Calmer waters for global markets

Very quiet night for international markets; the US and Europe were basically unchanged as the macro hype of the last six to eight weeks slowed down.

This has given investors in both regions the chance to review third quarter earnings season. Results have been strong in the areas of new aged technology and leisure, mixed in the likes of banking, home wares and discretionary, and soft in the areas of building and construction.

These varied results can be seen in the movements of the share prices. Netflix last night jumped 9.2% overnight on the back of reporting a 300% increase on the corresponding period in the earnings per share line.

Year-to-date the company is up 307%, from $95 in January to $387 as of the close of business last night. The improvement is due to programmes such as House of Cards – which has seen TV demand exploding – coupled with its strong movie business.

Then there is Google which added 13% to its share price on Friday on stellar results that were released after market on Thursday.

To illustrate the demand for new aged tech stocks, Friday’s trading was its third biggest in its short 13 year history, the market cap it added to itself on Friday alone was bigger than 401 companies on the S&P 500 and in the process became the world’s largest company.

US banks have been mixed; Goldman Sachs took a 20% hit on the revenue line, seeing it fall back while JP Morgan booked the largest lawsuit hit in US corporate history, worth $13 billion. Citigroup and Wells Fargo continue to tick along as credit starts to flow.

Construction has also been mixed and the release of existing home sales illustrates this. Having been delayed due to the government shutdown, the figures were weaker than forecasted and compared to August figures were down 10,000 to 5.29 million for the month of September. This dragged on the likes of D.R Horton and other construction stocks.

The weak existing home sales data could be due to affordability as the mortgage rates at the time reached 4.54%, the highest in five years, on speculation the Fed would taper. It will be interesting to see what happened in October as the effects of the shutdown filter through and the fact that bond rates fell sharply, which saw mortgage rates fall as well.

Ahead of the Australian open

The biggest news today will be from BHP, iron ore production is expected to be a record, the shipment numbers from Port Headland suggest BHP is on its way to reaching company guidance. The figures are due out at 8:30 AEDT.

AGM season also continues today and the one to watch will be McMillian Shakespeare; expect shareholders to asked questions about the business model and how it can proof itself against external factors after a turbulent four months following the proposed changes to the fringe benefits tax system from the previous government. Tomorrow sees AGL on the soapbox, followed by Newcrest on Thursday. The word ‘remuneration’ will be all the rage at NCM’s AGM.  

Ahead of the open we are calling the ASX 200 up a solitary point to 5353 (+0.02%). I reiterate my call that the 5421 level (the 61.8% retracement of the 2007 high to the 2009 low) is a real possibility inside the next few weeks as the ASX closes in on the full year numbers from ANZ, NAB and Westpac.

With a week to go before we see ANZ’s numbers I expect history to repeat and for these three to rally into their results. CBA will be dragged with them and may test all-time highs, even with more fund managers questioning profitability and the possible housing bubble.

BHP’s ADR is suggesting the stock could jump 23 cents to $36.43 (+0.64%), however this will be determined by the results it releases at half eight. It will be a major driver for risk as a whole today and could see the ASX moving higher still.

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