(WEDNESDAY 14TH DECEMBER - JAMES GERRISH - 7.30am)...The DOW JONES lost -66pts overnight while the S&P 500 fell -0.87%. European mkts were mixed (FTSE up +1.15%, German DAX off -0.19%, French CAC off -0.35%) while locally, the SPI FUTURES mkt is pricing a lower open off -12pts.
OVERSEAS MKTS;
Focus remained on the Bond mkts overnight while there was also comments by US Fed Treasurer Ben Benanke who was actually more positive on the US economy that usual. Looking at Benanke's comments, the mkt viewed them as a sign that further money printing and Quantitative Easing was a way off and like a kid who has just been told that he can't have Maccas now, that he can have it in a few months time, there was some obvious short term anger - prompting stocks to come back off earlier highs.
The mkt was actually up +126 at its best and down about -116 at its worst with selling corresponding with Benanke's speech.
I still think the Benanke put option is in place if needed, but the reality is US economic data is improving so its not needed at the moment.
On the Bond mkt, there was a successful sale of short-dated debt by the euro-zone's government bailout fund which shows investors seem more optimistic about the next phase of Europe's rescue project. The European Financial Stability Facility sold €1.972 billion of three-month treasury bills, opting to raise shorter-term funding after its 10-year bond sale in November struggled to receive adequate demand. It was the EFSF's first short-dated debt sale.
In addition, Spain and Belgium were able to sell their countries' debt at much lower yields than at previous auctions - another sign of easing concerns.
Italian debt continued to tick higher with the 10 year yield at 6.62%.
GOLD
We wrote a while back that we were negative gold short term largely on the back of a clear lack of near term inflationary pressures. We think that longer term inflation will be a major concern coupled with continued debasement of currencies and Gold will provide a good hedge, but where not there yet.
Technically, its now broken through support and is sitting just above the 200 day moving average. If you're still in Gold (physical that is), then its probably worth holding until it breaks the 200 day (around $1623) then if it does consider lightening. Technical downside target of $1400
ANYONE INTERESTED IN COAL SEAM GAS?? If so, its worth taking a look at the draft Energy White Paper put out by the Federal Govt yesterday - CLICK HERE - it gives the message that Australia will need to embrace CSG if we are to meet our rising energy demands. Good for the CSG industry that has been hammered by public negativity (thanks Alan Jones).
OUR MKT;
Lost ground yesterday and continues to be dictated by Euro Developments. To be honest, I'm getting a little bit sick of writing/discussing whats happening in Europe so we'll start to focus on some stock specific stories for the remainder of the week.
Super Retail Group (SUL)
Super Retail Group (SUL) has recently acquired Rebel Sport from private equity and we've now had a chance to look into the rationale behind the acquisition.
SUL is actually a stock we like and have held previously but the Rebel acquisition was somewhat of a concern. There is no doubt the stock has a strong history of earnings growth which we like and this has flowed through to rising payouts for investors as the charts below show.
When looking at the reasons behind the purchase, SUL believes Rebel lost its way in terms of effectively presenting and maintaining its position in the minds of consumers as the authority and leader in the sports/fitness category. SUL sees a large opportunity to extract greater share of wallet. Greater buying power, direct product sourcing, and superior supply chain and logistics infrastructure will lower costs, and increase Rebel's ability to respond to its market.
Although the progress on these aspects take time to occur and be shown in company performance, we note the strong track record in specialty retailing of SULs management and would argue that although this will ad greater risk to the company, the rewards (as in future growth) reflect the additional risk.
Given mkt conditions, we're probably not in any rush to buy SUL at this stage but its one we like, and will be looking to take a position in time
MODEL PORTFOLIO UPDATES
None this morning.
AUSTRALIAN DUAL LISTED STOCKS
In New York, News Corp fell by US$0.16 to US$17.70, equivalent to A$17.68, A$0.01 above its last close on the ASX.
ResMed fell by US$0.59 to US$24.05, equivalent to A$2.40, A$0.04 below its last close on the ASX.
In London, Rio Tinto rose 51.0 pence to £31.70, A$0.79 higher in Australian currency terms.
BHP-Billiton rose 4.5 pence to £19.02, A$0.07 higher in Australian currency terms.
Henderson Group Plc rose 0.8 pence to £1.08, A$0.01 higher in Australian currency terms.
