Equities market wrap

After initially falling for most of the morning, the lunchtime comments from our Governor helped the market rally back to square before pushing ahead slightly as the afternoon wore on with BHP Billiton (A$34.95, +1.2%),RIO Tinto (A$57.71, +1.1%) and of course the banks leading the charge. With weak leads from overnight it was always going to start down but word from Uncle Glenn that he wasn’t worried about asset price inflation or any other inflation and he saw no reason not to cut rates was enough to get the banks rocking and rolling again.

Of course if we get lower rates then all the yield stocks look increasingly attractive to investors and we saw good demand for Telstra (A$5.00, +1.6%),Westpac Banking (A$30.86, +0.1%),Commonwealth Bank of Australia (A$74.03, +0.2%) and even BHP Billiton (A$34.95, +1.2%) on defensive qualities.

However consumer staples were a little on the nose. We had Woolworths (A$33.22, -1.6%) numbers today which were somewhat disappointing and dragged Wesfarmers (A$40.22, -0.8%) down with them. The ACCC is getting a little concerned about shopper dockets and was enough combined with the sales numbers, to knock these ones off their perch. Resource stocks were better with RIO Tinto (A$57.71, +1.1%) and Fortescue Metals Group Ltd (A$3.71, +1.6%) in the spotlight. RIO has been selling stuff to the Chinese and looks to be on the verge of another deal in Canada. Won’t be much left at this rate. Also the Aussie dollar got whacked below 91 on Glenn’s latest comments so that helped resource stocks along as well.

Property trusts were across the board a little left out as Lend Lease Group (A$8.82, -1.6%), Dexus Property Group (A$1.045, -1.9%) and Stockland (A$3.67, -0.5%) eased. In retails and consumer stocks REA Group Ltd (A$31.59, -2.7%) reversed some of yesterdays good gains and Myer (A$2.68, +0.8%), David Jones (A$2.67, +0.8%) and Harvey Norman (A$2.66, -0.4%) were mixed despite hopes of the rate cut next week. Energy stocks were mixed with Woodside Petroleum (A$37.38, -0.3%) easier,but Santos (A$13.69, +0.4%) and Origin Energy (A$11.92, -0.3%) slightly better whilst smaller stocks like Buru Energy (A$1.69, -4.0%) and Karoon Gas Australia (A$5.65, -0.5%) eased back as did Linc Energy Ltd (A$1.625, -4.4%).

Good to see Macquarie Group (A$43.42, +1.8%) bouncing back today (was my tip this morning!) and so too for QBE Insurance Group (A$16.47, +1.8%) on the lower dollar I expect, although Insurance Australia Group (A$5.80, -1.5%) didn’t share the love. Mining services were also better led by Bradken (A$4.81, +4.6%) with Mastermyne Group (A$0.78, +11.4%), Austin Engineering (A$4.18, +3.2%) and Monadelphous Group (A$16.51, +2.0%) but failing to fire were WorleyParsons (A$21.85, -0.1%) and Cardno (A$5.26, -1.7%).

In the yellow jersey today were Resolute Mining (A$0.85, +5.6%),Bradken (A$4.81, +4.6%)(nice for a change),Regis Resources (A$3.49, +5.1%),Oceanagold (A$1.78, +3.5%) and Atlas Iron (A$0.85, +4.9%) whilst fixing a puncture at the back of the peloton were McMillan Shakespeare (A$8.75, -6.7%),AWE (A$1.355, -4.2%), STW Communications Group (A$1.57, -4.3%). Metcash (A$3.50, -4.6%), Whitehaven Coal (A$1.995, -5.0%) and Transurban Group (A$6.75, -3.4%).

Volume was again on the skimpy side but at least better than yesterday, at around $3.6bn.

Over the pond in Japan we saw a rally for the first time in days with the Nikkei up nearly 1.6% and a strong day in China(up 1%) too as it conducted its first reverse repo purchase with a pike (degree of difficulty 3.8) today with a purchase of 17 billion yuan ($2.8Bn) at a yield of 4.4%.Good to see them step in when liquidity is tight.

Stocks in the News

Few things today with Woolworths (A$33.22, -1.6%) numbers out. Their sales for the year to June 30 have risen 4.3 per cent to $59.16 billion, despite weak consumer confidence and low inflation, the company says. The supermarket chain said its transformation program had been “rewarded with a strong sales result”. Market wasn’t impressed!

House stock AWE (A$1.355, -4.2%) failed to impress with its latest quarterly and Drillsearch Energy (A$1.255, unch) has forecast more growth this year after generating a record $99 million in revenue in fiscal 2013 on the back of its new operating oil pipeline in the Cooper Basin. The newly installed Bauer to Lycium oil pipeline in the Cooper Basin’s western flank was producing 10,000 barrels of oil a day by the end of the fiscal year, the company said. The record sales revenue came after a record June quarter including 600,000 barrels of oil equivalent and $50.7 million in sales revenue.

Warrnambool Cheese & Butter Factory Co.Hold.Ltd (A$4.48, +0.2%) also announced today that due to the lower currency and higher dairy prices it would beat its guidance from April. This should be a feature of industrials going forward, cost cutting and a better currency environment helping things along. Didn’t do much for the shares though, no cream today. Only permeate perhaps!

On the economic front Approvals for the construction of new homes fell 6.9 per cent across Australia in June, official figures show. Local councils approved the construction of 12,778 new homes, including houses, townhouses and apartments in multi-unit buildings, in June. That compares to 13,727 approvals in May, seasonally adjusted.

In economic news from Japan, Japan’s industrial production fell in June by the most since March 2011, as automakers cut output after a gain the previous month. Output declined 3.3 per cent in June from the previous month, the Trade Ministry said, a steeper fall than any economists forecast, but the jobless rate is still 3.9%, lowest since 2008.So maybe Abenomics is working!

Tomorrows News Today

Looks like JP Morgan are set to settle with the regulator over power price fixing! Seems like a great way to raise revenue for these guys. Ka-ching! $400m simples!

UBS (Used to be Smart) Switzerland’s biggest bank, has reported a 32 per cent jump in second-quarter profit on gains at the investment bank and announced plans to buy back the fund set up by the central bank in 2008 to help it shed toxic assets.

If you were a coal producer would this worry you? China has started importing natural gas from Myanmar, a milestone as the world’s largest energy consumer expands its strategic access to energy resources across the Indian Ocean. The gas pipeline that connects China, Myanmar and the Indian Ocean has formally begun operations it was announced yesterday.

And in the ever-increasing corporate deals Hudson Bay has bought Saks for nearly $3bn.Seems all the cash that companies have accumulated since the GFC is going on M&A activity. Biggest Ad agency in the World last night, big drug buy in Ireland and more on the way. Seems we are back to the days where my deal is bigger than your deal. Call that a deal? This is a deal! How long until they come here I wonder. Virgin anyone?

And if a bloke comes up to you in your local pub in the next few days offering some diamonds for a good price, maybe you should check the receipt as the biggest haul in history has been stolen in France A whopping $135m worth was taken by a guy in a scarf in Cannes at the famous store that Grace Kelly frequented in ‘To Catch a Thief’! Seems like Monsieur Robbie is back, n’est pas? He just walked in with a handgun and in under a minute had legged it with a huge haul. Even more audacious than Nathan Tinkler!

That is all!