Australian Markets Weekly Wrap

Provided by The Australian Investor

Saturday 18th August 2001

This week, like the week before, was marked by negative receptions for good data and improved profits. American markets declined led by tech stocks, as investors punished companies that missed their profit forecasts. Europe seems finally to have decided it too might be slowing, something which must have been apparent to investors in the stock market of the leading European economy, Germany. Its XETRA DAX stock market index has declined 2,093.15 points or 28.61 per cent since the 17th of August last year, when its was trading at around 800 points above Britain's FTSE 100 - it closed yesterday 120 points below it.

With the picture from America still not clear enough, Japan in recession and Europe, which was expected to be the engine to keep global economic growth on track, admitting it too might be slowing, local investors weren't in the mood to celebrate, so the punishment of all and sundry stocks continued here.

From last Friday's close, the S&P/ASX 200 eased 70.9 or 2.1 per cent to 3,330.4 and the All Ordinaries eased 68.5 or two per cent to 3,275.4 over the course of last week.

On Monday the Reserve Bank announced that it was focused on long-term inflation rather than the shorter term, and that inflation could reach or exceed its top target of three per cent. The market took this as an indication another interest rate cut is unlikely.

The day also gave the market its first chance to respond to weekend reports ERG had won the Sydney Transit contract, and its shares surged, ending the week up 17c at 99c.

Westfield reported profit of $169.1 million, up 14 per cent, and it closed the week down 8.3c at WSF$14.50.

Seven and PMP finally finalised their deal. Seven ended the week down 15c at $7.17 and PMP at 54c, up 5.5c.

Australian Worldwide announced a wildcat gas discovery and ended the week steady at 53c.

Software Communications (Sofcom) reported a loss of $11.2 million and ended the week up 2c at 9c.

Hills Industries made a net profit of $22.77 million and over the week, its shares rose 2c to $2.96.

James Hardie reported a much reduced quarterly profit, down 92 per cent at $3.4 million. Its shares dropped 50c from last Friday to $5.40.

Paperlinx made $105.6 million, and ended the week down 6.6c at PPX $4.194.

On Tuesday , Dun & Bradstreet released the results of a survey of businesses showing prospects for growth in the December quarter are very strong.

The National Australia Bank reported its survey of businesses, and that too suggested economic growth should be much faster over the next six to nine months.

Telecom New Zealand reported a reduced net profit and ended the week down 9c at $4.19.

APN News and Media just managed to increase profit, hitting $22.1 million, and ended the week up 3c at $4.05.

Bristile increased profit by 53 per cent and ended the week up 14c at $2.39.

Suncorp Metway increased profit 18 per cent to $395 million, but disappointed analysts, and ended the week down $1.67 at $13.68.

Aristocrat increased its interim profit by 16 per cent to $31.6 million and ended the week up 40c at $7.07.

WMC reported a profit of $274.3 million, down 32 per cent, and fell 53c to $7.77.

In the US, retail sales in June were flat, better than the 0.1 per cent decline that was expected, and if motor vehicle sales are excluded, sales rose by 0.2 per cent, as predicted. The price of petrol in the US declined by 4.2 per cent in the period, and once both petrol sales and motor vehicles are excluded, sales increased by 0.6 per cent. As the US economy is supported by strong consumer demand, that increase, the largest since the start of the year, is good news.

On Wednesday , the Bureau of Statistics reported total hourly rates of pay excluding bonuses were up 0.6 per cent in the June quarter and 3.7 per cent for the year, suggesting the slowing economy cooled wage increases in the March and June quarters.

The Westpac Melbourne Institute Leading Index of Economic Activity, is another set of data suggesting growth in the next few quarters should be strong and exceed the long-term trend.

Futuris increased net profit by seven per cent to $80 million, and ended the week down 66c at $1.87.

Austar reported a loss of $196.1 million in the June half, and ended the week down 5.5c at 45.5c.

Simsmetal made $40.9 million for the year and rose 17c over the week to $5.85.

Sons of Gwalia increased net profit nine per cent to $63.7 million, and its dropped 27c over the week to $7.40.

Keycorp lost $42.75 million in the June half and ended the week up 11c at $1.25, with most of the increase happening Friday.

In the US, June business inventories declined more rapidly than expected and industrial production declined less rapidly, while capacity utilisation increased faster then predicted. Taken together, and allowing for the confusing nature of economic data coming out of the US for the last few months, the data suggest demand for manufactured has stopped sliding and is about to increase.

Thursday , the Bureau of Statistics announced average weekly ordinary time earnings rose 5.3 per cent in the year to May and 2.2 per cent in the May quarter, but the result was dismissed by economists as indicating little of consequence for interest rates or inflation.

Major companies announcing their results included Qantas, which failed to impress and over the week fell 40c to $2.88.

Lend Lease also failed to impress on the day and by the close of trade Friday, had fallen 36.3c to $11.617.

Leighton Holdings reported an impressive improvement in profit and it rose 10c over the week to $9.95.

Woodside reported a record interim profit and over the week, its shares fell 37.3c to $14.027.

Pacific Dunlop disappointed but offered hopeful news about its divestment program and ended the week steady at 80c.

Coles Myer finally found a CEO, to market acclaim, and reported increased annual sales and its shares rose 72.7c to $7.276.

Baycorp and Data Advantage also announced their results. Baycorp ended the week up 5c at $11.05 and Data ended up 30c at $7.35.

In the US, the consumer price index for July was down 0.3 per cent, but if food were excluded, the result was an increase of 0.2 per cent. Energy prices take most of the credit for the decline in the headline rate, only the second in 15 years.

Weekly initial unemployment claims dropped 8,000 rather than rising 5,000 to 393,000 as forecast.

July housing starts rose 2.8 per cent, faster than expected and reaching their highest level for more than a year and a half.

The Philadelphia Federal index was more than three times worse than expected, hitting negative 23.5.

On Friday , News Corp reported an operating loss of $746 million for the year, but operating profit was $3.1 billion, and by Friday's close, was $17.12, down $1.753.

TAB lifted net profit 9.6 per cent to $73.3 million and ended the week at $2.73, down 16.3c.

Optus warned that first-half profit would be affected by write-offs totalling $100 million and gained 6c to $3.64 over the week.

Envirostar Energy lost $1.235 million for the year, and fell 7c to 53c over the week.

RMG lost $10.7 million of the half, and gained 0.5c to close the week at 285c.

In the US, the trade deficit for June was slightly below consensus forecasts at $29.41 billion.

The University of Michigan consumer sentiment index was up 1.3 points at 93.5 for August, indicating that consumer demand, the support that has helped the US economy through this latest slowdown, will continue to buoy production and sales.

Aussie Dollar

The Aussie dollar gained 0.9 cents US over the week - from last Friday's 51.5 US cents it reached 52.4 US cents by 4.00 pm yesterday.

SPI

The September contract finished the week at 3,330, down 72 points.

Industrials

The S&P/ASX 200 Industrials index dropper 119.2 for the week to 5,792.2.

Resources

The S&P/ASX Resources index dropped 36.4 points over the week to close at 1,400.6.

Banks

The Bank Index closed the week down 132.1 points at 8,987.1.

Gold

The Gold Index closed the week down 14.6 points at 789.

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