KALIN®

Kalkine Daily - 06/03/2014

Mar 09, 2014

| Read Time :10 Mins

S&P 500 was down by 0.10 points or 0.01% to 1873.81 on Wednesday. U.S. stocks fluctuated after the Standard & Poor’s 500 index rallied the most this year to a record as investors assessed the Ukraine situation and weaker than estimated data on payrolls and services. U.S. private employers added fewer workers than expected in February and services sector growth hit a four-year low, the latest signs of the economic toll severe weather is taking.

We think Ukraine is certainly on the market’s radar screens and certainly still in the headlines. Markets are continuing to give a free pass to any weak economic data because of the weather. That could be the case for much of the data coming through in the recent weeks. Stocks will ignore the data if it’s bad and rally if the number is good. The Federal Reserve said the economy in most regions grew last month even as harsh winter weather impeded hiring, disrupted supply chains and kept customers away from stores and auto dealerships.

S&P 500 Daily Chart (Source – Thomson Reuters)

S&P ASX 200 was up 46 points or 0.85% and closed at 5446.20 points on Wednesday.Westpac Banking Corp’s new venture capital fund has taken an equity stake in Sydney-based peer-to-peer lender SocietyOne, in a deal that reflects the coming of age of online lending in Australia and the desire of the major banks to get closer to disruptive start-ups. Supermarket chain Coles is stepping up capital investment to drive a new phase of growth, unveiling plans to invest $1.1 billion over the next three years building 70 new supermarkets and creating more than 16,000 jobs. David Jones is expected to postpone merger talks with Myer Holdings for another two weeks until both department stores have released interim profit results.

Rex Minerals has raised $12.6 million in a two-tranche placement at 40¢ per share to institutional investors for working capital, ahead of a major financing and debt package later this year for its $850 million Hillside copper project in South Australia.

S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:-

Code	Name	Price	Change	%Change
PDN	PALADIN ENERGY LTD	$0.57	$0.06	11.88%
PNA	PANAUST LIMITED	$1.84	$0.10	5.76%
SRX	SIRTEX MEDICAL LIMITED	$15.68	$0.84	5.66%
SIR	SIRIUS RESOURCES NL	$2.51	$0.13	5.46%
CSR	CSR LIMITED	$3.25	$0.14	4.50%

Stock of the Day – Macquarie Group (MQG)

Macquarie group began trading in 1969 as Hill Samuel Australia, obtained its bank license in 1985 and listed in 1996. It is now internationally diversified and operating in corporate finance, treasury and commodities, equity markets and funds management. MQG pioneered the process of buying assets and rolling them into finds providing a captive client for the banking group. Most of these funds were dissolved demurring GFC with MQG yet to replace the lucrative income source.

MQG is more leveraged to equity markets activity than any of its global peers with over 35% of revenues directly linked to equity markets. Despite management’s cautiousness we see Macquarie benefitting from improving capital market conditions and a weaker Australian Dollar. As Macquarie derives two thirds of its earnings from off shore this should provide a boost to earnings.

Source - Macquarie Group

We view Macquarie as a market confidence stock with earnings outperformance leveraged to the global market conditions. A key risk to the stock is reversal in the US economic recovery and an disorderly unwind of quantitative easing by the US federal reserve potentially derailing investor and capital market confidence. We argue all of Macquarie’s divisions including the annuity style business would suffer as a result.

MQG Daily Chart (Source - Thomson Reuters)

The three capital markets businesses are still struggling with mixed trading conditions and subdued market activity. Capital and balance sheet funding remain strong and confirms the group’s longstanding financial conservatism. The earnings outlook guidance for Macquarie securities group and Macquarie capital is unchanged with both expected to be up on FY13. Both divisions are benefitting from the heightened activity in investment markets with key drivers being increased initial public offerings and transaction activity. We find the stock too expensive at current price and would review this again at a later date.

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