A burst of optimism today as investors piled into the market following Uncle Glenns comments yesterday. Looks like the rate cut is a done deal next week. As a result the great green blob of banking shares marched ever higher. Back in September 2011, I wrote that buying the banks, all four for 100 bucks was a great trade. At their peak in May the basket was 174 bucks and now sits at 168 ish. Same time I also talked about buying the resource basket of BHP, RIO and FMG for $100! Not so good I am afraid. Shows how the market has rewarded the yield stocks. As an aside TLS was 3.10 at that time. Same profit, same dividend. Different attitude!
Anyway having peaked at nearly 5100 this morning the market decided to become a little cautious pre the US FOMC meeting and spent the rest of the day sliding back towards 5070.Most sectors were positive with the big four and especially Westpac Banking (A$30.89, +0.1%) pushing higher and of course yet another record in Commonwealth Bank of Australia (A$74.21, +0.2%). Resources unfortunately failed to inspire with BHP Billiton (A$34.64, -0.9%) and RIO Tinto (A$57.51, -0.3%) trying hard to break square but failing as did Newcrest Mining (A$12.23, -0.6%) and Fortescue Metals Group Ltd (A$3.66, -1.3%). Others that failed in their endeavours today included the property trusts as CFS Retail Property Trust Group (A$2.05, -2.8%), Westfield Group (A$11.22, -1.3%),Westfield Retail Trust (A$3.01, -1.6%),Stockland (A$3.58, -2.5%) and GPT Group (A$3.66, -2.4%) all eased.
Healthcare stocks firmed as CSL (A$66.07, +0.7%) led them higher followed by ResMed Inc. (A$5.16, +1.8%),ResMed Inc. (A$5.16, +1.8%) and even Ansell (A$18.54, +2.0%) bounced. Energy stocks firmed too with Woodside Petroleum (A$37.59, +0.6%) higher followed by Origin Energy (A$11.95, +0.3%),Caltex Australia (A$18.71, +2.7%), and Oil Search (A$8.10, +1.8%).
The podium today had a surprise in it as Clough (A$1.43, +28.3%) soared on a takeover approach and Drillsearch Energy (A$1.37, +9.2%) kicked after their numbers yesterday. Others to taste the Champagne included Technology One (A$2.08, +5.1%), Aurora Oil & Gas (A$3.23, +4.9%),iiNet (A$6.06, +3.4%) and REA Group Ltd (A$32.79, +3.8%) while drinking a less inspiring losers’ beverage were McMillan Shakespeare (A$8.13, -7.1%),Energy World Ltd (A$0.60, -5.5%),Resolute Mining (A$0.815, -4.1%),Lynas (A$0.405, -4.7%) and Arrium (A$0.995, -3.9%).
Volume again was pathetic. The confidence of the average investor appears to be just that; average.
Best performing ASX 200 stock in July was Billabong International (A$0.405, -2.4%) at 186% followed by Linc Energy Ltd (A$1.62, -0.3%) at 97%.Both seemed to have survived near death experiences. Stay away from the light! While the worse performer this month was poor old McMillan Shakespeare (A$8.13, -7.1%). Obviously the Rudds’ don’t have them in their superfund!
The three strongest performing sectors in July were materials (9.59 per cent), energy (6.33 per cent) and financials (5.79 per cent), boosted by a lift in oil and iron ore prices.
Seems amazing that since Kev13 came back and we killed the fatted calf the market has rallied nearly 9%.July was a super month up nearly 6% alone!\
Stocks and Stories in the News
Clough (A$1.43, +28.3%) hit the headlines today with a $1.46 takeover approach from Murray and Roberts for the 40% odd they don’t own. The deal consists of 1.32 plus the 14 cents fully franked dividend.
Few quarterlies out from our house favourites like Buru Energy (A$1.74, +3.0%),Kina Petroleum (A$0.37, unch),REY Resources (A$0.052, unch) and Universal Coal PLC (A$0.078, -2.5%).
Potash was in the news this morning as the pricing cartel looks to have collapsed with a free for all developing and the Russians pushing for price cuts and more sales. Incitec Pivot (A$2.63, -1.1%) was a tad weaker but not really an Potash stock but it now looks unlikely that BHP Billiton (A$34.64, -0.9%) will NOT push ahead with their Canadian Potash expansion. Most money saved and the balance sheet improved.
Economic news from Australia today showed Australian private sector credit for June gained 0.4 per cent for the month, and up 3.1 per cent year on year.
Housing credit was up 0.4 for June and 4.6 for the year. Business credit rose 0.5 per cent for the month and 0.9 per cent for the year.
China will meet its economic growth target of 7.5 per cent this year as authorities will continue to implement prudent monetary policy and keep market liquidity relatively ample, the chief of the top economic planning agency said today.
Chinese steel demand is expected to remain weak in the second half of 2013, the country’s steel association said on Wednesday, putting further pressure on steel mills struggling with falling prices that have pushed them into the red.
Tomorrows News Today
FOMC tonight. Reporting season kicks off here soon. Bradley Manning will be sentenced and Wendy has hired new layers. Watch out Rupert! 21st Century Fox may have to be renamed 11 ½ Century Fox if she gets half.
Zimbabwe to vote for a new President. I know who my money is on! What’s the odds on a Abbott Mugabe double I wonder.
US drugmaker Pfizer has agreed to pay $491m (£320m) to settle a probe into illegal marketing of a drug by Wyeth, a firm it had acquired in 2009.
And to put the US reporting season in perspective as everyone is saying how many have beaten estimates. In fact, were it not for a robust financial sector, profit on the S&P 500 would be tracking negative 1.6 %.That two-thirds of companies are beating estimates seems almost beside the point: Analysts were so bearish that any company with a pulse could have beaten consensus. So are we going to see a much better second half. Doubt it. Cost cutting can only do so much. Maybe that’s why everyone is out there buying companies. Only way to grow is through acquisition.
No good news for BP I am afraid in the UK as their fund for the Gulf compensation victims is nearly out of money. May need to pop some more in and raise the provisions. Also Barclays in the UK is raising nearly 6bn Pounds in a deeply discounted rights issue. Seems to have found a huge black hole in its accounts, thanks to the new BOE tests, to the tune of 13bn quid. And these guys were one of the better ones!
And front page of UK newspapers this morning is the story of how the Bank of England sold the Nazis gold they looted after their invasion of Czechoslovakia in 1939.Not their finest hour.
That is all!