolworths, QBE, Origin Energy and CSR all announced acquisitions. Woolies ended the week down 79c at $10.21. QBE dropped 88c to close at $10.93. Origin lost 8c to $2.92. CSR dropped 35c from last Friday's close to end at $6.75.

In the US, the Labor Department advised the official unemployment rate in June hit 4.5 per cent, just short of the 4.6 per cent analysts expected. Factory layoffs took most of the blame with a drop of 114,000. The service sector is not creating jobs at its prior speed either. The participation rate has dropped. However, unemployment claims data indicates the month started worse than it ended. Average hourly wages rose the expected 0.3 per cent, so with inflation contained and unemployment on the rise, speculation about another interest rate cut next month is hotting up.

Aussie Dollar

The Aussie dollar rose almost half a US cent over the week - from last Friday's 50.74 US cents it reached 51.15 US cents by 4.00 pm yesterday.

SPI

The June SPI200 futures contract is complete. The September contract finished the week at 3,355, dropping 97 points.

Industrials

The S&P/ASX 200 Industrials index dropped 160.8 for the week to 5,898.7.

Resources

The S&P/ASX Resources index dropped 19.6 points over the week to close at 1,562.6.

Banks

The Bank Index closed the week down 724.1 points at 8708.6.

Gold

The Gold Index closed the week down 36.5 points at 796.

Comments from our readers

No comments yet