The Federal Budget dominates business and economics this week in Australia, while in the US it will be inflation and new house starts as well as surging oil prices tat will shape sentiment.
The AMP’s Dr Shane Oliver reckons the budget surplus will be at least $20 billion (or 1.7% of GDP), while the income tax cuts promised by the ALP in the 2007 election campaign, plus cuts and changes to welfare spending will also be highlights.
As well he’s expecting increased spending on education, training and infrastructure including the establishment of the Building Australia Fund, cutbacks in middle class welfare, tax increases on alcohol and cigarettes and public service cutbacks.
“In an environment of increasing economic uncertainty and growing pressure on households an aggressive tightening in fiscal policy is unlikely and the income tax cuts may not be such a bad idea after all,” Dr Oliver said on Friday..
“The Budget is unlikely to alter the outlook for interest rates or have a major impact on financial markets, but it should help to develop Wayne Swan’s and the Government’s economic credentials.”
Of interest will be the government’s estimates/forecasts for employment. As the jobs figures for April showed, the employment market remains strong, with jobs growth of 2.9% in the year to April.
But the Reserve Bank now forecasting a sharp slow down in domestic economic activity (outside the rebounding rural sector), employment is expected to decline over the next two years and the unemployment rate will quite likely rise from April’s 4.2% to well over 5% in a year’s time.
The RBA said in its second quarter Monetary policy Statement on Friday that it is looking for non-farm economic growth to slow from about 4% to 1.75% year’s end - the slowest since the post GST days in 2001, and before that, the bad recession of the early1990s.
Inflation is forecast to fall back into the Reserve’s target - 2 to 3 per cent - but not until the second half of 2010, and even then it will very likely be on the high side of the range. Interest rates should remain on hold for months, or be pushed higher in the last quarter of this year if price pressures continue to rise.
It won’t cause the Reserve Bank to change its mind, but it is another statistic that will not lessen its heightened fears over inflation and possible wages breakouts.
The jobs market is strong, and fat wage deals being done in Victoria by the state government and a wages campaign being threatened by the state’s unions will only add to the Bank’s scepticism about inflationary pressures.
We know activity in the building and retailing sectors, traditionally two areas where the slowdown or the surges first show up, are easing. But we also know the booming resources industry is about to get a massive cash injection from higher prices, while rural Australia is possibly looking at its best season in three years.
So the bank would have been hoping for a sign that the slowdown had reached the labour market. It didn’t in April.
Today the RBA produces its second Monetary Policy Statement of the year: the first was hawkish on inflation and up to a month or so ago, this report would have been more relaxed. That’s now not as likely.
The latest figures from the Australian Bureau of Statistics show positive jobs growth in April.
But the slight rise in the unemployment rate to 4.2% from 4.1% in March was because more people were looking for work.
In fact the number of new jobs was more than double the market estimate: 25,000 vs. a 10,000 estimate: a sign the gathering slowdown has not hit employment or the ability of employers to keep hiring people.
It was the 18th consecutive month that we have seen a growth in jobs in Australia.
In March New Zealand Finance Minister Michael Cullen and the Bank of New Zealand forecast a possible recession.
Mr Cullen said he couldn’t rule out the possibility of a recession this year, while BNZ said the probability of two consecutive quarters of the economy going backwards - the classic definition of recession - was better than 50%, but it still expected economic growth of 1.4% for the year.
Mr Cullen said that any recession would be “shallow”; a “technical recession” he was quoted as saying. BNZ seemed to concur.
Almost two months later there’s a growing chance the predictions will turn out to be accurate.
With so much of the NZ economy dominated by Australian companies, there should be interest in what is happening across the Tasman in retailing (Woolworths and Harvey Norman), media (Fairfax and APN News), financial services (all four big banks), the likes of Coca Cola Amatil, car exporters and building products groups such as Boral, Fletcher and James Hardie.
A sharp drop in employment in the March quarter is the latest in a growing number of indicators signally a slowing economy across the Tasman.
Statistics New Zealand said yesterday that there was a fall of 29,000, or 1.3%, in seasonally adjusted employment in NZ in the March quarter to 2.14 million people.
(Australia added more than 25,000 jobs in April alone, to put that in some context.)
And over the year to the end of March, employment fell 5000, or 0.2%; Australia’s rose by around 2.9%, or close to 302,000.
In the wake of the jobs figures, NZ analysts now believe the chance of a cut in the country’s key interest rate, the Reserve Bank of NZ’s Official Cash Rate (OCR) could happen around September.
Oxiana’s Quarterly Financial Report.
0 Comments Published by strudy1 May 9th, 2008 in Daily Diary, MY PORTFOLIOThis quarterly report makes for good reading and is a foretaste of even greater things ahead.
oxi_qrtlyreport_march08.pdf
Spotless Group has gone a bit coy on its half a billion dollar takeover offer for Programmed Maintenance Services after seeing Programmed’s Target statement this week.
Spotless yesterday warned that it could let the offer lapse if Programmed’s audited full year earnings match the figure indicated in Programmed’s target’s statement.
In Programmed’s target’s statement, released Wednesday, the company indicated that earnings before interest (EBIT) for the full year to March 31, 2008, were forecast to be $53.5 million on an unaudited basis.
Programmed also forecast a net profit of $27.1 million for fiscal 2008.
But yesterday Spotless told the ASX that it “notes that its offer includes a condition that the consolidated EBIT of Programmed for the year ended 31 March 2008 is not less than $56 million, which was at the low end of broker forecasts before the offer was announced.”
“If Programmed’s actual audited results for the year ended 31 March 2008 are consistent with the unaudited forecast results, Spotless would be entitled to allow the offer to lapse.
“Spotless is disappointed with Programmed’s unaudited EBIT forecast for the year ended 31 March 2008 of $53.5 million, which is approximately 10 per cent below the median of broker forecasts of $59.6 million before the offer was announced.”
Spotless also said that Programmed had elected not to provide shareholders with an independent expert’s report on the value of the Programmed business.
Bollinger Band Squeezes.
0 Comments Published by strudy1 May 8th, 2008 in Daily Diary, Find Profitable Shares., Fundamental Analysis.This article was contributed by “Fabcat.” a new contributor from“Topstocks.
Topstocks are offering a “Free Pro” account for one month at no obligation to you whatsoever. You can get there by clicking on the link provided on the right hand side of this page.
Bollinger Bands.
If anyone is interested in Bollinger Bands, here is some info. from Julia Lee via ASX/Hubb:
_squeezes.htm com"> www.asx.com.au
Julia Lee from Hubb explains how Bollinger band squeezes indicate that a price is about to break out.
Bollinger bands measure periods of volatility.
There have been numerous studies done on volatility. These studies reach one important conclusion. Markets tend to move in cycles of high volatility and low volatility. Studies have shown that a period of high volatility is often preceded by a period of low volatility.
High volatility usually signals the end of a trend. Low volatility usually signals the calm before the storm or the calm before a breakout in the share price and the beginning of a trend.
Periods of high volatility are usually followed by a period of low volatility. Periods of low volatility are usually followed by a period of high volatility.
About Bollinger band squeezes.
Bollinger band squeezes happen when there is low volatility. It indicates when there is a balance between buyers and sellers. I call it the calm before the storm.
A Bollinger band squeeze usually indicates that the price is going to break out.
Visually, they are easy to identify. They occur when the upper and lower bands are close together. They are named the Bollinger band squeezes because visually, it looks as though the upper and lower bands are being squeezed together.
A Bollinger band squeeze indicates a period of low volatility.
The problem with Bollinger band squeezes is although they indicate a breakout, they give you no clues on the direction that the breakout will be. Hence, more information is required to make money from a squeeze.
Use in conjunction with …
Bollinger bands measure volatility and to get a complete view of the chart, I recommend that you also use a price and a volume indicator as well. Using Price, volatility and volume indicators means that you are getting signals based on different aspects of the market rather than using three indicators that measure the same thing.
Determining the direction of the breakout.
So you’ve seen a Bollinger band squeeze and you know that it means that the price will probably break out. How do you determine which direction that the break out will occur?
Professor John Bollinger suggests that in determining breakout, you look at it together with the Relative Strength Index and also with a volume indicator for confirmation.
I tend to use the Bollinger band squeezes together with volume and news released by the company on profitability.
No Beef Deal For FCL, ACC
Shares in Futuris Corporation and its 43% owned associate, the beef producer Australian Agricultural Company, fell sharply yesterday after Futuris’s announcement that it had terminated the process to sell its AACo stake
That was a decision which came as a surprise to investors and brokers, but not if you look at the accompanying story on the optimistic outlook for rural Australia, including beef farmers, from the Australian Bureau of Agricultural and Resource Economics.
Beef farmers are expecting a significant rise in returns and many will make a profit as the drought ends in some regions (especially Central and Northern Queensland).
But that information was missed by nervy investors who sold off Futruris shares by around 12% at one stage and AACo by about the same amount as well. Futuris (FCL) shares ended at $1.87, down 11.3% and AACo at $2.84, down 9.3%.
The CEO of Futuris, Les Wozniczka, called a conference call with analysts late yesterday to try and better explain the decision.
Futuris announced at its AGM, after the market had closed on Tuesday that it had terminated the sale process. Despite significant interest in the AACo stake, none of the proposals arising from the sale process had certainty of execution or timing.
Futuris also provided market guidance that underlying earnings before interest and tax for the 2008 full year would be at the upper end of analysts’ forecasts of $154 million to $183 million.
The company said full year underlying profit was expected to be around $100 million, depending upon continued good rainfall and sales of managed investment schemes.
That hoary market rumour of Oxiana being snapped by an acquisitive world major miner, like Xstrata, resurfaced late yesterday, sending the share price up by more than 7% or 24C.
Oxiana is about to enter a ‘merger of equals’ process with Zinifex that aims to produced a company with a combination valuation of $12 billion, give or take a dollar or two.
But a spoiler bid has been rumoured for some weeks, with some institutions in Oxiana and investment banks trying to unsettle the deal by bagging the zinc mining side of the deal: i.e. the valuation attached to Zinifex.
Whether a bid comes is another thing, but Oxiana itself was long a speculated candidate for merger talks and then a deal with a host of miners, including Zinifex.
Those talks came to fruition while the likes of Xstrata have continued to try and buy Australian coal assets (Pacific Resources), nickel and then had a failed attempt to merge with the world’s leading iron ore miner, Vale of Brazil (ex CVRD). Xstrata is also talking to Maccarthur Coal about a possible deal, but the talks have not progressed.
The rise in Oxiana shares in the afternoon was the largest since March 19 with 31.7 million shares were traded; almost double the stock’s daily average in the past six months.
Bloomberg said that Xstrata plans further acquisitions, according to a Swiss newspaper,, Finanz & Wirtschaft said yesterday, citing chief executive Mick Davis.
It was a less than stellar result from the Happy Dragon, St George Bank.
The country’s smallest ‘big’ bank experienced its first fall in profit in six years on higher bad debts, funding costs and a tax charge (that’s being disputed).
Net after tax profit including one off items fell 10% to $514 million in the six months ended March 31, from the $572 million earned in the first half of last financial year.
On a cash earnings basis though (which is preferred by the various banks), profit rose 6.2% to an all time high $603 million; but it was a record overshadowed by the detail in the profit announcement.
To make sure shareholders remained happy, interim dividend was boosted 6 cents a share to 88 cents, a payout ratio of a very high 81%.
And to try and encourage shareholders into taking shares instead of all cash dividends, a discount of 2.5% will be applied to shares taken in the dividend reinvestment program, another sign of a bank looking to minimise the cash outflow (As the ANZ has done with its DRP being underwritten to ensure it gets as much cash as possible).
And the global credit crunch, which is not going away, and associated stockmarket turmoil, which is easing from the high levels of earlier in the year, has forced St George Bank to cut its earnings forecast for the rest of this financial year from a 10% increase to one in a range of 8%-10%, so long as there are no ‘material one off’ events (such as a big company collapse it may be exposed to).
The bank had only reaffirmed its long standing 10% target in February, about six weeks from the end of the March half.
Now it says a $20 million credit loss on a margin loan and the slowing domestic economy will see its target for earnings per share growth drop to within a range of the 8% to 10%.
Atlas Pearls Declares Dividend and Progress Report.
0 Comments Published by strudy1 May 7th, 2008 in Daily Diary, MY PORTFOLIOHere is the latest information from Atlas Pearls (ATP) Which was issued today.
An interim dividend of 2 cents might not seem a lot but taken over the total year it equates to around 9.8% dividend fully franked. Which is a lot better than a lot of other stocks are currently paying.