S&P 500 was down by 13.72 points or 0.74% to 1845.73 on Monday. U.S. stocks sank, tracking a global selloff in equities, as investors sought havens on concern that Russia’s military presence in Ukraine could lead to a larger conflict.  The S&P 500 extended declines after Ukraine said Russia’s navy ordered two of its ships in Crimea to surrender amid the worst standoff between the West and Russia since the end of the Cold War. Western diplomats are seeking to calm tensions in Ukraine, with U.S. Secretary of State John Kerry arriving in Kiev today.

US auto sales in February were more brisk than expected as hefty incentives lured customers into dealerships late in the month despite cold and snowy weather.  American manufacturing growth rebounded off an eight-month low in February, helped by a recovery in new orders. The Institute for Supply Management (ISM) said its index of national factory activity rose to 53.2 in February, up from January’s read of 51.3, which was the weakest reading since May 2013.


S&P Daily Chart (Thomson Reuters)

Crude prices rose more than $US2 a barrel, Gold futures jumped 2 per cent and top-rated euro zone government bonds surged as heightened tensions over Ukraine sent investors scrambling.  Gold surged 2 percent to a four-month high on Monday as escalating military tension between Ukraine and Russia bolstered demand for assets perceived to be relatively safe as investors sold riskier investments such as equities. Gold, which lost 28 percent of its value last year, benefited from knee-jerk buying on economic uncertainties as Russia's President Vladimir Putin's forces tightened their grip on the Russian-speaking Crimea region.


Daily Gold Chart

S&P ASX 200 was down 20.5 points or 0.38% and closed at 5384.30 points. Simon McKeon, the incoming chairman of AMP, claims no changes to the company's strategy are required to boost its lagging share price performance. National Australia Bankhas cut a range of fixed home loan interest rates, as competition in the mortgage market continues to heat up. Coca-Cola Amatil will pay former chief executive Terry Davis $150,000 a year for three years in exchange for him not working for competitors in Australia. In the year to December, the budget deficit stood at $26,957 million (around 1.7 per cent of GDP), the lowest calendar year deficit in five years. The government projects a deficit of $46,989 million in 2013-14. Australia’s largest lighting retailer, Beacon Lighting, has started meeting institutional investors ahead of the $141.9 million initial public offering slated for April.


ASX 200 Daily Chart (Source – Thomson Reuters)
 
 
 
 
The top gainers on ASX 200 were:-

Code	Name	Price	Change	%Change
MML	MEDUSA MINING LIMITED	$2.46	$0.29	13.36%
RSG	RESOLUTE MINING LIMITED	$0.67	$0.07	10.74%
BDR	BEADELL RESOURCES LIMITED	$0.84	$0.08	10.53%
NST	NORTHERN STAR RESOURCES LTD	$1.23	$0.08	6.96%
NCM	NEWCREST MINING LIMITED	$11.99	$0.65	5.73%

 
 
Stock of the Day – Australian Stock Exchange (ASX)
ASX operates Australia’s primary national securities exchange. The main operating activity is to provide a market for trading and pricing equities and derivatives (such as options, futures and warrants) and the clearing and settlement of ASX traded securities  and debt securities (such as government bonds).

ASX recorded positive revenue growth across all seven divisions in the first half fiscal 2014. New listings and increased trading activity across equities and derivatives underpinned solid group revenue growth of 8%.  Demand for non-volume related earnings such as market information and connectivity also get a lift from increased confidence and activity.

While the interim result reflects the firm’s near monopoly position in equity markets we support a number of initiatives and capital investments which should drive growth. Regulatory barriers to entry currently protect the derivatives and equities clearing and settlement business. The combination of clearing and exchange businesses also make the company’s products sticky with its customer base.


Source – ASX

While the entry of Chi-X is having an impact on trading revenues (5% of ASX group revenue), we see other revenue lines as possessing far greater competitive advantages. The National Stock Exchange is miniscule compared to ASX. Companies want to list where investors are and perhaps shy away from smaller exchanges in fear they will not be taken seriously with the investors. Brokers and software providers likewise have little incentive to incorporate smaller exchanges into their processes where there is little interest.


ASX Daily Chart (Source – Thomson Reuters)

Daily cash market trade volumes increased 22% in first half fiscal 2014, while the average daily value of on market trades was up 8.8%. We expect less initial public offering or IPO activity in the second half with the market digesting the recent influx of new listings and some investors being stung by some poor offerings. We like the ASX story but find the stock too expensive at $36.47. We will review the stock at a later date to take stock of any changes.

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