Cost control saves the day for Medibank

The stock market heads into the final day of a busy week with a broadly neutral macro setting from international markets.

The stock market heads into the final day of a busy week with a broadly neutral macro setting from international markets.

Market action suggests that investors are looking through the daily round of claim and counter claim on the Greek debt negotiations and are disinclined to take any action on this score until there are concrete developments.

The fact that oil prices rallied off their lows in the US trading session indicates that markets are now looking forward to production cuts in months to come. Oil traders are starting to look beyond ongoing production increases and the large build in inventory levels that’s occurring at the moment. This sentiment is also likely to see local energy stocks hold relatively steady today despite last night’s news of a sharp rise in US crude inventories.

Today’s trading is again likely to be dominated by reaction to profit results. Investors in Medibank are likely to be relatively satisfied by today’s result. There may be room for a little nervousness in slightly softer than expected premium revenue and management outlook comments pointing to the continuing challenges posed by affordability for customers. On the other hand investors are likely to be pleased by Medibank’s progress on cost cutting.  For many this is the core rationale for owning the stock. The question for Medibank shareholders today will be whether today’s result justifies the extent of recent gains in the stock price.

For further comment from Ric Spooner please call 02 8221 2137.

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