Reports to lift market - again

Stronger than expected results from Qantas, SAI Global, Nine Entertainment and Adelaide Brighton are likely to drive the share market higher today against a backdrop of calm overseas markets. Rising oil and copper prices should lend support, but the picture is clouded somewhat by today’s stock options expiry.

Qantas has smashed analysts’ forecasts, delivering a $203 million profit that will ease investor concerns and goes someway to justifying the more than doubling of its share price over the last four months. Cost cutting and operational improvements contributed, but a lower oil price is a key factor in the turnaround. Adelaide Brighton hit record profit levels, 14% ahead of last year. While shareholders will be pleased, increasing profits in building materials and transport stocks speak directly to an improving economy, and should buoy sentiment in trading today.

Investors who sell call options to generate income from their portfolios are facing challenges. The 12% rise in the index over the last month means they will need to roll their exposure forward, buying back options that are deeply in the money to avoid selling out of favoured investors. While this is a happy situation from a profit perspective, their activities today are likely to leave option market makers “short”, adding to the buying appetite.

For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.