** 14/02/11 - 8.53am - by James Gerrish**
-
US stocks climbed on Friday to a fresh 2.5 year closing high after the Egyptian President stepped down.
-
The DOW JONES added + 43 points or +0.36% to close at 12273.
-
In London the FTSE 100 was also positive adding +42 points or +0.71% to close at 6062
-
Commodities were pretty much weaker across the board in London especially Crude Oil which was sold down after tensions in Egypt improved - therefore no longer any threat of supply disruption up the Suez Canal.
-
Locally, SPI FUTURES are pricing in a rise of +39 points when trading kicks off this morning.
The market continues to pull away in the US with the index rallying strongly since December. We haven't been as bullish on the local market and this highlights our increasing focus on Asian markets. There has been a noticeable shift in trading action depending on what China is doing so we need to be more conscious of the Shanghai market.
Check the chart here of SSEC.
This market has been under pressure of late given the bias towards tightening monetary policy. Technically, I think we're starting to see some positive signs from Shanghai and this could be catalyst that we need to push to 5000. Personally, I think we'll get there however I’d be a little reluctant to start accumulating stocks for a longer term hold now. 5000 is a significant level and given the uninterrupted rally in the US, I'm looking to be a buyer into the next pullback rather than jumping on a trend that I think is towards its end. That doesn't stop us from being active on a short term basis and this is my preference for now.
Reporting season continues to be positive with RIO booking a pretty impressive result at the end of last week however a lot of the upside appeared to be priced in. The market was also looking for some more capital management initiatives such as a special dividend that didn’t occur. BHP reports this Wednesday and although we're all expecting a great result, the focus will be on capital management. When you look at these two stocks that produce substantial amounts of cash I think it’s pretty understandable that shareholders want more in the way of dividends.
Yes, I appreciate they are growth stocks however yields around the 2% mark is pretty light. We've seen that BHP has struggled to make any inroads in acquiring tier 1 growth assets so why not give some funds back to shareholders or at least invest more substantially in themselves. When you look at projected Return on Equity figures for 2011 which sit at 35%, it’s a pretty attractive investment particularly when it seems an uphill battle to acquire anything of significant size. If a more substantial capital management initiative is rolled out on Wednesday, including and material increase in dividends or a substantial share buy back program, the stock will rally.
In other company news, CBA Goes Ex-Divi today as does ALS, BKN, and RKN.
Companies of note to report today are Bendigo Bank, Leighton Holdings and Western Areas.
If you would like analyst reviews on any companies that have reported so far, please contact me directly.
