The past week saw on going worries about US growth and a surge in the oil price to its highest level since last September and in the weeks ahead, more of the same.
Performance in the market was mixed.
In Australia our market was up 5.7 per cent in the quarter.
The Dow fell 1 per cent last week to12,354.35, the S&P 500 slipped 1.1 per cent to 1420.86 and the Nasdaq also lost1.1 per cent to end at 2421.64.
In the March quarter, the S&P gained 0.2 per cent and the Nasdaq added 0.3 per cent for the third straight quarterly advance. But the Dow lost0.9 per cent, thefirst quarterly decline since the second quarter of 2005.
APA’s advisers are spreading the story that a rengotiation of the debt package is underway which will have a lower acceptance condition, meaning it will be able to win control and freeze out non-accepting shareholders.
Some small shareholders are reportedly attempting to get their shares back from the offer (you can do that if you accepted prior to March 23).
A long feature in the Sydney Morning Herald on Saturday had the ring of finality about it and the tone was decidedly not if the bid fails but why it failed and what happens.
Could the QAN shares be firming because the market thinks the bid will fail and they see the price firming towards the $5.60 level which was the original offer price from APA?
Qantas’ special 15c a share ‘final’ interim dividend will be paid this week.
That’s the one that took the offer price from $5.60 to $5.45.
Meanwhile the confusing carve of Alinta (AAN) announced on Friday is so complex that shareholders will need some good advice on what to do. There is, however, one small but very interesting point.
Alinta said the total consideration for shareholders in the confusing offer from Singapore Power and Babcock and Brown would rise to $15.40 after the inclusion of a fully franked dividend of 40 cents per share.
That’s why Alinta was saying the final price was $15.40 (in fact its $15.00, the 40c dividend is there for the existing shareholders to have).
But that’s what Qantas and its mates at APA forgot. Imagine is the price was $5.60 plus the dividend of 15c, or $5.75. It would be game over.
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Meanwhile the quiet surge in the Telstra share price continues. It closed at $4.66 on Friday, yet another 12 month high (actually the highest level since September 2005. Turnover was a strong 38.7 million while the installment receipts hit $3.21 on 70.8 million units traded.
Five bucks a share is the next major level according to the TLS bulls.
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The Australian share market rose over the week, capping off its eighth consecutive positive month of gains.
According to Dr Shane Oliver of the AMP, Australian shares gained 2.8 per cent in March and are up 5.7 per cent year to date, far stronger than has been the case for most global share markets.
And we should remember that early March was most in recovery from the very sharp fall at the end of February.
But Dr Oliver cautions there are some problems: “The spike in the oil price on Iran tensions could go either way. A further escalation in tensions could easily see the oil price pushed back towards last year’s high of $US78/barrel, which would translate to a petrol price of about $1.42 a litre in Australia.
“But if the issue with Iran is resolved soon then $US5/barrel could be wiped off the world oil price overnight, leaving it stuck in a range around the $US60/barrel level.”
Crude oil for May delivery fell 16 UScents to settle at $US65.87 a barrel on the New York Mercantile Exchange. Prices rose 5.8 per cent last week and 7.9 per cent in the quarter. Oil is down 1.9 per cent from a year ago.
Copper prices rose for a fourth consecutive week and posted the biggest monthly increase in 11 months on signs of strong demand for the metal.
Inventories monitored by the London Metal Exchange fell for a seventh straight week
Comex May copper futures rose 5.95 USc to $US3.146 a pound on the Comex division of the New York Mercantile Exchange. Copper rose 14 per cent in March. And if you look at the Rio and BHP share prices you see a reflection of that.
Three months LME copper rose $US 105 on Friday to $US 6,860 a metric tonne.
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Gold finished at $US669.00 an ounce on Friday, up on the day.
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And the AMP’s Dr Oliver has this reminder about the outlook for markets
· Share markets are still likely to see more turbulence in the short term as uncertainty over US and global growth may linger for a while yet, the crisis in the US mortgage market has further to run and tensions with Iran have the potential to escalate into something more threatening to oil supplies and the global economy.
· Nevertheless, while the short term outlook remains a bit uncertain, our view remains that the four year old bull market in shares is alive and well. Valuations both globally and domestically are reasonable, profit growth is slowing but is still likely to be solid, the current slowdown in global growth will help to sustain the low inflation/low interest rate economic expansion, the Fed’s gradual move towards a more relaxed stance on interest rates is extremely positive and there is lots of cash out there looking for a home.
As such, global and Australian shares are likely to provide solid gains for the rest of the year, notwithstanding inevitable set backs along the way.
· Listed property securities, after becoming extremely overvalued in mid-February, have fallen back to around fair value leaving them well placed to provide decent returns going forward. From their peak levels in late February to their recent lows US REITs have had a 13% fall and Australian listed property trusts have had a 10.5% correction.
· Bond yields are likely to have further downside in the short term on the back of
