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A snapshot of today
What happened today?
ASX 200 closes up 24 at 5170 points on broad based industrial gains after RBA head Glenn Stevens, talks up the economy. Fed keeps rates on hold and takes risk off the table. China behaves and US futures up 17.
- A solid end to the week as the market dipped then gathered confidence following commentary from Glenn Stevens. For the week the ASX200 is up around 2%.
- The Fed kept rates on hold overnight as they focussed on risks to their economy from external volatility and weaker economic growth. This seemed to be a huge anticlimax after the tension building over the last 6 months. With inflation hardly registering on the dial, one Fed member even marked down negative rates on his dot point chart as it looks likely that the zero rate policy will continue for some time to come. This is both a positive for equities and a negative suggesting a less robust US economy.
- The Fed did also downgraded their expectations for both growth and inflation over the next two years which means lower for longer. The Fed slashed its unemployment forecasts down from 5%. It expects the jobless rate to fall to 4.8% in 2016. And it believes unemployment will hold firm at 4.8% until 2018.GDP forecast now at 2.3% for 2016 and 2.2% for 2017
“This is what it sounds like,when the doves cry.”
Interesting that two members are now thinking negative rates
RBA head Glenn Stevens fronted the Senate Enquiry this morning without reading the Fed Statement it seemed, and revealed he was happy with rates where they are at the moment. He also said the economy was moving from mining to other growth drivers but the pace, he acknowledged was slower than he would have liked. He appeared to be alert and definitely not alarmed by events in China. It certainly looks like our rates are on hold for some time and with the bounce in confidence post political manoeuvres, he was optimistic about the outlook.
- Energy shares were one of the only sectors to be in red territory today on the back of falling oil prices. Santos STO) -5%, Woodside (WPL) -0.87% and Origin Energy (ORG) -3.42%.
- In the big miners both BHP-0.77% and RIO -1.42% were in the red as was South32 (S32) -0.96% but Gold stocks were in demand following a good move on the gold price after the Fed failed to raise rates. Newcrest (NCM) +6.94%, Evolution Mining (EVN) +1.62% and Oceana Gold Corp (OGC) +8.2%. Base metal stocks were also better, Independence Group (IGO) +5.03% one of the best performers.
- Banks were back in favour with gains of around 0.5-1% in the big four. Comments from Stevens on the housing market were a relief to banks, he suggested “the rate of growth will gradually come back to the regulator’s 10 per cent ‘speed limit’ on investor lending growth”.
- Insurers also popped up around 1.7%. Wealth managers were also out performing with BT Investment (BTT) +2.52%, Macquarie Group (MQG) +0.91%, Henderson Group (HGG) +1.03% and Challenger Limited (CGF) +0.7%.
- Everyone’s favourite ‘clean and green’ stocks, Bellamy’s (BAL) +2.99% and Blackmores (BKL) -3.52% drew continued strength from the sale of Swisse to a Chinese healthcare group for $1.6bn. Vitaco (VIT) closed +2.44%.
- In other industrials, TPG (TPM) +1.9% hit all time highs as the AGM looms next week with hopes for an update on the recent iiNet purchase.
- Consumer stocks were slightly better, Woolworths (WOW) +0.49 % and Wesfarmers (WES) + 0.0% doing well as did healthcare stocks led by CSL +0.13%.
In company news
- The PNG government today confirmed that they met Peter Coleman from Woodside and would not interfere with the WPL/OSH merger proposal despite the PNG government holding 10% of OSH.
- Sydney Airports (SYD) +1.74% on August passenger numbers.
- Premier Investments(PMV) -3.04% announced a strong result with underlying NPBT up 1.9% with NPAT up 2.7%. An increase in the final dividend to 21c. Smiggle Global sales rose 26% with Smiggle UK a stand out.
- Kathmandu Holdings (KMD) +0.38% as the offer from Briscoe group lapsed with acceptances of only 3.4% on top of the 19.9% they already owned.
- Veda Group (VED) + 31.33% were in focus as Equifax Inc lobbed a non-binding proposal to acquire the company for 270 cents a share cash. The deal is subject to a number of conditions including due diligence and regulatory apporvals.As usual the board has said that it is too early to tell if it will proceed or not but will keep the market informed.
- Boral (BLD) +1.77% the company has reached an agreement with the construction union to end a black ban on the company which began more than two years ago in Melbourne.
Meanwhile in Asia, the MSCI Asia-Pacific index was looking at a one month high, adding around 0.76%. Shanghai up 0.18%, Japan down 1.75% and Hong Kong up 0.19%. Numbers from China suggested that house prices are rising in half of the 70 cities in the survey. New home prices rose in 35 compared to 31 in July. New-home prices in the southern business hub of Shenzhen jumped 5.1 percent from a month earlier, slower than the 6.2 percent advance in June. They gained 1.3 percent in Shanghai and 0.9 percent in Guangzhou, both slowing from the pace in the previous month. Prices climbed 1.1 percent in Beijing, the same pace as in July.
The focus this weekend shifts to the US visit of President Xi Jinping starting next week. This will be his first state visit and it is unlikely that he would like to have his talks with business leaders and Obama framed by a rout on the Shanghai markets. Much like the WWII victory celebrations, it seems likely that the authorities will step in to counter any volatility.
Japan markets are closed until Wednesday next week for holidays.
In Europe opening calls:
- FTSE down 8
- DAX down 33
- CAC down 18
And finally a thought for the weekend, this was Janet Yellen’s horoscope for today she is a Leo.
“You’re the missing piece of the puzzle today, Leo. As a result, people will look to you for answers, Information and new ideas may be flying around, and you may be called upon to make sense of it all. Don’t be afraid to err on the side of the fanciful. This may be exactly the answer needed.”
Have a great weekend
May have a new PM by next week!