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END OF DAY REPORT

A snapshot of today:  

market today 27.8

 Defensive stocks in focus

What happened today? 

  • ASX 200 closes up 60.5 points to 5233.3 for the third day of gains. Volatility low after initial surge. Good corporate results from Flight Centre and Retail Food Group. China firmer and calmer, up 0.8% as enthusiasm wanes. US futures up 12. Last day of earnings tomorrow.

27.8 chart

Today, a tight range after the jump

  • Once again we saw a huge jump on the open hitting a high of 5268 before some profit taking set it. Hardly unexpected and we would suggest Friday will see some more backing and filling before the weekend when anything could happen. Volume suggested that normal service is starting to be resumed but volatility will continue.
  • Banks were once again the stand out sector with ANZ +1.78% and Westpac (WBC) +1.15% shining through with insurers also joining in, QBE Insurance +3.27% the best of the best. Wealth managers also shone following good news from Perpetual (PPT) +6.06% on results and a good bounce in Magellan Financial (MFG) +2.04% and Challenger (CGF) +2.51%.
  • In industrials we had a broad based rally with very few spots of red. Consumer staples were stronger with Wesfarmers (WES) +2.17% outperforming Woolworths (WOW) +0.6% by a factor of three.
  • REITS were firm and Healthcare stocks also did very well following results from Ramsey Healthcare (RHC) + 5.54%. Healthscope (HSO) +7.51% a standout. Even Ansell (ANN) +4.65% bounced substantially.The Utility sector was up by more than 3% as defensives shine.
  • Resources were positive led by BHP +0.5%, South32 (S32) +1.36% and OZ Minerals (OZL) +2.25% despite falls in commodity markets. Even Newcrest (NCM) +0.46% managed a rise although other gold stocks were not so lucky. Evolution Mining (EVN) –8.46% said its annual profit doubled to $100m and offered shareholders a 1 cent dividend however there is a large stake from Newcrest potentially overhanging the market and ensured a miserable day.
  • Energy shares followed the trend with the exception of Santos (STO) –2.14% as media rumours swirl on asset sales and capital raisings. The big winner was Origin Energy (ORG) +3.17% and the traders favourite Liquefied Natural Gas (LNG) +7.05%.In micro caps Paladin (PDN) +18.18% surged.

In company news:

  • Nine Entertainment (NEC) –3.45% reported a fall of 2.9% to $140.1m with David Gyngell saying it fell ‘short of expectations’. Net profit in the year ended June 30 fell 2.9 per cent to $140.1 million from the year-earlier $144.2 million. Revenue rose 2.6 per cent to $1.61 billion. Analysts were expecting profit of $141.3 million and revenue of $1.58bn
  • Flight Centre (FLT) +11.52% reported a 3.4 per cent fall in underlying profit before tax to $363.7 million, in line with its latest earnings guidance, but pleased the market by forecasting its earnings will grow 4 per cent to 8 per cent this financial year. The company has forecast its underlying profit before tax will rise to between $380 million and $395 million in the current financial year, excluding impairments and unforeseen items. That is above analyst expectations of $374 million before the result. The 2014-15 result was the second best in the company’s history. No change to the dividend at 97 cents.
  • Retail Food Group (RFG) +10% had a great result as profits rose to $55.1m, nearly 50% higher than last year. A positive outlook was key too, as they look for a 20% rise for next year and a big expansion plan with 230 new outlets in the pipeline. These guys are the owners of Gloria Jeans, Brumby’s and Di Bella Coffee.
  • MYOB (MYO) +7.1% announced a profit of $19.8m up nearly 40% with a record uptake of cloud solutions with subscriptions at 142,000 in June and rising to 180,000 in August. Taking into account the costs of listing the company in May, a statutory loss of $65m was reported.
  • Ramsey Health Care (RHC) +5.54%. The company said its full-year net profit rose 27 per cent to $385.54 million from $303.76 million. Underlying net profit climbed 19 per cent to $412.09 million from $346.15 million, helped by new acquisitions and expansions. The dividend was unchanged at 60.5 cents. Revenue rose 49.8 per cent to $7.4 billion while group earnings before interest and tax rose 37.4 per cent to $803.89 million. Core earnings per share of $1.96 came in ahead of analysts’ expectations of $1.94.
  • Perpetual Group (PPT) + 6.06% a solid result up 50% lifted by strong market activity and a rise in funds.Net profit rose to $122.5m. Final dividend of 125 cents up 37%.
  • Transfield Services (TSE) +3.48% operator of detention centres and infrastructure company reported a 11.6% drop in profits largely because of provisions, one off items and higher tax. No dividend and a profit of $48.6m down from $55m.
  • Boral (BLD) –7.96% very disappointing and comments from CEO didn’t help. EBIT jumped 21% to $357m with a 48% rise in full year profits to $257m.Final dividend of 9.5 cents. However a conservative outlook was enough to dampen enthusiasm with flat US earnings forecast looking at a disappointing outcome for FY16 of $345m against expectations of $393.The CEO warned that the construction industry faces a crsis.If they cannot make money in this environment then they have no hope. That may explain the share price reaction.
  • Billabong (BBG) +2.38% returned to profits after four years in the wilderness. A bottom line of $4.15m is at least a start. Sales rose to $1.05bn, but the result fell short of some expectations but still managed a small rise.
  • On the economic front, the ABS released its latest capital expenditure numbers showing the big slowdown in resource related investment. The sector was down 11.3% whilst manufacturing was also weak down 3.4% but a good pick up in services leading to an overall drop of 4%

cap 27.8

Mining investment continues to show big falls.cap 27.8 1

Services up 4.4 % saves the day.

  • Meanwhile in Asia China steadied up 0.8% with Japan up 1.34% and Hong Kong up 2.23%. The PBoC has injected #23.4 bn into the financial system to stop the falls and stimulate the economy. The great Meltdown of China since June is around $5 trillion which is more than the combined market caps of the other BRIC countries at $2.8 trillion.

Early calls for European markets:

  • FTSE up 110
  • DAX up 230
  • CAC up 94

And finally, volatility looks like it has passed its peak judging by moves in the Australian Volatility Index. Hopefully. US GDP numbers 2nd September will be the key.

And the long term chart of Volatility

vix 27.8

Short term volatility may be easing

  • Volume was $6.8bn Daily (average $4.3bn)
  • Dow Jones Futures down 26 points.
  • Dow Jones was up 619 overnight.

Clarence

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