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A snapshot of today:
What happened today?
ASX 200 closed down a modest 5.6 points to 5197 after an early fall to 5164 on overseas weakness and capital raisings. Westpac Bank was suspended as it is raising $3.5bn. Volume was again lighter than normal. China calm after today’s CPI and PPI economic data. Chinese Plenum at the end of the month. Dow futures up 5 points.
- A surprisingly good day today all things considered. A negative lead from Wall Street pushed the SPI Futures down overnight and the news first thing this morning was Westpac (WBC) raising $3.5bn in an accelerated entitlement issue. WBC also brought out its results early and importantly raised its dividend 2.2% to 94 cents. This was a vote of confidence for the sector and despite some indigestion from the new shares, the banks performed very well. It may be that the market was expecting the WBC capital raise and so investors were happy to bargain hunt as dividend fears recede. The other interesting thing with the WBC announcement was it has moved interest rates up on variable and other mortgages by 0.2%. The banks have long warned that any changes in capital requirements will increase costs and those costs will be passed on to borrowers. Not to deposits mind you, but this is sending a strong message to APRA and the RBA that the bank will march to its own tune. The move by WBC also gave some commentators reason to believe that the RBA will cut rates in November. This looks unlikely given the better economic mood since Turnbull seized power and the fact that any move by the RBA seems unlikely to stimulate the economy.
Stocks and sectors
- The banking sector was very firm given the news from Westpac (WBC) this morning, with National Bank (NAB) +0.9%, Commonwealth Bank (CBA) +0.44% and ANZ +0.49%. Insurers and wealth managers were mixed with HendersonGroup (HGG) -1.25% and Macquarie Group (MQG) -0.59% easier.
- Energy shares were the worst performers today given the falling oil price. OriginEnergy (ORG)-7.42% and Santos (STO) -6.8% singled out after their extraordinary run recently. Materials also eased with BHP -0.52%, RIO -0.69% and FortescueMining (FMG) -1.37%. Lynas (LYC) +26.32%, the blast from the past announced much better results this morning with positive free cash flow of $1.3m and an increase in production to 3171 tonnes and cash receipts of $55.9m.
- In other mining stocks, gold producers were once again in demand led byOceanaGold Corp (OGC) +10.13% and Evolution (EVN) +3.11%, Silver Lake (SLR) +25% and Perseus Mining (PRU) +6.41%
- In the industrials, healthcare was back in favour with strong rallies in Ansell (ANN) +3.56% , ResMed (RMD) +2.29% and Sonic Healthcare (SHL) +3.04%. Utilities and airline stocks were in demand, Sydney Airports (SYD) +0.66% and Transurban(TCL) +0.7% with Alan Joyce giving a lunch time talk helping Qantas (QAN) +1.88% take off.
- Telstra (TLS) -0.7% continued to be sold off following Andy Penn’s AGM and the move by the ACCC on its fixed line business that looks set to cost $80m in profits in 2016.
- Westpac Bank announced a $3.5bn accelerated entitlement issue. The fully underwritten $3.5 billion renounceable entitlement offer has been priced at $25.50, a 13.1 per cent discount to the bank’s dividend adjusted theoretical ex-rights price. The deal will boost Westpac’s closely watched common equity tier one capital ratio by around 100 basis points. The bank raised $2.5bn earlier this year through its DRP and today also announced increase in dividends to 94 cents (up 2.2%) and a 3% rise in cash profits to $7.82bn. Cash earnings in the Australian bank rose 8 per cent, while the bank’s net interest margin was unchanged at 2.08 per cent. The cash earnings were 1 per cent ahead of analyst expectations.
- Rio Tinto (RIO) -0.69% will have to pay more than $200 million in royalties and court fees after losing a legal battle with iron ore magnate Gina Rinehart. The High Court ruled in favour of Rinehart and heirs to her father’s business partner in their pursuit of royalties from two RIO mines in the Pilbara.
- BHP -0.52% is pushing ahead with a hybrid debt raising, looking to sell about $4.2 billion in bonds to institutional investors in the US over the next few days.
- New float – Baby Bunting (BBN) +30.71% came on today with a flourish, opening at 196.5c and hitting a high or 202c before closing at 183c, against the listing price of 140c. The company, which is the biggest retailer of baby goods in the country, raised more than $50m in its IPO. TDM Asset Management, which bought the company in 2007, will retain a 30% stake.
- Treasury Wines Estates (TWE) will pay $754m for “the majority” of Diageo’s UK and US wine operations. Treasury Wine will ask shareholders for $486m in fresh equity while. The remainder of the purchase will be funded via new US dollar denominated debt facilities. The rights issue is a two-for-15 pro-rata accelerated renounceable entitlement offer with retail entitlements trading, priced at $5.60 a share.
- Domino’s Pizza (DMP) +6.91% announced it had bought a French Pizza chain, Sprint, for $55m and is now looking to increase its branches to 3250 in the next ten years from 1506 at present. Pizza Sprint stores will be rebranded to Domino’s during the next 18 months, boosting the number of Domino’s stores by a net 80 to 330 (nine stores will be closed).
- Crown Resorts (CWN) +1.32% after better than expected revenue from the Golden Week celebrations. After months of decline, it may be a turning point with Macau’s estimated average daily revenue of $143m higher than the forecasts.
- iSelect (ISU) +4.5% updated the market on the takeover approach, confirming that it was Providence Equity Partners but no certainty of the proposal going through as yet.
- Kalina Power (KPO) -96.9% recommenced trading today for the first time since November 2013.
- Westpac’s monthly consumer sentiment gauge registered a reading of 93.9 points for October, up from 97.8 points. In September 2013, the index was 11.6% higher at 110.6 points.
- New Zealand budget surplus of NZ$414m. The May budget forecast a deficit of $NZ684 million, after the government had promised a surplus, so it was a good result for the government and a significant milestone in good economic management.
- In China, factory gate prices continue to decline and consumer inflation moderated, poenetially leaving room for further stimulus from the PBoC. The CPI increased 1.6%, down from 2% in August. The PPI fell 5.9% extending its negative read to 43 months. Food price growth slowed to 2.7% whilst consumer prices rose 1.4% and services 2.1%.
- The Shanghai market ended down slightly down 0.56% while Japan fell 1.97% as the Yen gained for the third day running.
- Gold pushing ahead in Asian trade to $1174/oz. Now up 5.9% for October.
- Singapore also eased its policy settings as it narrowly avoided a recession. GDP unexpectedly rose an annualised 0.1% in the three months through September from the previous quarter, when it shrank a revised 2.5 %.
Ahead in Europe and US.
- More US earnings numbers tonight – Bank of America, BlackRock, Delta Airlines, Wells Fargo, Netflix. Intel, JP Morgan and Johnson and Johnson all slightly disappointed last night, citing the stronger USD and global growth slowing.
- A new chief for Barclays in the UK with JP Morgan veteran Jes Staley taking over the throne.
- FTSE 6289 down 53
- DAX 9979 down 54
- CAC 4611 down 33
- IBEX 10062 down 54
- MIB 21914 down 135