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What happened today?

ASX 200 closed up 12.5 points at 5210 as it struggles in the thin air after a strong run. China back on line but not as positive as first expected. 4.16% up in Shanghai with Dow Futures showing a loss of 91.

  • After a strong start with a high of 5256, we had a bout of disappointment which took some of the wind out of the sails. Materials and energy stocks led the way with gains only slightly off the top but banks and financials failed to fire with industrials and safe haven stocks falling away as traders switched to riskier assets with more alpha.
  • Volume was again below average and suggests that not everyone is convinced that this break out is the real deal.

Stocks and Sectors

  • Mining stocks were the stars today as a string of high profile brokers jump on the rally bandwagon. BHP + 3.05%, RIO +1.92% and FMG +5.24% all doing well but the star of the big miners was recently divorced South32 (S32) +8.04%. Second line resource stocks also did well, Western Areas (WSA) +9.16% presented at the Australia Nickel Conference helping their cause with Iluka resources (ILU) +2.06% and Independence Group (IGO) +5.99% also doing well.
  • Energy shares continued their rally despite the oil price slipping overnight on US storage numbers. Santos was the performer as the Origin Energy (ORG) +5.41% Issue looks to have renewed hope that there is good demand in the sector. Origin Energy and the rights (ORGR) +15.46%. Even ERA +24.24% rebounded as bargain hunters searched for stocks that had been left behind in the current squeeze. Senex(SXY) +3.23% and Sino Gas (SHE) +6.33% also doing very well. Gold stocks took a breather as the higher AUD and the lower bullion price took its toll. Newcrest(NCM)-3.98%, Evolution Mining (EVN) -4.38% and Ashanti Gold (ASH) -7.03%.
  • In the industrials it was a mixed bag, gaming stocks did well as Macau gaming was hoped to be a beneficiary from the Chinese holiday and fears that the clampdown from authorities may be overdone. Safe haven stocks that have been performing very well came in for profit taking, Sydney Airports (SYD)-1.99%, Transurban(TCL)-1.91%, Macquarie Atlas Road (MQA) -3.12%,Qantas(QAN)-3.23% and AGL Energy (AGL)-1.41% all falling foul of the trend. Even high flyers Bellamy’s (BAL) -2.14% and Blackmores (BKL) -6.29% suffered today in risk on trading.
  • Banks suffered a little as Macquarie Group (MQG) put their capital raise to bed following the purchase from ANZ +0.76% of the Esanda Motor Vehicle business.Bank of Queensland (BOQ) +7.32% were a highlight given the result and the rise helped other regional players like Bendigo and Adelaide Bank (BEN ) +2.3%. REITS were in the doldrums with some of the wealth managers also suffering. Henderson Group (HGG) -0.52% and BT Investment (BTT) -1.77% the worst of the group.

Corporate News

  • Macquarie Group (MQG) shares in trading Halt. MQG agreed today to buy the Esanda Dealer Finance business from ANZ for $8.2bn.This will give Macquarie motor vehicle assets of around $17bn. The group announced a $400m capital raising through an institutional book build and a SPP.
  • Bank of Queensland (BOQ) +7.32% stunned the market this morning with a better than expected cash profit (up 19%) with cash earnings 2% above forecasts with bad debt charges flat at 18bps. A number of one offs may have helped including the acquisition of Investec’s loan book last year but the market cheered and this may bode well for other bank results.
  • Bluescope Steel (BSL) +3.24% announced employees had voted to accept a 3 year pay freeze to ensure the company survives. The Port Kembla plant is under threat of complete closure with a loss of all 5000 jobs and a huge local impact. The company is yet to agree to the terms.
  • Bionomics (BNO) +19.57% announced a deal with global giant Merck &Co for a strategic partnership. The US pharma has made a $9m investment in the company that is developing treatments for chronic and neuropathic pain using their drug platform. Merck also bought 21.7m shares at a touch over 59 cents.
  • A2 Milk (A2M) decided to take a little cream off the top today as it announced a NZ$40m capital raising to fund expansion plans in Asia. The price will be determined by a bookbuild, which has been underwritten at a floor price of NZ 67 cent a share. The milk producer also recently increased its debt facilities from $3 million to $10 million to give it additional flexibility in its expansion plans.

Economic News

Mining states continue to see weakness in housing

Apartment renters faced an increase of 3 per cent over the year to $510 a week, making Sydney the most expensive capital to rent a unit in the country.

Asian Markets

  • China came back on line today after the ‘Golden Week’ holiday and although a positive reaction it was somewhat muted given the large rises from other markets.
  • It looks likely that Alibaba Group and Tencent will be announcing they have combined two of their start-ups in a $15bn deal offering services online. This follows their deal earlier this year when they combined Didi and Kuaidi Technologies in a ride sharing company to take on Uber.
  • Iron ore was up 3% with steel mills restocking after the holiday. The most traded Iron ore future on the Dalian Commodity Exchange was up 2.6%with other commodity futures also playing catch up Copper up 3.2% after being 4% to the good.
  • Shares in Japan were choppy on Thursday falling 1.06% after official figures showed Japanese firms could be spending less on physical assets. Core machinery orders, a leading indicator of capital expenditure, fell by 5.7% in August, compared with expectations for a rise of 3.2%.

Ahead in Europe and the US

  • News late last night from Deutsche bank on big write-downs of EUR7bn and the potential to scrap the dividend will hurt sentiment initially
  • Tonight the US earnings season kicks off with Alcoa the traditional first cab off the rank.
  • The market forecast is for EPS of 13 cents less than half of the number from the same time last year. Revenue number is expected around $5.56bn down from $6.24, we are also expecting more details about the company’s plan to split into two.

ASX 200 Index Today                                  Aussie Dollar Today US71.71c

 

  • Volume was $5.10bn Daily (average $4.3bn)
  • Dow Jones Futures down 96 points.
  • Dow Jones was up 122 points overnight.

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