TheS&P 500 was down by 1.56points or0.08%on Wednesday to 2000.72. U.S. stocks ended mostly down on Wednesday, as a decline in Apple shares dragged the Nasdaq lower and investors held off on big bets before the European Central Bank's upcoming policy meeting. The European Central Bank will hold a monthly policy meeting today, where investors will look for clues that the ECB may launch a bond-buying program.

Toll Brothers Inc., the largest U.S. luxury-home builder, fell 4.7 percent after it said orders for new homes dropped and it lowered its forecast for sales this year. Delta Air Lines Inc. lost 5.2 percent after it lowered forecasts for some third-quarter targets. PulteGroup Inc. fell 3.8 percent as home-builders tumbled. The UK’s FTSE 100 share index hit a 14 year high on Wednesday. The UK index which has lagged behind other world benchmark share indices this year rose 44.41 points on Wednesday to close at 6,873.58 its highest level since December 1999.


FTSE 100 Daily Chart (Source – Thomson Reuters)

S&P ASX 200was down by 2.4points or 0.04%on Wednesday and closed at 5656.1 points.Australian Bureau of Statistics data showed GDP grew a modest 0.5 per cent in the June quarter. Wednesday’s data shows that the terms of trade is now 22 per cent below 2011 peak. Telecommunications was the ­best-performing sector as Telstra continued its week-long rally up another 1.1 per cent to $5.72. Lynas Corporation was the best-performing stock in the ASX 200, up 9.7 per cent to 17¢.

Iron orefell by 1.2 per cent overnight to trade at $85.70 a tonne. APN News & Media has announced that it intends to offer US$250 million of senior unsecured notes. Fortescue Metals Groups had a record breaking August 21014 culminating in the shipment of more than 15 million tonnes of iron ore. Qantas Group passenger numbers for July 2014 increased by 3.2% from the previous year. The following stocks will trade ex-dividend today:

Acrux, Bendigo Community Telco, Canterbury Surrey Hills, Greencross, Objective Corp, Phileo Australia, Prime Media, Vita Group, WDS Ltd, Wilson HTM Investment Group.


Lynas Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – AGL Energy (AGK) 


AGL Energy’s 2014 result came as little surprise as profit guidance was provided in July. The 4% decline was largely attributed to unusually warm weather. However we consider much of the weakness in the retailing business to be structural as electricity demand has been falling for a number of years due to growing solar panel use and more energy efficient electrical devices.


Retail operating EBIT drivers (Source – Company Reports)

Since 2010 AGL’s retail customer numbers have increased 24% but retail electricity volumes have fallen 2%. Much of the customer growth in fiscal 2014 was due to the acquisition of Australian Power and Gas but lack of acquisition opportunities means any additional customer growth is likely to be organic. The recent deregulation of retail electricity prices in New South Wales should help sustain or even improve retail profit margins but we expect long term decline in electricity demand to continue.


Merchant operating EBIT drivers (Source – Company Reports)
 
The Macquarie Generation acquisition will be funded by AUD 1.2 billion one for five pro rata accelerated renounceable entitlement offer at AUD11 per share. We consider the offer price to be attractive. The acquisition increases generation capacity by 180% to 10,500MW and will make AGL the largest electricity generator in the National electricity Market or NEM. More importantly it means AGL now generates all of the electricity it needs for sales to customers.


AGL Daily Chart (Source – Thomson Reuters)

The strategic shift to increase generation capacity is in response to two key industry changes, namely the onset of liquefied natural gas or LNG exports and less political support for environmentally friendly energy policies such as the carbon tax and the Renewable Energy Target or RET. AGL expects Queensland LNG exports to reduce gas fired generation within NEM by 16 or 17 terra watt hours or around 8% of total generation. Aside from the NEM wide supply reduction the impact will be particularly pronounced in Queensland which will need to import electricity from New South Wales benefitting generators like Macquarie Generation. We reiterate our HOLD recommendation on AGL Energy at the current price of $13.61.

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