Don’t get too excited that our market is expected to open higher this morning on the back of a big rally by US and European equities and firmer commodity prices.
The futures market is pricing in a 0.36% rise in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), but the big question is whether the market can sustain the gains throughout the day.
Australian equities have been abruptly making an intra-day turnaround recently and the uncertainty is probably the reason why the futures market is not expecting a much stronger start for our market today even though European stock indices surged well over 2% and Wall Street jumped over 1% on Friday.
But I suspect resource stocks will be leading the gainers today. A 0.6% gain by the gold price to $US1,189 an ounce should lend support to gold miners Newcrest Mining Limited (ASX: NCM), while a 0.8% rise in the West Texas Intermediate (WTI) oil price should help Woodside Petroleum Limited (ASX: WPL) and Oil Search Limited (ASX: OSH) recoup some of the 3% plus losses they suffered at the close on Friday.
On the other hand, capital raising expectations are likely to drag on the bank sector. Bank of Queensland Limited (ASX: BOQ) is reported by the Australian Financial Review to be raising $200 million via a hybrid issue in the wake of the largest equity raising in the ASX’s history by National Australia Bank Ltd. (ASX: NAB).
I believe more banks will be going to shareholders with cap in hand, and until they do that their share prices are likely to underperform.
On the earnings news front, fertiliser and industrial chemical supplier Incitec Pivot Ltd (ASX: IPL) posted a 27% uplift in first half profit to $146.4 million today, while Corporate Travel Management Ltd (ASX: CTD) said its earnings before interest, tax, depreciation and amortisation (EBITDA) will be slightly ahead of its previous forecast.
Outdoor and auto accessories retailer Super Retail Group Ltd (ASX: SUL) could lose ground today as it was downgraded to “underweight” from “neutral” by the Commonwealth Bank of Australia (ASX: CBA) following its quarterly trading update.
There’s plenty happening on the corporate action front to keep investors busy as well. The board of copper and gold miner PanAust Limited (ASX: PNA) is recommending investors accept the $1.85 a share takeover offer by Guangdong Rising Assets Management and its shares are likely to jump to just under the offer price. PanAust last traded at $1.73.
Fellow miner Independence Group NL (ASX: IGO) is looking to capitalise on its strong share price by looking at using its scrip to make opportunistic takeovers, according to the AFR. Independence Group has rallied 35% this calendar year and possible targets include Sandfire Resources NL (ASX: SFR) and EVOLUTION FPO (ASX: EVN).
Advertising and marketing group STW Communications Group Ltd. (ASX: SGN) is also reported to be considering a restructure of its business following its woeful performance that has seen its share price plunge by a third since January. I have touted STW as a likely takeover target before.