Risk relief for broader markets while Woolworths margins remain under pressure

International markets ended with a note of relief last night. Stronger sessions for US stocks and oil together with selling of the Japanese yen should all set the scene for a solid tone for the opening session of our market.

The oil market continues to show signs of stabilising above $30 which provides temporary relief for stock markets. US oil production has declined somewhat in recent weeks. Markets would be relieved to see this trend continue. If production drops below 9 million barrels a day in the not too distant future, investors are likely to take some comfort from signs that the next leg down in production cuts is finally starting to unfold

News that Brazilian iron ore miner Vale is considering the sale of core assets could herald a significant change in the iron ore market. It opens up the possibility that China may acquire a share in some of Vale’s core, low cost iron ore operations.

Woolworth’s results are yet to provide investors with comfort that their competitive position is stabilising.  Pressure on profit margins continues and is not yet translating into improved like for like sales.  A lower than expected dividend payment will not help investor sentiment.

The appointment of Brad Banducci as Woolworths new Ceo will surprise some in the market. While he is a very well respected retail executive, some investors had been anticipating and external appointment and a clear break from recent strategic and operational problems. Mr. Banducci’s proven track record with Dan Murphy will; however be a source of confidence for investors.