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A snapshot of today:

 

What happened today?

ASX 200 closes up 15.5 points at 5263.8 in another impressive ‘come from behind’ day as Santos soars on a takeover bid. Energy shares the big winners despite falling oil price. Banks turn positive late after CBA raises mortgage rates. AUD tests 72c as China steadies. Dow futures up 33.

A disappointing start seemed on the cards, but the news from Santos (STO) +16.18% on the takeover approach was enough to send the energy sector soaring with Origin Energy (ORG)+5.71% (next?) and Karoon Gas (KAR)+7.65% the other standouts. Other Cooper Basin players benefited from the attention, Drillsearch (DLS)+2.34% and Cooper Energy (COE) +10.0% just two in the spotlight. Good numbers from South 32 (S32)+3.1% also helped sentiment in a mixed market. We saw a low of 5217 early before bargain hunters appeared in energy stocks. Light volumes again at just over $3.4bn in another slow day.

  • Financials remained under pressure with modest rises in Commonwealth Bank(CBA) +0.77% and Westpac Bank (WBC) +0.91%. Commonwealth Bank has joined Westpac raising rates on mortgages by 0.15%, slightly less than Westpac Bank.
  • More profit is taking today in the gold sector led by Newcrest (NCM) -3.88%, Evolution Mining (EVN)-4.62% and Oceana Gold Corp (OGC)-6.11%. Lynas(LYC)+15.69% was a big winner today as were Arrium (ARI) and Grange Resources(GRR) +13.04%. Others though fared worse with Western Areas (WSA) -2.35%,Independence Group (IGO) -2.57% and Atlas Iron (AGO) -3.13%.
  • Big miners eased on weaker commodity prices with BHP -0.54%, RIO -0.23% andFortescue Mining (FMG) +0.4%.
  • In the industrials, consumer stocks were weaker, Crown Resorts (CWN) -2.5%,  Domino’s Pizza (DMP) -2.69%, Ardent Leisure (AAD) -3.7% and Metcash (MTS) -3.66% and Greencross (GXL)-6.9% after its AGM today and trading update.
  • Media stocks took a hit after the ACCC said yes to the 15% investment in TEN by Foxtel. Nine Entertainment (NEC) -4.42%, Seven West Media (SWM)-7.59%, APN News and Media (APN) -3.77% and STW Communications(STW) +0.36% all in the ‘not happy Jan’ camp today.
  • In the food space, Capilano (CZZ) -5.61% was a big loser today on light volume but darling Blackmores (BKL) +2.55% and Bellamy’s (BAL) -0.13% both mixed.
  • Medibank Private (MPL) -2.81%continued to slip away following the surprise resignation of George Savvides yesterday.
  • Speculative stock winner of the day goes to Primary Option (POP) +87.5% after announcing they had secured another $700,000 from professional investors and appointed two new independent directors to the board. Both stockbrokers, with good financial industry experience that will help this small cap legal industry software company move forward.

Corporate news

  • Santos (STO) +16.18% announced this morning that they had been approached by the shadowy Middle East backed private equity group called Scepter.The bid valued STO at 688 cents and has been described by the Santos board as ‘opportunistic and failing to reflect the fair value of the company’s assets’. Naturally the company would say that, but it appears the bidder is serious as it has enlisted ex-CEO John Ellice-Flint to run the company if they gain control. The risk was always that, having opened their data room to asset sales, a predator would appear, particularly as they are on the cusp of significant cash generation and are effectively without a CEO, as David Knox is set to leave. Bear in mind that only a month ago STO were trading at around 400 cents.

  • South32(S32) +3.1% restated guidance this morning with a commitment to cut 25% off its group and unallocated costs. The review of the company’s South African assets is continuing, but alumina production increased 11%, and silver production at the Cannington mine was 20% up. Lead and Zinc production was steady, but sales of zinc were strong, up 27% from last year.
  • TEN was given the all clear today to proceed with its deal with Foxtel. The ACCC has given the ok for Foxtel to buy up to 15% of TEN as it saw no breach in media diversity or control rules. Maybe because no one watches TEN anymore.
  • Wesfarmers (WES) +0.54% Coles, has increased its share of the $90 billion groceries. Total sales rose 4.7 % to $7.6 billion in the three months ended September 30, exceeding market growth around 2.8 %, Food and liquor prices at  Coles fell 1.3 % during the quarter,  the strongest level of deflation in two years. Kmart also had a record quarter, with same-store sales rising 8.6 % and total sales by 12.5 % to $1.1 billion.
  • Infomedia (IFM) -7.23% held the AGM today The chairman commented on the decision to remove the CEO due to disappointing revenue flow through from a strong sales pipeline. He was offered another senior management role, but it is hard to go from CEO to anything else but resignation. The company believes that the recent fall in the share price is linked to this period of management and board changes. They realise they need to increase the investment in key areas like R&D. The dividend policy has been previously set at 75-85% of NPAT, and that will remain unchanged.

Economic News

  • NAB’s index of business conditions rose 6 points to +11 in the three-quarters to end September, based on its quarterly survey of more than 920 firms.
  • Corporates were also more upbeat on the outlook, with the index of expectations for the next three months rising to +13 and for 12 months at a lofty +25.As a result,  many expected to lift their investment spending with the index for capex plans over the next 12 months rising to +20.

In Asia

  • China stabilised after heavy falls in the last hour or so of trading yesterday at our close it was unchanged with Hong Kong coming back online today after a holiday yesterday, down 1.00 %.
  • Commodities continue to fall away after short-term rebound.

  • The Shanghai Composite had rebounded 9.4 % in October, heading for the steepest monthly advance in six months, amid speculation the government will loosen monetary policy and announce more overhauls of state-owned enterprises to bolster the economy. The Communist Party meets for its fifth plenary session starting Oct. 26.
  • Margin traders reduced their holdings of shares purchased with borrowed money on Wednesday, halting the nine-day rising stretch that was the longest increase since June. The outstanding balance of margin debt on the Shanghai Stock Exchange dropped 0.8 % to 609.6 billion yuan (US$96 billion).

Ahead in Europe and the US

  • Once again it is back to the future today as the US debt ceiling starts to come into focus with a November 3rd deadline on emergency measures. A US policy agency has said the US will run out of cash between November 10th and 19th. Seems like only yesterday we were all worried about the debt ceiling and then gone, solved. However, it is back again especially tricky as Republican Leader John Boehner is set to resign on October 30th. Pop in a Fed meeting and the Chinese Plenum and early November is shaping up as a major decision point. We have all seen this playbook before. Even Jarred Hayne can see this one coming, it is just a question of how much suspense we can take before the House signs off on the debt levels.
  • In Europe, all eyes will be on the ECB for any signs that they will expand the stimulus program. Repeat after me,’whatever it takes’ QE Forever?
  • President Hollande has said that Greece needs a debt relief discussion. Remember Greece?

Ahead in European Markets

  • FTSE – 6327 down 22
  • DAX – 10205 down 33
  • CAC – 4675 down 20

Clarence

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