The Australian share market is trading lower after investors felt some disappointment over the latest moves by the US central bank to boost the US economy.
The US Federal Reserve has extended a program that aims to encourage borrowing and spending by reducing long-term interest rates as it cut its forecast for US growth.
But the Fed has said it was prepared to take more action if needed.
At 1200 AEST on Thursday, the benchmark S&P/ASX200 index was down 22.7 points, or 0.55 per cent, at 4,109.7 points, while the broader All Ordinaries index fell 21.9 points, or 0.52 per cent, to 4,154.9 points.
On the ASX 24, the June share price index futures contract, which expired at noon, was up 13 points at 4,142 with 10,974 contracts traded.
The September share price index futures contract was down 27 points at 4,066 points, 18,889 contracts traded.
OptionsXpress market analyst Ben Le Brun said investors were trying to make up their minds on what the latest Federal Reserve stimulus package meant for the US.
‘‘There might be some slightly disappointed investors and traders as well,’’ Mr Le Brun said. Mr Le Brun noted that the Federal Reserve had said that it stood ready to do more should economic conditions warrant it.
‘‘US markets are only four per cent off their 2012 highs at the moment, so that in itself tells you that conditions aren’t quite right for a full-blown package,’’ Mr Le Brun said.
On the local bourse, in the resources sector, global miner BHP Billiton lost 22 cents to $32.38, and Rio Tinto eased six cents to $57.66.
Among the major banks, ANZ was eight cents lower at $21.67, National Australia Bank reversed 18 cents to $23.27, Westpac dipped six cents to $21.14, and Commonwealth Bank slipped five cents to $52.04.
Surfwear company Billabong was in a trading halt as it launched a $225 million fund raising venture it says is vital for its future. Billabong last traded at $1.83.
Toy distributor Funtastic was also in a trading halt after it said it has raised up to $24.6 million to reduce bank debt and improve its gearing ratios. Funtastic last traded at 16 cents.
National turnover at 1211 AEST was 1.04 billion shares worth $4.07 billion, with 470 stocks down, 313 up and 352 unchanged.
On Wall Street on Wednesday, the Dow Jones Industrial Average closed 12.94 points, or 0.10 per cent, lower at 12,824.39 points.
Making news today
In economic news:
- Westpac ACCI survey of industrial trends
In company news:
- Australian Ethical Investments general meeting
- Echo Resources general meeting
- June 2012 share price index futures contract expires
- Ironbark capital - Record date
- CI Resources Ltd - Record date
- Fisher & Paykel Healthcare Corp - Record date
- Dicker Data Ltd - Ex Div Date
Analyst rating changes:
- Transfield Services raised to 'hold' at RBS
- Orica raised to 'strong buy' at BBY Ltd
- Consolidated Media Holdings kept on hold at Deutsche Bank
- Alumina still rated as 'neutral' at Citigroup despite doubts on earnings
Offhsore overnight
Bond markets
Spanish and Italian government bonds surged for a second day amid speculation European leaders are seeking ways to reduce the borrowing costs of the region’s lower-rated nations.
- Spain’s 10-year bond yield fell 30 basis points, or 0.30 percentage point, to 6.74%
- Italy’s 10-year debt dropped 15 basis points to 5.77%
- German 10-year bunds slid, sending yields to the highest in six weeks, rising eight basis points to 1.61%
Treasuries fell and US stocks fluctuated as investors weighed plans by the Federal Reserve to boost growth and prospects for stepped-up efforts by European leaders to fight the debt crisis. Crude oil tumbled.
- US 10-year yields climbed three basis points to 1.65%
United States
US stocks edged lower after the Federal Reserve acted to aid the fragile economy with stimulus measures that were in line with market expectations but went no further.
Key numbers:
- S&P500 lost 0.17% to 1355.69
- Dow Jones Industrial Avg lost 0.10% to 12,824.39
- Nasdaq Composite Index added 0.02% to 2930.45
Europe
European stock markets were mixed on Wednesday amid hopes the US Federal Reserve would announce more stimulus to boost the world's biggest economy and as a government emerged in crisis-struck Greece.
Key numbers:
- London's FTSE 100 added 0.64% to 5622.29
- In Frankfurt the DAX 30 added 0.45% to 6392.13
- In Paris the CAC 40 added 0.28% to 3126.52
Asia
Asian stocks rose, with the regional benchmark index heading for its highest close in a month, amid speculation the Federal Reserve will expand stimulus measures and after the Group of 20 leaders pledged to support economic growth and help overcome Europe’s debt crisis.
Key numbers:
- MSCI Asia Pacific Index added 1% to 116.95
- Japan’s Nikkei 225 added 1.11% to 8752.31
- Hong Kong’s Hang Seng added 0.53% to 19518.85
- China’s Shanghai composite lost 0.34% to 2292.88
How we fared yesterday
Australian shares rose slightly today on hopes the Federal Reserve will announce more stimulus measures for the struggling US economy, while locally News Ltd surprised with a takeover bid for ConsMedia.
The benchmark S&P/ASX200 index rose 9.1 points, or 0.2 per cent, to 4132.4, while the broader All Ordinaries index added 9.4 points, or 0.2 per cent, to 4176.8.
BusinessDay with agencies
Stocks Seesaw and Land Flat - Wall Street Journal
By JONATHAN CHENG
U.S. stocks finished a volatile day roughly where they started, as investors balanced positive developments in Europe against disappointment that the Federal Reserve held off on more aggressive action to juice the economy.
The Dow Jones Industrial Average finished down 12.94 points, or 0.10%, at 12824.39 after falling as many as 92 points intraday. The Standard & Poor's 500 index fell 2.29 points, or 0.17%, to 1355.69, to snap a four-day win streak. The Nasdaq Composite, meantime, inched up 0.69 points, or 0.02%, to 2930.45 to extend its winning streak to five days—the longest since January.
The day's gyrations came after the Fed said it would extend its "Operation Twist" stimulus measure through the end of the year. As part of the program, the central bank sells short-term Treasurys and buys longer-dated ones in an effort to keep long-term borrowing costs down. Prior to the announcement, Operation Twist was scheduled to end June 30.
But some investors had been looking for more, in particular a new commitment to bond buying in response to the U.S.'s exposure to the European debt crisis and fears of a slowing economic recovery in the U.S.
The Fed committee members said in the statement that they were "prepared to take further action" if needed. The Fed has said since January that it plans to keep short-term interest rates at "exceptionally low levels" at least through late 2014.
"If you look at what most economists were saying, it was unlikely that we were going to get any more than Operation Twist, but the market may have been expecting more dramatic action," says Maury Fertig, chief investment officer at Relative Value Partners.
Mr. Fertig said the recent rally had been fueled by hopes for a third round of direct bond buying by the Fed, known on Wall Street as QE3. "There's a mild level of disappointment that there wasn't QE3, though the Fed has to save some bullets and see what happens in the next six weeks before their next meeting," he said.
Yields on longer-term U.S. Treasurys initially fell after the Fed announcement, as investors factored in more purchases of securities by the central bank. The yield on the benchmark 10-year note finished the day at 1.640%, compared with about 1.67% prior to the Fed statement.
Gold pared its earlier losses, shedding 0.5% to settle at $1614.80 a troy ounce. Crude oil futures fell 2.7% to $81.80 a barrel, the lowest level since October, after government inventory numbers showed a larger-than-expected build-up in crude reserves. The dollar moved higher against many of its rivals, including the yen, though it lost ground to the euro.
Consumer-staple stocks pulled the major benchmarks down. Leading the decline was Procter & Gamble, which tumbled $1.82, or 2.9%, to $60.39 to lead the Dow decliners after the blue-chip consumer products company lowered its earnings outlook. Leading on the positive side were financial stocks, as J. P. Morgan Chase rose 1.02, or 3%, to 36.45 a share.
Prior to the Fed announcement, European markets finished broadly higher, with the Stoxx Europe 600 ending 0.6% higher after Greece's conservative New Democracy party secured a consensus for a coalition government with the Socialist Pasok party and the Democratic Left party.
In London, the minutes from the Bank of England's last policy meeting showed the central bank was close to pumping more stimulus in the U.K. economy. Also, data showed job growth in the U.K. in April reached its highest level in more than three years. The FTSE 100 index rose 0.6% to hit a six-week high.
Asian shares were mixed early Thursday. Japan's Nikkei stock average was up 0.9%, helped by a weaker yen but Australia's ASX S&P index and South Korea's Kospi were both 0.4% lower.
Printed in The Wall Street Journal, page C4A version of this article appeared June 21, 2012, on page C4 in the U.S. edition of The Wall Street Journal, with the headline: Stocks Seesaw and Land Flat.
China’s Stocks Fall to 3-Month Low on Global Growth Concerns - Bloomberg
China’s stocks fell, dragging the benchmark index to the lowest level in three months, after a report showed China’s manufacturing may shrink for an eighth month in June and the U.S. cut its economic growth estimates.
Jiangxi Copper Co. and China Shenhua Energy Co. the biggest copper and coal producers, declined at least 2 percent on concern demand for commodities will slow. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. fell after the 21st Century Business Herald said the four biggest lenders saw net deposits decline by a combined 460 billion yuan ($72 billion) in the first two weeks of this month.
The Shanghai Composite Index (SHCOMP) lost 35.3 points, or 1.5 percent, to 2,257.59 at 1:08 p.m., set for the lowest close since March 29 and a weekly decline as financial markets are closed tomorrow for a holiday. The CSI 300 Index (SHSZ300) slid 1.8 percent to 2,506.82. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, fell 0.9 percent in New York.
“Investors have accepted the fact that the economy is going to be bad and stimulus measures will be slow,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “There’s little impetus to enter the market so stocks will be dragged down in the near term.”
Concerns that a growth slowdown is deepening and Greece will leave the euro area have pushed the Shanghai index down 8.3 percent from this year’s high set on March 2. It’s up 2.6 percent for the year.
China’s manufacturing may contract in June, matching the streak during the global financial crisis in a signal the government’s stimulus has yet to reverse the economy’s slowdown.
U.S. Outlook
The 48.1 preliminary reading for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compares with a final 48.4 for May. A reading above 50 indicates expansion. If confirmed on July 2, it would equal the run of below-50 readings from August 2008 to March 2009.
A gauge of energy producers in the CSI 300 slid 2.8 percent, the most among 10 industry groups. The materials measure lost 2.2 percent. Shenhua Energy fell 2.1 percent to 23.43 yuan. PetroChina Co., the biggest energy producer, slumped 1.2 percent to 9.15 yuan. Jiangxi Copper declined 3.5 percent to 24.36 yuan.
The U.S. central bank cut its estimates for growth and said it sees little progress on unemployment during the rest of the year. The Federal Reserve lowered its estimate for 2012 gross domestic product growth to 1.9 percent to 2.4 percent, from 2.4 percent to 2.9 percent in April.
Banks Drop
The Fed will expand its Operation Twist program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012. That “should put downward pressure on longer- term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said.
Chinese banks’ borrowing costs rose for a third week, the longest stretch in 2012, as a funding squeeze fanned speculation policy makers will relax lenders’ reserve requirements. Shibor, for 1-month yuan loans, climbed 51 basis points in June to 3.48 percent, after 5 months of declines caused by monetary easing.
Industrial Bank Co. retreated 1.5 percent to 12.77 yuan. China Merchants Bank Co. declined 1.2 percent to 10.90 yuan. ICBC, the biggest lender, slid 0.5 percent to 3.92 yuan, while China Construction Bank lost 0.9 percent to 4.49 yuan. The two lenders along with Bank of China Ltd. and Agricultural Bank of China Ltd. saw net deposits drop by a combined 460 billion yuan in the first two weeks of June, the 21st Century Business Herald reported, citing an unidentified lender.
QFII Reform
The government will cut the minimum requirement on assets under management to $500 million from $5 billion for companies seeking a license under the Qualified Foreign Institutional Investor program, the China Securities Regulatory Commission said in a statement on its website yesterday. The regulator also said it will allow them to invest in the country’s interbank bond market.
The iShares FTSE China 25 Index Fund (FXI), the biggest U.S.- listed China exchange-traded fund, lost 0.3 percent to $33.94, snapping a six-day rally.
“The sentiment is pretty low right now,” Kevin Shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in Purchase, New Work, said by phone yesterday. “Chinese policy makers really need to do something to help the economy rebound. They’ve been too cautious and they should be aggressive right now.”
To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
These 10 Stocks Are Ridiculously Cheap - istockAnalyst.com (press release)
But that's not how the market works.
From day to day, overvalued stocks can climb yet higher, while undervalued stocks can fall and fall. Some of them fall so much that they move far below any logical, rational level. I'm talking about stocks that are valued well below the tangible book value that can be found on the company's balance sheet.
These stocks can stay "below book" for awhile, as many stocks did throughout 2002 and again in 2009. But eventually logic prevails.
Well, 2012 brings us another trove of "below book" value plays. I found more than 100 companies out of the 1,500 that are in the S&P 400, 500 and 600 that trade below tangible book value.
To narrow the list, I am looking at stocks that trade for less than 80% of tangible book, have seen their book value rise in each of the past three years (meaning they are actually adding value to the company), and should see book value rise even more in 2012 and 2013 because they are expected to remain profitable.
I found 20 stocks that fit the bill, and fully half of them are insurers.
Why are these insurance stocks so cheap? Because interest rates are so low and they can't generate their historical levels of profit margins. Still, all of these insurers saw book value rise, even in the last downturn, and should keep raising book value as expected profits fatten up the balance sheet even more.
You'll find another 10 deeply undervalued stocks in this table.
I've got two personal favorites here. The first is tech distributor Ingram Micro (NYSE: IM), which will admittedly never be a richly-valued stock due to its low growth and skimpy profit margins. This stock has often traded between 95% and 100% of tangible book value, however, which is why it's so appealing right now. A move back the midpoint of that range implies roughly 25% upside, and that low book value measure implies little downside. Moreover, analysts expect Ingram Micro to earn roughly $4 a share over the next 24 months, implying that tangible book value may end up around $25 a share by the end of 2013.
The forgotten upstart
A decade ago, consumers were buzzing about a new airline service called JetBlue (Nasdaq: JBLU). Consumers gave the carrier very high marks, and investors loved the fact that it had a brand new fleet of fuel-efficient airplanes. Back in 2003, this was one of the hottest stocks in the market, briefly touching $30. These days, the stock is down to $5.
What went wrong? In a nutshell, other carriers improved their operations, closing the gaps of operational efficiency and customer loyalty. And those new JetBlue planes are now a bit older and now require more maintenance than before. Still, the stock doesn't deserve to be THIS cheap. Investors are overlooking the fact that JetBlue has never generated an operating loss in its history, has a strong presence in the coveted Eastern seaboard, and is still in growth mode. Sales are expected to rise 7% in 2013, while earnings are expected to rise 25% to around $0.70 per share. Not bad for a $5 stock.
A still-strong brand, lean cost structure and valuable set of assets is why some have speculated JetBlue will end up as takeout fodder in an industry that continues to consolidate. Regardless, trading well below tangible book value, it's hard to see how shares can fall much further from here.
Risks to Consider: Even as investors have few reasons to sell these deep value stocks, it may take a firmer economy before buyers step in.
Action to Take --> You should look into this list further. Even as these stocks offer tangible downside protection, they could rebound just as sharply as higher-beta stocks, giving them a nice blend of offensive and defensive characteristics.
-- David Sterman
This article originally appeared on StreetAuthority
Author: David Sterman
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