Global Markets Overview – August 14, 2014

The choppy price action in equities continued with the pendulum swinging in the way of the bulls this time around. Perhaps the lack of fresh bad news on the geopolitical front calmed investor concerns. This gave investors a chance to focus on the raft of economic releases across the globe, with significant emphasis placed on disappointing US retail sales data. Given negative US data is now being perceived as positive for equities again, this reading helped ease fears of an early Fed funds rate hike. Additionally the BoE revised its wage outlook lower and this was perceived as dovish and Mark Carney exercised a cautious tone which resulted in sterling losing ground. Some also felt a round of subdued China data implies the government will have to remain active, or even step up its efforts, to keep the economy on track for its growth target.

AUD and euro in focus

AUD/USD managed to reclaim the 0.9300 handle, only just though, and I still feel traders will be eyeing selling in the 0.933 region which was previous support. The local economic calendar is relatively light today with MI inflation expectations being the only release on the calendar. Even the euro managed to pick up some gains, but remains vulnerable to sellers in the 1.3400 region. With Q2 GDP figures due out later today for Germany, France and the region, there will be some cautious trading in the single currency. While the market is pricing in growth, there is a risk we'll see a disappointment in these figures with analysts tipping a relatively flat performance for the quarter.

Telstra results look solid

Ahead of the open we are calling the local market up 0.4% to 5538. Once again earnings will be the primary focus with Telstra being front and centre today. TLS has been one of the market's solid performers for a while now and expectations for a robust set of results were rife. The net income was up 14.3% to $4.28 billion, beating estimates of $4.20 billion. Revenue was also well ahead at $25.9 billion and the company announced a buyback of up to $1 billion. Underlying earnings were also ahead at $11.1 billion, with capex down around 3.8%. The final dividend was a smidge ahead of estimates at 15 cents but with plenty of free cash flow, investors will be optimistic that more capital will be returned to shareholders in coming years. In terms of guidance, TLS was quite conservative and forecast broadly flat FY15 earnings.

Other stocks reporting include Fairfax, Crown, Singapore telecoms and Goodman Group. FXJ's results seem to be broadly in-line with estimates with the rapid decline in revenue slowing. The stock is coming off a very low base following recent struggles and it seems the tick higher in sales and dividend might appease investors along with significant savings in coming years. Materials plays might come under pressure after commodities struggled yesterday, but perhaps the improvement in sentiment will underpin some buying.

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