S&P 500was up 0.6% to 1839.78. The main reason for the index to go up was a reading on manufacturing data hitting a four year high more than offsetting other soft data and weak results from Wal-Mart. U.S. factory activity accelerated at its fastest pace in nearly four years in February, according to Markit's preliminary U.S. Manufacturing Purchasing Managers Index, a bullish economic indicator following a string of weaker-than-expected reports. New filings for unemployment insurance fell in the latest week, boding well for the job market. China's flash Markit/HSBC Purchasing Managers' Index (PMI) fell to a seven-month low of 48.3 in February from January's final reading of 49.5, sparking a sell-off in Asian shares. A reading below 50 indicates a contraction while one above shows expansion.


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

Facebook is buying WhatsApp in a cash and stock deal which could cost it up to $19bn and see the social network enter the fast-growing chat app market.The Menlo Park-based social network will take over the app which boasts over 450m users, who use it to message without paying sms fees. Users of the app send almost as many messages as the number of sms sent over the entire global telecoms network. WhatsApp doesn’t collect information like name, gender, address or age. Instead, users are approved after their phone numbers are authenticated. The service became popular with friends and family communicating in different countries, especially in Europe because it circumvents the fees charged by phone carriers.


Source - Google Images

S&P ASX 200was up 0.08% to 5412.3. Australian shares pared early gains to end 0.08% percent higher on Thursday as strong company earnings were offset by a survey showing activity in China's factories shrank again in February as employment fell at the fastest pace in five years. The S&P/ASX 200 index added 4.1 points to 5,412.3 after hitting an intraday high of 5,441.5. The benchmark rose 0.3 percent on Wednesday and is currently sitting at three-month highs. Fairfax Media Ltd surged 23.08 percent to its highest price in over two years, as it reported an uptick of 2.3 percent to A$178 million in earnings before interest, taxes, depreciation and amortization in its first half and improved underlying profit. AMP Australia’s third-largest retail funds manager climbed 9.33 percent to 4-month highs of A$4.92. The company missed forecasts with a 10.6 percent fall in full-year profit, but its shares surged higher as the company said it was stemming losses in its wealth protection unit. Leighton Holdings jumped 4.88 percent to A$17.21, a three month high, after Australia's biggest builder reported a 30 percent jump in full-year underlying profit. The top performers on the Index were :-

CODE	Company	Price	Change	% Change
FXJ	FAIRFAX MEDIA LIMITED	$0.88	$0.17	23.08%
BRG	BREVILLE GROUP LIMITED	$9.00	$1.04	13.07%
AMP	AMP LIMITED	$4.92	$0.42	9.33%
IIN	IINET LIMITED	$7.95	$0.45	6.00%
LEI	LEIGHTON HOLDINGS LIMITED	$17.21	$0.80	4.88%

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

Stock of the Day – Goodman Fielder (GFF)

GFF continues to deliver on its strategic plans but has been negatively affected by cyclical input costs rises in major categories. The best time to buy FMCG companies is arguably when cyclical cost imposts are highest. Price increases negotiated over the past 12 months should translate into margin expansion as input pricing eases.

Over the last 12 months GFF has increased average prices in baking 8.5% which have been completely offset by volume declines of 8.2%. Although the pricing gains have undoubtedly helped earnings, we are unsure whether such a strategy would work over the long term in the highly price sensitive baking category. For us the volume declines illustrate the highly competitive nature of the category and the likelihood that despite GFF’s focus on increased Direct Marketing Expenditure (DME) sales could remain under pressure.

Management have made a commendable effort in firstly identifying $125m in cost savings and in their execution which has thus far seen more than half of this amount realized. The challenge however is that these savings do not yet appear to have had a positive impact on earnings with most being reinvested in DME spend which appears to be required to maintain earnings.


Goodman Fielder Daily Chart  (Source - Thomson Reuters)

The dairy business saw a 39% decline in EBIT as higher input costs were unable to be recovered through the pricing. The problem for the GFF is the highly competitive dairy category and the commoditized nature of the product (milk) both of it make a challenge to earn a suitable return. Recovery in Asia Pacific has been delayed – The supply issues that plagued the poultry business in 2H13 unexpectedly didn’t appear this half. Underlying EBIT was down 3% reflecting increased costs to improve manufacturing whilst a related inventory build negatively impacted the cash flows. There are a number of issues facing GFF that have impacted earnings. We would keep an eye on the stock and review it again at a future date.

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