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ASX200 drops 135.3 points to 5474.8.Local results and capital raisings smash the banks. Down nearly 3.8 % for the week.US Futures up 1.

Another day that we would rather forget much like the Cricket team. Michael Clarke couldn’t decide whether he should bat or bowl on the first day. So he did both. Much like our market today as both resources and financials got much the same treatment as Steve Smith and Chris Rogers.

The action today

  • The opening had more blood in the banks than an episode of Game of Thrones, as the ANZ rights issue completely bowled the market out. A massive 7.49% fall in the ANZ share price, the worst in almost seven years was the lowlight. A huge 56 points of the fall was in the big four. Not sure what was worse, the slight earnings miss, the outlook statement or the capital raising. Seems that the stock the company placed at 3095 cents was instantly sold down. Not quite sure why an institution would take stock at that price then turn tail. This negativity infected the rest of the banks like wildfire. Commonwealth Bank (CBA) -3.84 %fell heavily as results are due next week and possibly a capital raising. National Bank (NAB) – 2.29% were the best performer relatively. Looking at a rudimentary bank index, just adding up the share prices of the big four, it is back to around $177.Topped out at $212.Back in September 2011, you could have bought a bucket of bank shares for $100.This does not include dividends. At the same time you could buy a similar bucket of resources, BHP, RIO and FMG for $100.Now $81!

  • After the blood bath this week as the July rally has nearly been obliterated in a week we should see some recovery with high volumes today pointing to a blow off bottom. We shall see.

Price action in ANZ with the huge gap today

  • In resource land, we saw RIO -0.52% buck the trend following their results last night. Much has been written about the numbers and we have a feature on them in the newsletter, so no point in rehashing it, however the market seemed happy with the dividend capital expenditure, cost cutting and outlook. Over the fence at BHP -2.85 % things were not so warm and fuzzy, falling away as did other resource stocks. Fortescue Mining (FMG) -1.83%, South32 (S32) -2.31% and Newcrest (NCM) –2.66% all suffered as expected with gold stocks continuing to fall away. Energy shares hit again with falls of around 1% for the majors although Origin (ORG) -3 % stumbled more.
  • In industrials, there were few places to hide with losses across the board. Crown Resorts (CWN) +1.03% bucked the trend on Macau Gaming numbers from Melco Crown with net revenues in the second quarter of 2015 falling 24 per cent to $US916 million ($1.25 billion), missing a consensus forecast of $970 million, due to declines in both high-end and mass-market earnings at its casinos. Its closely watched property earnings before interest, taxes, depreciation and amortisation fell 35 per cent to $US204.9m.

Melco Crown starting to turn the corner for Jamie Packer?

  • Other industrials to shake off the winter blues included Slater and Gordon (SGH) +3.15%, Shine Corporate (SHJ) +1.6% and iSelect (ISU) + 0.56%.
  • There was talk yesterday that a big lender of stock in Slater and Gordon had pulled back the facility for nearly 16m shares. This caused a huge short covering rally and explains why the share price bounced so positively yesterday from 261 cents and held firm today. Looks like the battle is on between the shorts and the lenders of stock. This could catch on in other highly shorted stocks.

Slater and Gordon shorts pulled yesterday?

  • Ramsey Healthcare (RHC) -4.7 % issued an update following French subsidiary results and reaffirmed their forecast guidance given in February for Core NPAT and Core EPS growth of 18% to 20% for full FY2015, including nine months of Generale de Sante where Ramsey has a 50.9% controlling interest.
  • Orica (ORI) – 16.94 %produced a shocker today. Cannot quite understand why the market could think that these guys were immune to the collapse of mining services business. A huge write down of around $1.65bn with a two year profit outlook which is pretty dismal. Once again the focus was on costs and trying to put the best spin on a terrible result. There is no escaping the fact that explosives seem to have blown up in their face. We again heard the words from a CEO ‘Challenging environment’. This seems to be the phrase most trotted out this reporting season already.
  • Virgin (VAH) – 0.5 %also reported today with some signs for Qantas (QAN) -1.82 %.They are rejigging their international network with Tigerair taking over some routes. Looks like a fare war with Qantas will break out with $89 fares to Denpasar. The full-year loss for Virgin of $49 million compares with a loss of $213 million previously. While a fall in oil prices led to a $60 million benefit for the airline, it was partly offset by the negative impact from a weaker Australian dollar.
  • Hills ltd (HIL) + 0.5 % has had to take a $94m write-down after former CEO Ted Pretty tried to reposition the company for the 21st Century. Not quite as successful it seems.
  • In economic news the RBA released its Statement of Monetary Policy. The big story there was not only the downgrading of the growth outlook for the economy, but also its forecasts for the unemployment rate set to remain little changed from the current 6.3%.They cut GDP forecasts by 0.5% to 2.5% to June 2016.They also focussed on lack of population growth and raised their inflation forecasts but overall they saw signs of a more positive economic environment over the last few months. Seems that rate cuts are now well and truly off the radar. The AUD reacted positively to the minutes rallying to 73.75.
  • Heading off to Asia, The Bank of Japan refrained from expanding monetary stimulus as Governor Haruhiko Kuroda bets the world’s third-biggest economy will emerge from a recent soft patch and inflation will pick up. They will continue to pump up its monetary base at a yearly pace of 80 trillion Yen. The Nikkei up 0.37%
  • China was firmer, up 1.9%, as the measures from authorities continue to stabilise the market. Maybe we could see similar moves here the way the market is falling .Looks like the 3500 to 3600 level is the line in the sand that the PBOC is focussed on.
  • Tonight we get the all-important jobs number from the US. Forecast is for around 225,000.Unemployment expected to hold at 5.3% Expect some weakness in London on mining stocks again. But the super Thursday update from the Bank of England will be a major focus today. In European data Friday, economists expect to see that industrial production edged higher in Germany but slowed in France. The U.K. trade balance is forecast to widen in June.
  • Hopefully we could get some better news from Trent Bridge and maybe the Wallabies too. May help the market find its mojo .A huge week for results next week, CBA will be the focus. JBH on Monday.

Clarence

XXX

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