Well the Dow has now put in a Black Caviar like performance with 20 out of 20 Tuesdays up in a row! However the warm and fuzzy feeling did not entirely spill over to our market at least not in financials which have led the market up so far this year. News that a big US investment Bank (you know who you are!) was recommending clients switch out of banks and into resources was enough to set things off again. After a relatively positive start the banks were ambushed in the canyon, had nowhere to go and were like bunnies in the spotlight. They all suffered badly again as Westpac Banking (A$28.72, -2.5%) led them down followed by Australia and New Zealand Banking Group (A$27.60, -1.7%), National Australia Bank (A$30.55, -1.8%) and Commonwealth Bank of Australia (A$66.89, -2.5%). NAB go ex-dividend tomorrow so expect a bigger fall than the dividend. However the red blob was countered by the green of the materials with BHP Billiton (A$34.87, +2.6%) pushing higher on the falling Aussie dollar and positive sentiment form the switch. Others to benefit from the lower dollar were CSL (A$60.61, +2.9%), QBE Insurance Group (A$15.96, +4.7%), James Hardie Industries PLC (A$9.99, +1.5%), ResMed Inc. (A$5.26, +4.0%), News (A$34.77, +3.1%), Rio Tinto (A$54.70, +3.4%) Fortescue Metals Group Ltd (A$3.53, +4.1%) and Amcor (A$10.08, +1.8%).
Big winners today included Ten Network (A$0.285, +9.6%),Linc Energy Ltd (A$1.65, +11.1%), Western Areas Nl (A$2.93, +6.9%) and Panaust (A$2.40, +7.1%). Whilst in the dunce’s corner were Seek (A$10.12, -3.6%), Wesfarmers (A$40.14, -2.6%), David Jones (A$2.56, -2.7%) and Metcash (A$3.94, -1.3%).
The huge switch from Banks in May has coincided with their Ex Dividends. How many times have we seen the banks run up into their dividends then fall in a screaming heap. This year is just the same. NAB is down 15% off its 34.00 high at the end of April, WBC is down 15%, Australia and New Zealand Banking Group (A$27.60, -1.7%) down 13%.That does include dividends in May.
In media stocks, Fairfax Media (A$0.615, +3.4%),Ten Network (A$0.285, +9.6%) and Seven West Media (A$2.22, +4.7%) all held good gains, whilst in energy stocks AWE (A$1.27, +5.8%) ,Karoon Gas Australia (A$5.69, +3.1%) and Linc Energy Ltd (A$1.65, +11.1%) were better and Oil Search (A$8.41, +1.1%),Santos (A$12.91, +0.8%) and Origin Energy (A$13.33, +1.8%) were all better. We did see some bottom picking in mining services with Boart Longyear (A$0.665, +9.0%), Bradken (A$4.66, +2.4%), Monadelphous Group (A$16.08, +0.6%) and WorleyParsons (A$20.04, +1.6%) the best of them. Coal stocks were in the black today as New Hope (A$3.76, +3.9%) and Whitehaven Coal (A$2.23, +1.4%) put in some solid fuelled gains.
Industrials were better, Brambles (A$9.34, +3.0%) Qantas Airways (A$1.60, +5.3%), Toll (A$4.93, +0.8%), Sydney Airport (A$3.71, +0.8%) and Seven Group (A$7.60, +4.3%) all powered ahead. Volume was slightly better today with BHP leading the way on dollars’ worth traded.
Stocks in the News
Housing construction is still only a spark rather than a fire at the moment with figures out today suggesting the spluttering continues. Construction work done fell 2.0 per cent in the March quarter, disappointing expectations of 2 per cent growth. Over the year to March, the volume of construction work done was up 0.2 per cent, the Australian Bureau of Statistics said. 11:35am: The amount of construction work done fell 2.0 per cent in the March quarter, disappointing expectations of 2 per cent growth. Engineering work done, which includes mines, roads, bridges and the like, was down 2.5 per cent in the quarter. CSR (A$2.14, +3.4%) and Boral (A$4.50, +2.5%) did rally though. Lower dollar helps.
Wesfarmers (A$40.14, -2.6%) put out a strategy briefing and promptly nosedived! 243 pages as well, so they only touched the surface really! Seems their competitors Woolworths (A$33.13, +0.7%) are launching some serious price cuts in their supermarkets, no Status Quo song will help there. They have run hard much like the banks.
Cabcharge Australia (A$3.94, -5.1%) continued its fall today after yesterday’s shake up from the Victorian Government. Expect the NSW Government to be watching carefully. My Cab driver today was telling me about the costs in Sydney. $30,000 a year in licence fee,$6,000 for CTP, all up around $50,000 before you buy the cab or put gas in it! No wonder Cab fares are so high. Red Tape and fees are the killer for business.
Australia and New Zealand Banking Group (A$27.60, -1.7%) announced a $425m buyback of its shares today. Did not help sentiment in the end as the stock slipped from the opening.
BHP Billiton (A$34.87, +2.6%) the big gainer as brokers and analysts toured the coal operations today in Queensland. Must have liked what they saw.
Aristocrat Leisure (A$4.30, +6.2%) hit the jackpot today when three cherries came up, the pokies machine maker will pay an interim dividend of 7 cents a share on June 28, compared with 4 cents previously. Investors are also liking plans to return more money to shareholders, as the company lifts its target payout ratio to 80 per cent of net profits from 60 per cent previously.
Aussie Dollar at a 19 month low. BHP up 6.% in May, WBC down 14%.How things change. PIMCO (The World’s largest bond fund) released their assessment of the local economy and warned that we should get used to the NEW NORMAL.. That is low growth, low interest rates, weak currency, more cautious customers and greater interference from Governments, wonderful.
Tomorrows News Today
Expect to see more weakness in the Dollar as PIMCO and every commentator focusses on the downside to 90cents.RBA rate cuts seem to be the primary reason. We all screamed when the dollar was strong, well at least the exporters but now we seem to be taking a weak dollar personally as if it is some serious comment on us as individuals. Makes fuel more expensive and all those imported cars and will push inflation higher for sure but will be a welcome relief for manufacturers, tourism and education. Welcome to the currency wars! Just book your overseas trip soon! And fill up the car!
South Africa’s economic growth slowed sharply in the first three months of the year. According to official figures, between January and March, the country’s economy grew by just 0.9%, compared with the previous quarter.
Australian stocks are lagging global equities by the most in two years amid concern that a weakening currency and decelerating commodities demand from China, the nation’s biggest overseas market, will hamper profits and economic growth.
The International Monetary Fund lowered its forecasts for China’s growth and said making “decisive” policy changes would put the economy on a more sustainable path. Expansion will be about 7.75 % this year and next, David Lipton, first deputy managing director of the IMF said.
More money laundering scandals and looks like the evil threesome have allowed several Zombie countries to take more time to get their debt under control.. Austerity is soooo 2012!!