Australian Markets Weekly Wrap

Provided by The Australian Investor

Saturday 4th August 2001

Despite some disappointing profit results, and some warnings about the prospects for companies in the next six to twelve months, good data in this country seems to be making investors more and more confident, and over the week major indices rallied, though by Friday, they'd run out of puff a little. Reactions to warnings and poor profit performances seem to be becoming more muted and less extreme, a good omen for a return to more balanced conditions on the exchange.

From last Friday's close, the S&P/ASX 200 leapt 105.4 to 3,402.5 and the All Ordinaries jumped 99.8 to 3,345.3 over the course of last week.

Monday brought the first good data for the week: our trade balance was in surplus to the sum of %537 million in June, maintaining a string of trade surpluses now five months long and helping support strong local economic growth.

Mosaic Oil announced that it was working on the 900 metre oil column in its Spring Grove field, and ended the week up 1.5c at 23.5c.

Lihir announced it was on track to beat its targets for the year and by the end of the week it was down 2c at 88c.

Elders Rural Bank reported its first profit, and over the week, Futuris Corp rose 10c to $2.53 and Bendigo Bank fell 19c to $6.41.

Melbourne IT reported a profit, and after falling from grace last year, its week was up 1c at 57c.

GUD reported a profit marginally below last year's and lost 1c over the week to $1.82.

Australian Plantation Timber entered voluntary receivership, the first, and some fear not the last casualty of increased ATO scrutiny of timber schemes scaring away investors.

On Tuesday , the Bureau of Statistics advised that housing approvals continued to rise in June, with the result exceeding analysts' forecasts.

The Reserve Bank announced that private sector credit continued to rise in June, as did M3 and Broad Money, all indicating the economy continues to grow.

BHP lodged its quarterly production report, showing serious increases in production of just about every one of its commodities except oil and condensate, and ended the week up 50c at $9.99.

Pacifica's profit was down by more then 11 percent, and its shares fell 21c to $3.82 over the week.

Plaspak lifted sales and profit and ended up 4c at 70c.

Paperlinx sold its Australian Paper Plantations to focus on its core manufacturing activities, and ended the week at $4.071, up 8.1c.

Hardman Resources advised the Courbine 1A well was dry, and by the end of the week its shares were down 31.5c at 43.5c and Woodside's fell 18c to $14.60.

Origin Energy reported a solid June quarter and ended the week up 54.8c at $3.028.

In the US, a slew of official data gave investors something to think about, and they seem to have decided the news was good: US markets ended the day up. US Conference Board consumer confidence fell slightly, but the fall was all in consumers' views of their present situations rather than future expectations, suggesting future consumer spending might not be affected at all. American investors took the punt that interest rates will be cut the at the next meeting of the Federal Open Markets Committee.

They were also more confident about the future of the labour market. The Conference Board suggested further falls were unlikely.

The Chicago Purchasing Managers Index, an indicator of economic activity, fell in July, and the 'new orders' component declined even more steeply. The 'prices paid' index also declined.

June personal income climbed 0.3 percent and June personal consumption rose 0.4 percent, both exceeding the consensus forecast rate of 0.2 percent. Part of that rise in consumption was caused by rising purchases of cars, which in turn pushed up durable goods orders. Personal savings as a percentage of disposable income fell to 1.1 percent from the May's 1.2 percent.

All numbers taken together indicated to investors that another interest rate cut in the US might come sooner rather than later, which set investors to buying.

On Wednesday , the Bureau of Statistics advised retail trade in June rose 1.1 percent form May, beating forecasts and making economists revise their forecasts for December half GDP upwards.

United Energy reported its profit for the half-year was down 63 percent and by the close on Friday, its shares were up 36c at $2.74.

Santos and Petroz had more bad news about the oil and gas sector: the partners in the Bayu-Undan Project in the Timor Sea have decided unanimously to postpone indefinitely the construction of the pipeline to Darwin. By the end of the week, Santos shares were up 23c at $6.38.

James Hardie revealed it had completed an overnight book build at $5.75, and fell below tha for the day, and ended the week down 38c at HAH $5.66.

WMC sold its Australian talc mine to Rio Tinto. WMC ended the weekdown10c at $8.71.

Seven Network and PMP announced they had completed due diligence, and thrashed out the terms of their partnership, scotching rumours. Seven rose 10c to $7.65 over the course of the week and PMP fell 1.5c to 49.5c.

Anaconda's Murrin Murrin is approaching design rates and capacity, and it has cash on hand and at the bank of more than $140 million, and it ended the week up 7c at $1.29.

In the US, the National Association of Purchasing Management Index for July was another indication of the problems with American manufacturing: it was down again, as it has been now for every month is the last year, hitting 43.6 percent. The inventory component of the Index is at its lowest level for nineteen years, indicating that businesses will have to be renewing orders to rebuild stocks sooner rather than later.

US Construction spending fell 0.7 percent in June, 1.1 percent below expectations.

Thursday ,

Corporate Express announced good results, with profit up 28 percent to $15.3 million. Its shares closed on Friday at $4.90, up 8c.

After the market closed Rio Tinto announced its annual results: a net profit of more than $1.6 billion, up 24 percent. Its concerns about market conditions for its metals in this half saw its shares punished Friday, and it ended the week up 83.9c at $33.519.

Westfield America reported good profit growth and ended the week steady at $1.74.

BridgeDFS also reported that its results beat forecasts, and closed steady for the week at $2.40.

On Thursday in Britain, the Bank of England cut interest rates one quarter of a percent to five percent, and the European Central Bank left rates unchanged at 4.5 percent.

In the US, the economic news was mixed. New unemployment claims fell 23,000 to 346,000, the lowest they've been since the middle of February.

June US factory orders dropped 2.4, six times the consensus forecast rate

On Friday , the flow of announcements slowed to a trivkle.

Newcrest Mining announced the latest resource estimate for Cadia Far East and ended the week down 3c at $4.30.

Keycorp got another order for its terminals from National Australia Bank and over the week it fell 15c to $1.25.

Nufarm continues to consolidate its position in the crop protection products market and by the end of the week up 6c at $2.87.

In the US on Friday, unemployment data for July showed a higher-then-expected fall of 42,000 but the unemployment rate was steady at 4.5, a lower rate than forecast. The rate of decline in manufacturing sector employment is slowing: July's fall of 49,000 was the smallest since December. An unemployment rate of 4.5 percent in just 0.6 percent above the cycle's low last year, but voluntary unemployment is declining sharply.

The data by themselves are not likely to affect the US Federal Reserve Bank's next decision on interest rates.

The National Association of Purchasing Management's non-manufacturing index for July was down from June's 51.2 percent at 48.9 percent, a decline rather than the expected rise.

The decline in payrolls in June was revised from 114,000 to 93,000.

Aussie Dollar

The Aussie dollar gained almost one US cent over the week - from last Friday's 50.84 US cents it reached 51.8 US cents by 4.00 pm yesterday.

SPI

The September contract finished the week at 3,419, up 117 points.

Industrials

The S&P/ASX 200 Industrials index gained 192.4 for the week to 5,880.5.

Resources

The S&P/ASX Resources index gained 28.3 points over the week to close at 1,489.9.

Banks

The Bank Index closed the week up 352.2 points at 8,952.

Gold

The Gold Index closed the week down 9.6 points at 792.5.

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