The Market is up 14 points. The Dow Jones was up 69 points at 16,676 — the market rose on the open and drifted lower before some strength later in the day, supported by good economic data and corporate activity. Small cap and “momentum” stocks were strong performers and the best performing sector was Financials. Telcos underperformed and materials lagged on weak gold and silver prices. Volume was below average but above pre-holiday levels and the market traded in an 81 point range.

The S&P was up 11 points to 1912, a new record closing high.

US economic data was better than expected — Durable goods order rose 0.8% in April compared to expectations of a 0.7% fall. The S&P/Case-Shiller index of house prices rose 1.2%, above expectations and consumer confidence also beat expectations at 83.

Corporate Activity — Pfizer said it had abandoned its buyout offer for AstraZeneca. Pilgrim’s Pride offered to buy Hillshire Brands, whose shares rose 20%.

US bond markets were stronger — The 10 year bond yield fell two basis points to 2.515% despite stronger economic data. The strength was attributed to mounting geopolitical tension in the South China Sea between China and Vietnam and disappointing non-defence capital goods orders ex-aircraft (seen as a proxy for business investment).

European share markets were stronger — The German DAX rose 0.49%, the French CAC rose 0.06% and the UK FTSE rose 0.43%. Markets were boosted by comments from ECB President Mario Draghi suggesting the ECB would soon take action to address the risk of deflation.

The Aussie dollar was stronger and is currently trading at US92.61c.

Gold fell US$26.20 or 2.03% to US$1265.50 an ounce.

Base metals were mixed — Aluminium rose 0.65% and zinc rose 0.38% but nickel fell 0.28% and copper fell 0.05%.

Iron ore fell US$0.50 to US$98.10 a tonne.

Ex-dividend today — DuluxGroup (DLX) 10c, Aurora Div Income (AOD) 0.51c

STORIES

  • Australian Agricultural Company (AAC) — Has announced a loss of $39.9 million for the year ended March 31 2014 following poor seasonal conditions. Operating cash flow improvement of $21.2 million to $18.5 million. Sales of $316.8 million down $20.7 million.
  • Aristocrat Leisure (ALL) — First half Profit of $57.4 million up 9.2% on year which was in line with market expectations, mostly due to a lower Australian dollar and tax rate. Revenue up 7.6% but fell 2.2% in constant-currency terms. First half dividend 8c. They expect strong financial year net profit growth.
  • Stockland Group (SGP) & Australand (ALZ) — Has now offered 1.124 of its shares for every Australand share up from a previous offer of 1.111 of its shares. This gives an implied value of 435c a share up from 420c. The increased offer now values ALZ at $2.5 billion.
  • Drillsearch Energy (DLS) — Have announced their intention to make a conditional off-market takeover offer for Ambassador Oil and Gas.
  • Wesfarmers (WES) — Strategy Briefing Day Presentation. Near-Term outlook for coal looks challenging. Signs metallurgical coal market has reached its bottom.
  • Woolworths (WOW 3789c) — The AFR reports that Woolworths has asked UBS and Goldmans Sachs to review a possible listing of its hotel division, ALH Group. ALH runs 300 pubs but the new vehicle would be a listed landlord — only the freehold would be spun out into a separate entity containing around 100 pubs. The ALH group represent almost 10% of WOW’s EBIT and the listing could raise $600 million plus. The ALH Group is 25% owned by Bruce Mathieson. Woolworths followed a similar strategy in 2012 when it moved 75 neighbourhood style supermarkets into a separate real estate spin-off SCA Property Group (SCP).