The S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) has climbed 0.5% to close at 4,312.6, following gains overnight on Wall Street, where the Dow Jones Industrial Average rose 0.4% on strong corporate earnings. Expectations of further stimulus boosts by US and European policy makers also appear to be driving the market.
The Australian dollar is slightly lower against the US dollar, now buying 105.5 US cents.
The National Broadband Network (NBN) construction costs have blown out by 4% to $37.4 billion, and the project is now running six months behind schedule. The expected completion date is now June 2021. However, the increased funding requirements do not affect Treasurer Wayne Swan's plans to deliver a $1.5 billion surplus this financial year. Under federal government budget rules, funding for the NBN is treated as an equity investment, rather than as an expense, because the NBN is set to recover its costs and deliver a return on investment.
The Australian Bureau of Statistics released home loan approval numbers today. June approvals have risen 1.3%, following a fall in May of 0.9%. It appears first home buyers are coming back into the market, with their share of new loans rising to 18.3% – the highest level since January. The number lends support to the Reserve bank of Australia's view that official interest rate cuts are starting to do their job of stimulating the market.
Company news
Stockland (ASX: SGP) reported a big fall in earnings for the 2012 financial year, and forecast that 2013 earnings are likely to be even lower, before recovering in 2014. Investors didn't like the news much, and shares in the company fell 5% to close at $3.24.
The flying kangaroo, Qantas Airways Limited (ASX: QAN) has announced plans to cut 2,800 full-time jobs in an effort to save $300m a year in costs. The company also received some good news today with Fair Work commissioners ruling in Qantas' favour in a spat with the Transport Workers Union over outsourcing.
Rio Tinto Limited (ASX: RIO) has announced its first half earnings to June 2012, after the market closed. Net profit was down 22% to US$5.9 billion compared to the previous half's US$7.6 billion, mainly due to falling iron ore, aluminium and copper prices.
Winners and losers
From the majors, Computershare Limited (ASX: CPU) rose 6.2% to close at $8.01, despite reporting falls in earnings of 41%, while Iluka Resources Limited (ASX: ILU) gained 3.4% to close at $9.61.
As mentioned above Stockland fell, while Transurban Group (ASX: TCL) lost 4.2%, on top of yesterday's 1.5% drop.
The Foolish bottom line
Beware of headline profits announced in company reports. Rio Tinto's net earnings beat analyst expectations handsomely, but the number includes US$1 billion in recognition of a deferred tax asset, which is a non-cash adjustment and partially masks a fall of US$1.9 billion due to lower commodity prices.
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More reading
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- BHP facing the perfect storm?
- Australian dollar flying high – Aussie tourists to benefit
Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
