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ASX 200 closes down 63.9 at 5610.1 as ANZ capital raising smashes banks. CBA next? Disappointment with Downer.US Futures down 23.RIO reports after hours.
Market action today low of 5588 but bounces slightly
In our end of day report yesterday we suggested that the market looked like it was starting to roll over from testing the 5700 level. Who thought it would happen so quickly!
A massively underwhelming day considering the positive leads we had from the US and the price of iron ore.All wind was taken out of the sails early when Australia and New Zealand Bank (ANZ) ,trading halt ,dropped a surprise $3bn capital raising on the market. For some time, the wannabe Asian bank has held firm on its promise not to rush to raise fresh capital unlike their peers. However today they have bowed to the inevitable and tapped institutions on the shoulder for $2.5bn hitting up shareholders for the balance through a Spathes looks a little petulant towards non ANZ holders who are now locked out of the opportunity to participate, unlike the right issue with National Bank (NAB) – 2.24%.
The sector was sold done aggressively as the ANZ snuck in a sneaky trading update, around 2% below expectations with a full update on 18th August, as funds made way for their discounted ANZ stock with Commonwealth Bank (CBA)- 3.3%, copping it very badly potentially next cab off the raising rank.
Shows that investors need to stay nimble in CBA
The other three took a similar beating with the falls in the three remaining banks accounting for around half of the points loss on the ASX 200.
The selling also fed though to other financials like Macquarie Group, (MQG) – 1.41% AMP -0.91 % and QBE– 0.76%. In the industrial space there were few winners in the broader market sell off. The only bright spots seemed to be gaming stocks and pizza. Not a bad combination at all. Domino Pizza (DMP) +1.07 % and Crown Resorts (CWN) +0.59 %. Aristocrat Leisure (ALL) + 1.04% continue their great run this year, one of the big beneficiaries of the higher USD.
Breaking news in RIO.Beats expectations.Buy back ongoing and capital expenditure at US$6bn.Net Debt US$13.6bn at June end.
Once again it seems that either we have resources or industrials. Today resources rallied led by BHP +0.76 %, RIO + 1.08 % and Newcrest (NCM) +2.55 % had their day in the sun. Fortescue Mining (FMG) +1.33 %opened strongly as well but succumbed to some profit taking after yesterday’s great run. Energy stocks also fell victim to lower oil prices and the general sell off with Santos (STO) -2.54 % struggling
EDI Downer (DOW) – 11.35 % will never be EDI Upper it seems. Another disappointing result and after struggling back from near 2015 lows in May, they are back in the dog house after a very disappointing outlook statement. Downer cited ‘weakness and a high degree of uncertainty in several markets, especially mining where some customers have ended contracts early’ .Looks like they are now targeting $190 for next year against $210m this year. The company’s mining division, which carries out contract mining and earthmoving, suffered a 20 per cent drop in revenue in the year to June to $7.4 billion, the main driver of a four per cent decline in total revenue
Volatility to the max this morning, in Slater and Gordon (SGH) – 3.06 % as they crashed then rallied today in a rollercoaster session on more UK woes. It was revealed that Quindell whom they bought the professional Service Division off earlier this year and probably wish they hadn’t were under investigation for fraud from the SFO In London. The stock did pull itself out of a nose dive after some calming words from the company but suspect they wish they hadn’t never heard of Quindell. The stock touched 265 cents today before closing at 317c cents! A wild ride.
Genworth Insurance (GMA) – 10.26 % suffered the slings and arrows today as brokers downgraded the stock and took the warnings from the company on Queensland and WA delinquencies to heart. Seems that broker comments are the key to reporting season.
Another day another CEO bites the dust as Flexigroup (FXL) – 4.69% announced today that David Stevens and Peter Lizantis were going to lead the company in the interim having release incumbent Tarek Robbiati from his obligations early.
Syrah Resources (SYR) – 7.91% returned from the blood today boasting a bulging bank balance following the successful placement to raise $166m with a retail offer to follow.
In mid cap news Covata (CVT) unchanged ,an emerging force in cyber security, announced a move into Silicon Valley with a new office there to support US growth.
On the economic front, employment surged in the month of July even as the unemployment rate climbed from 6 to 6.3 per cent. The latest official figures from the Bureau of Statistics show a jump of employment of 38,500 in July after a jump of 7000 in June and 42,000 in May. The combined jump of 87,500 came as the unemployment rate climbed from 6 to 6.3 per cent. The discrepancy is explained by a jump in the number of unemployed Australians from 771,000 to 801,000.
Kathmandu’s (KMD) + 8.94% board has unanimously rejected a $312 million takeover offer from New Zealand retail group Briscoe’s, declaring it “does not reflect the underlying value of Kathmandu”.
Fresh from his wildly successful time at Telstra, former head honcho, David Thodey, has popped up as head of the CSIRO. Let us hope that he can be as successful there.
Turning overseas, it was a quiet session for Japan up as they marked the 70th anniversary of the Atomic bomb on Hiroshima, up 0.66%, Hong Kong down 1.3% and China up 0.23%.The lower Yen is a big boost for Japanese exporters as Topix heads from its highest close since 2007.
Seems that the authorities have only spent around half of the available $144bn rescue funds for the Chinese markets.
Meanwhile the fourth Ashes test kicks off tonight to distract us slightly. Maybe not enough to distract UK market watchers though as Super Thursday is on. A killer combo of UK rates decision, minutes from the Monetary Policy Committee and the Inflation report will dominate traders screens. Normally there is a two week gap between rate decision and the minutes. Information junkies only need apply.
The other big bet!