Australian Markets Wrap: Touchy Investors Still Win A Rise

Provided by The Australian Investor

Monday 23rd July 2001

Markets closed this Friday in a better position than they did last Friday, but it seems to have happened more by accident than as the result of any conscious decision about the balance between good and bad economic data - the balance still overwhelming favours the good data in Australia - or good and bad corporate news - the balance isn't that positive, but that's what to expect at this stage in the cycle. Carriers of bad corporate news were thrashed and thrashed again, while carriers of good news might as well have kept their mouths shut and remained at home.

From last Friday's close, the S&P/ASX 200 dropped 12.3 to 3,384.2 and the All Ordinaries dropped 14 to 3,328.1 over the course of last week.

On Monday WMC advised it is on track to meet its production targets for the year and ended the week down 57c at $8.85.

In the US on Monday, Hughes Electronics, owner of News Corp target DirecTV, reported growing losses, and News Corp dropped 26.2c over the week to $17.528. American inventories were steady in May, according to their Commerce Department, and the inventory-to-sales ratio improved, with stock moving through store faster.

On Tuesday , the NAB released the results of is latest survey of business conditions, showing general confidence about conditions over the next 12 months despite some worsening of conditions in the quarter just passed. The key point was the strong rise in business confidence in June. Mining and telecommunications, the one troubled by expectations that slowing foreign economies will affect demand, and the other affected by increased competition, experienced the most profound worsening in conditions.

LookSmart announced it had the best reach of any Internet network, and ended the week down 0.6c at 9.9c.

Norwood Abbey's laser device gained TGA approval, and on Wednesday, it added a key US patent to its portfolio. Its shares ended the week down 4c at 72c.

Harvey Norman issued its sales report, with like-for-like growth modest, and ended the week at $4.07, down 27c.

In the US, industrial production declined for the ninth month in a row, falling 0.7 percent, worse than the 0.5 percent consensus expectation. Durable goods production fell 1.2 percent. Even production of consumer goods fell. As naturally as day follows night, capacity utilisation in the US was also down, hitting 77 percent, its lowest level in almost 18 years.

On Wednesday , the Westpac Melbourne Institute added its voice to the chorus singing that song about excellent prospects for growth in this half of the year. It looks like all that restructuring is paying off. Annualised growth in May was 4.1 percent, exceeding the long-term rend of 3.2 percent. The picture gets less clear after the December half as we become hostage to the strengths and weaknesses of the global economy.

Access Economics' Monitor for July reported investor confidence fell in June after rising for months. Inventory levels have dropped, suggesting the backlog may be close to gone, good news for factories and wholesalers who are waiting for orders.

David Jones reported that its sales look set to increase four to five percent on last year's and its shares ended the week down 2c at $1.06.

Frucor reported strong growth in revenues, and over the week, rose 9c to $1.42.

Bioprospect announced that it had discovered a nutraceutical or the treatment of prostate cancer, and after a surge, its shares ended the week up 4c at 20c.

Newcrest Mining's annual gold production was down by more than one fifth, and it ended the week down 7c at $4.26.

A stream of data came out in the US on Wednesday: inflation is low but higher than expected, June housing starts rose three percent but June building permits fell 3.3 percent. The data wasn't the biggest American economic story of the day: The head of the US Federal Reserve addressed the US House Financial Services Committee and noted that while official data is no longer exclusively negative over there, he can not say their economic slowdown is over. The Reserve hasn't abandoned the use of further interest rate cuts if necessary.

The US Federal Open Market Committee is predicting growth of 1.25 percent to two percent for the rest of 2001, and three percent to 3.25 percent on 2002, with unemployment rising for the next eighteen months.

Thursday , Sons of Gwalia announced it had hit its target for gold production in the June quarter, and its tantalum division was powering ahead, and it ended the week steady at $8.65.

CSR shareholders heard cautiously positive news at their AGM and the company's shares ended the week at $47.60, down 41c.

Keycorp's terminals are over their production problems, and should be available in October. Over the week, its shares fell 14c to $1.80.

Woodside reported strong June-half sales, and ended the week down $1.103 at $14.54.

Downer EDI announced a couple of new contracts, and ended the week up 8c at 64c.

On Thursday in the US, the trade deficit for May was the lowest seen for 16 months at $US28.3 billion, and well below the consensus expectation of $US32.4 billion. Weekly jobless claims fell 35,000 to 414,000, almost eradicating the previous week's increase. June Leading Indicators rose more than expected, 0.3 percent. The Federal Reserve Bank of Philadelphia reported confidence fell again.

On Friday , press reports that Mr Packer intended to sell his Fairfax stake were followed closely by the announcement the deal was done. Fairfax shares ended the week down 37c at $3.88.

Coles Myer issued another profit warning, angering brokers and investors, it split its hsares into two types, one with a shareholder discount, and the other without, and it ended the week down 37c at $5.98.

Pasminco will ditch its mining and exploration assets to pay its debts, concentrating on refining and smelting. Investors liked the news and it ended the week up 2.5c at 21.5c, having closed on Thursday at 14.5c.

In the US on Friday, Dow and NASDAQ heavyweight Microsoft issued a profit warning. The US Budget surplus for June was $US31.86 billion, down from the level recorded in June last year. Corporate income taxes were down by around $11 billion or 26 percent compared to June 2000, an indication that the slowdown continues to bite.

Aussie Dollar

The Aussie dollar gained almost half a US cent over the week - from last Friday's 50.58 US cents it reached 51.35 US cents by 4.00 pm yesterday.

SPI

The September contract finished the week at 3,394, down six points.

Industrials

The S&P/ASX 200 Industrials index gained 11.6 for the week to 5,832.7.

Resources

The S&P/ASX Resources index dropped 57.9 points over the week to close at 1,507.9.

Banks

The Bank Index closed the week up 146.4 points at 8,981.9.

Gold

The Gold Index closed the week up 16.6 points at 799.3.

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