Overseas Market Report – Stocks End Higher after China Rate Cut, Tech Earnings
U.S. stocks closed higher on Friday after upbeat tech company earnings and a Chinese rate cut.
The People's Bank of China cut its benchmark interest rate by 25 basis points to 1.5%. The move comes as the Chinese government looks for ways to kick start its slowing economy.At market close, the Dow, S&P 500 and NASDAQ were up 0.9%, 1.1% and 2.3%, respectively.
For Australian ADRs listed on the NYSE, BHP Billiton added 37 cents (1.05%) to $35.75, ResMed gained 75 cents (1.35%) to $56.25, Telstra Corporation rose 31 cents (1.56%) to $20.19, Spark New Zealand lifted 7 cents (0.68%) to $11.16 and Westpac increased 22 cents (0.97%) to $23.00.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.09% and the 5-year yield was 1.42%.
Procter & Gamble's (PG) top line remained tepid–down 12% on a reported basis and 1% when excluding foreign exchange movements and divestitures. The firm posted stellar profit expansion, with a 250-basis-point increase in adjusted gross margins to 51.1% and a 270-basis-point improvement in adjusted operating margins to 23.2%, which also reflected efforts to enhance productivity.
Amazon (AMZN) continues to stake its claim to one of the widest economic moats in the consumer space. There were few negatives from the third quarter–strong active users (up 13% to 294 million) and top-line growth (23%, or 30% on a constant currency basis) imply market share gains and validate the powerful network effect inherent in Amazon's core commerce platform, while Amazon Web Services' impressive revenue growth (78%), segment margins (25%), and new services introduced at the re:Invent conference underscore the long-term cash flow potential of this disruptive business unit.
Alphabet (GOOG) (GOOGL) posted third-quarter results that were modestly ahead of Morningstar's internal forecast, and mostly in line with its investment thesis tied to several themes including expanding operating margins, success in mobile advertising, and appropriate capital allocation. Management is clearly trying to communicate a more coherent message about its capital allocation strategy, as the company announced a plan to return more than $5 billion back to shareholders through a share buyback. Revenue growth and margins across Alphabet's primary advertising ("Google") businesses were solid, as revenue grew 13% (23% on a constant currency basis), while operating margins improved 300 basis points to 25.2% after adjusting for a nonrecurring impairment charge in 2014.
Shares of Microsoft (MSFT) jumped after the firm reported better-than-expected results. The firm reported strength in its cloud business in the period, while the company continued to see pressures in its phone handset business. On an adjusted basis, earnings in the quarter were 67 cents per share, well above the 59 cents per share expected by economists.
European markets were higher after the Chinese central bank move.
The FTSE 100, French CAC 40 and Germany's DAX were up 1.1%, 2.5% and 2.9%, respectively.
Asian markets were also up on the day.
The Shanghai Composite and Hang Seng were each around 1.3% higher, while the Nikkei 225 rose 2.1%. India's Sensex was up 0.7%.
Australian Market Report – Local Market Expected To Open Higher
Ahead of the local open, SPI futures were 55 points higher at 5,378.
Friday 23 October – close. The Australian market started the day strong as local investors were impressed with the European Central Bank's indication of further economic stimulus. Local stocks hovered at the day's highs, with consumer and resource stocks leading the way up along with the big four lenders. All sectors performed positively. The Australian dollar appreciated against most major currencies.
The All Ordinaries jumped 88.50 points to 5,388.10 while the S&P/ASX 200 rose 87.80 points to 5,351.60.
Caltex Australia (CTX)
Caltex Australia advised its realised lagged Caltex Refiner Margin (CRM), in respect of CRM sales from production for the month of September 2015. The September unlagged CRM was US$18.05/bbl, this is slightly below the prior month but above the prior year equivalent. The unlagged Caltex Singapore Weighted Average Margin was US$14.48/bbl, below the prior month but above the prior year. Higher Brent prices and higher petrol and diesel refiner margins in the week commencing from 28 September 2015 drove an unfavourable US ($0.77)/bbl pricing lag. Sales from production in September 2015 were below the prior year equivalent when both Lytton and Kurnell refineries were operating, but continue the strong production performance in the preceding month. CTX added 9 cents to $31.79.
Qantas Airways (QAN)
Qantas Airways Chairman addressed to shareholders by stating that the Co. has strongly performed in financial year 2015. The key components of the performance were an underlying PBT of $975m, a statutory PAT of $560m, return on invested capital of 16% and EPS of 25.4cps. Rapid progress with the Co's transformation program drove a $1.6bn turnaround in underlying profit compared with financial year 2014. The Chairman gave credit to employees for their hard work and commitment to build a strong future of the Co. The Chairman also thanked shareholders for the patient and support. The Co. earned customer satisfaction in the domestic and international markets. The Co's management took steps to pay down debt, diversify sources of liquidity and lower the Group's cost of capital. QAN remained unchanged at $3.86.
In This Issue
Evolution (EVN) | HOLD
Evolution Mining’s (EVN) strong September Q performance of 174koz @ all-in cost of A$1,015/oz (previously released) exceeded Argonaut’s expectation. Although we recognise higher capex spend in H2 at Cowal and a stockpile adjustment of -A$221/oz, the AIC of A$529/oz during the September Q is a positive surprise and likely to result in reduced group AIC guidance for FY16. Factoring this Q’s performance, particularly at Cowal, increases our valuation to A$1.35 (was A$1.25). HOLD maintained given the recent strong share price performance.
St Barbara (SBM) | BUY
Evolution Mining’s (EVN) strong September Q performance of 174koz @ all-in cost of A$1,015/oz (previously released) exceeded Argonaut’s expectation. Although we recognise higher capex spend in H2 at Cowal and a stockpile adjustment of -A$221/oz, the AIC of A$529/oz during the September Q is a positive surprise and likely to result in reduced group AIC guidance for FY16. Factoring this Q’s performance, particularly at Cowal, increases our valuation to A$1.35 (was A$1.25). HOLD maintained given the recent strong share price performance.
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