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A Snapshot of today:
ASX 200 finishes up 84.8 at 5115.2. Woodside bid for Oil Search and banks recover some mojo. US Dow futures up 103 with small gains in China (0.46%) despite weak export data. Market closed on its highs in thin volume. 5000 continues to be the line in the sand.
- A surprisingly good day as the leaked takeover of Oil Search by Woodside helped turn market sentiment around. The energy sector was the stand out performer with Oil Search (OSH) +17.24% and Woodside (WPL) -3.01% slipping on the news. It is offering one WPL share for every four OSH shares. Would imagine this is just the start of the negotiation and we might even see other players joining the fray for its strategic PNG assets. Importantly the PNG government holds a 10% stake in OSH so its signature is vital. This one has a long way to go, but other stocks in the sector likeSantos (STO) +5.25% rallied hard, punishing the shorts. News it had opened a data room following a number of corporate approaches was welcomed as it grapples with either asset sales or an equity issue.
- Still in the energy space, Buru Energy (BRU) +8.82% rallied hard on a conference presentation, AWE + 7.52% on BassGas production numbers exceeded expectations as Yolla5 comes on line.
- In other resources, iron ore continues to confound the commodity doomsayers asBHP +2.11% and RIO +2.18% drew some strength from the capital raising announced last night by Glencore and production cuts to some of its copper operations helping boost the metal price.
- The Glencore issue is an attempt to shore up the company’s credit rating and balance sheet. Both BHP and RIO are more conservatively run as can be seen by their debt levels.
No dividend and a US$2.5bn rights issue to hit Glencore. Big miners continue to do it tough.
- In industrials, REITS were strong as were wealth managers and insurers. AMP + 1.96%, ASX + 2.49% and Macquarie Group (MQG) +1.66% the stand outs. Banks though were a big winner today as the pricing period for the ANZ SPP and the last day for CBA rights holders to pay, played out. Commonwealth Bank (CBA) +2.56% and Australia and New Zealand Bank (ANZ) +3.07% the two in the spotlight.
- Telstra (TLS) +1.43% was a standout performer today as bargain hunters stepped in,TPG (TPM) +3.05% pushed higher as brokers are warming to the cost out integration of iiNet story.
- In corporate news today the $11.65bn proposed merger of Woodside and Oil Searchgrabbed the headlines. Analysts will have lots of fun if the deal goes through renaming the new entity. Maybe Woodsearch?
- Billabong (BBG) –1.74% was hit hard on news of the resignation of director Mathew Wilson, citing a conflict of interest. The conflict appears to be related to Oaktree Capital and its shareholding and portfolio, following the release from escrow of nearly 330m shares.
- Consumer confidence plunged last week after weak economic growth and retail data sparked worries of a possible recession. The weekly ANZ-Roy Morgan consumer confidence index dropped 5.8% to its lowest levels since July 2014, after the first Coalition budget.
- Meanwhile in Asia, we saw some disappointing export numbers from China. Overseas shipments fell 6.1% compared to an 8.9% fall in July. Imports dropped 14.3% leaving a trade surplus of 368 bn yuan. It looks like China will be unable to meet its export growth target for the year and may prompt more moves from the government to devalue the yuan. The stock market reacted slightly negatively at first before a rally towards the close. The authorities continue to try to stem the losses with the latest attempt to implement a ‘circuit breaker’ mechanism. Trading would be suspended for 30 minutes when the market rose or fell by 5%. If the index went up or down by 7% or more, trading would be suspended for the day. The mechanism could only be triggered once a day.
- Meanwhile Japan was weaker on a third straight day of gains in the yen –2.43% erasing all the gains for the year, Hong Kong was mildly positive +0.67%. Japan’s economy contracted 0.3% during the quarter, compared to original calculations of a 0.4% contraction. The revision beat market expectations for a contraction of 0.5%. It also revealed a revised contraction in private consumption on Tuesday, to 0.7% from a previous estimate of a 0.8%.
How the markets have fared in trillions of dollars of value lost
- In an attempt by the authorities to prop up the Chinese stock market is has been estimated that they have spent USD 236bn. Since its June highs the index has dropped 41% but is still up 3% on the year.
Estimates for the opening in Euro markets:
- FTSE 6085 up 10
- DAX 10137 up 28
- CAC 4559 up 10
German Trade Balance numbers out this morning for July: EUR 25.0 bn v expected EUR 23.5bn.
And finally, brokers and commentators appear to be dusting off their buying pads as they continue to highlight the oversold nature of the market. This chart from Deutsche bank shows the cheapest sectors on a long term average basis with resource exposed and energy stocks trading a long way away from the norm. Food for thought, but the Fed meeting and China concerns will continue to weigh.