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A snapshot of today:
What happened today?
ASX 200 closes up 87.8 points at 5351.6 as ‘Super Mario’ opens his wallet. Again. Strong gains across the board. Banks back in focus. China barely changed but Tokyo up 2.3%. US Futures up 36.
The market burst out of the gates this morning buoyed by better than expected earnings numbers from the US and more importantly news that ECB President Super Mario will do ‘whatever it takes’ again to stimulate the flagging European economy. Once again we see the markets beholden to central bank stimulus as perhaps we have entered ‘QE Forever’ territory. Despite a little profit taking the gains were locked in and heavy volume was an encouraging sign as cashed up buyers are being dragged into the bull pit. A rising tide lifted all boats today. A high of 5373 mid morning
- We have now seen three major M&A deals in the energy space in a matter of weeks. This is despite the lower oil price. Oil Search (OSH) +0.13%, Santos (STO) +2.22% and Drllsearch (DLS) +25.95%/ Beach Petroleum (BPT) +3.01%. There won’t be many oil companies left at this rate.
- In industrials today, Woolworths (WOW) +3.81% spiked following reports in the media that private equity buyers are looking at taking Big W out. KKR and others look to be very active in the buyout space, and despite Australia being out of investor favour, it looks like the smart money is finding value and good deals.
- Banks were back in the black today as they have all moved now to raise mortgage rates to cover the cost of capital raisings. Seems there was growth to their profit numbers after all. Australia and New Zealand Bank (ANZ) +1.05% were the last to raise rates this afternoon with a rise of 0.18%. They are all different. Good point of differentiation, do not want to be accused of acting in concert.
- Asset and wealth managers were in demand Magellan Financial (MFG) +3.62%,Henderson Group (HGG) +4.06% and BT Investment Managers (BTT) +7.68% the stand outs. Insurers less exciting but Medibank Private (MPL) +0.83% bounced back after the departure of George Savvides.
- Media stocks recovered after heavy losses yesterday following the ACCC decision onTEN. Fairfax (FXJ) +4.42%, APN News and Media(APN) +4.9% and Nine Entertainment (NEC) +2.97%. Movie goers to Star Wars and Bond will bolster the coffers of our two listed cinema companies Amalgamated Holdings (AHD)+4.96% and Village Roadshow (VRL)+3.65%.
- Resource stocks were back in demand today as ‘Risk On’ came back in favour. Fear is leaving the building with Elvis and as more central banks move to stimulate economies again, asset prices will rally. BHP +2.37%, RIO +1.84% and Fortescue Mining (FMG) +3.2% better despite lower iron ore prices with South32 (S32) +2.34% also doing well. Gold stocks were once again in demand with Evolution Mining (EVN) +3.87%, Resolute Group (RSG) +7.14% and St Barbara (SBM) +3.97% powering ahead. SBM is now up 20 times its December 2014 price of 7c.
- The speculative stock of the day is Impact Minerals (IPT) +32.26% following high-grade drill intercepts its Broken Hill project. 10.4 g/t platinum,10.9 g/t of gold in a 1.2 m interval and other good results from a 29m interval.
- Strange but true, BHP +2.37% in its London AGM said that it would look at raising debt levels to pay the ‘progressive’ dividend it has promised. Strange days indeed. In the good times, they were really stingy and in the bad times they are borrowing money to be generous.
- National Bank (NAB) +1.92% moved today to raise mortgage rates by 0.17%, splitting the difference between Commonwealth Bank and Westpac.
- News today of the arranged marriage of Cooper Basin players Beach Petroleum(BPT) +3.07% and Drillsearch (DLS) +25.95%. Matchmaker Kerry Stokes has pushed these two together and let no one cast them asunder. The continued M&A activity in the oil and gas sector had happened far quicker than we thought when we wrote on the attractive second-tier players this morning, pre the announcement. Terms of the deal have been agreed, and shareholders are recommended to take the 1.25 Beach shares for every Drillsearch they own. The deal will create a $1.2bn company with a combined production of 12.1 m barrels of oil equivalent.
- Santos (STO) +2.22% downgraded its production guidance to between 57-59 m barrels. Capital spending will be around 10% lower at $1.8bn. LNG sales volumes had more than doubled this year, thanks to PNG LNG and the start-up of GLNG. Production in the September quarter was 14.5 million boe, up 4% on a year earlier. But the drop in oil prices meant sales revenues were 24% down from the third quarter last year, at $808 million.
- Qantas (QAN) +0.0% AGM today. Fuel is the biggest cost to any airline and it looks like QAN is expecting a credit card bill when it fills up of about $3.61bn and the worst case of $3.81bn including the cost of its options and the use of its Coles shopper docket. In addition to a better fuel bill, it also expects a better operating environment with a 1.1% rise in seats filled across its network. Expectations are for pre-tax profits of around $1.69 bn this financial year.
- ResMed (RMD) +0.39% reported a 3% drop in net income to $US80.4 million ($112 million) for the three months ended September 30 from the year-earlier period. Revenue for the first quarter of financial 2016 year rose 8% to $US411.6 million, led by strong growth in the Americas. Gross margin declined to 58% because of an unfavourable mix of product sales and declines in average selling prices. Research and development expenses increased by 12% on a constant currency basis to $US27.2m, while constant currency selling and administrative costs rose 11% to $US111.1m. It declared a quarterly dividend of 30c.
- The co-founder of shopping centre giant Westfield, Frank Lowy, is retiring as chairman of the company’s Australian business. Lowy will step down as Scentre Group (SCG) +2.49% chairman at the company’s AGM in May 2016, ending more than 50 years at the top of the Australian shopping centre business
- OZ Minerals (OZL) +5.57% raised its full year copper production target to between 126,000 and 131,000 tonnes of copper at its Prominent Hill mine. The company has recently been raided by KKR, taking a 10% stake. Aren’t they busy boys these days.
- Average new home prices in China rose for the fifth month in a row in September, increasing 0.3% from August. Home prices in September fell 0.9% compared with a year earlier, slowing from a 2.3% drop in August. New home prices in Beijing in September rose 4.7% from a year earlier while those in Shanghai increased 8.3%.
- Chinese house prices showing risk of a crash is receding.
- China’s Huarong Asset Management Co., the nation’s biggest bad-loan manager, raised US $2.3bn after pricing its Hong Kong initial public offering near the bottom end of a range. Huarong is one of four Chinese companies set up by the government in 1999 to clean up state-owned banks.
- Meanwhile in Japan, the years biggest float in Japan Post and its banking and insurance businesses is set to raise US$11.7bn. 70% of the issue is being sold to retail investors. Japan Post Bank is priced at 0.47 times book value, while the figure for the insurance unit is 0.67 times. If the holding company’s shares are also set at the top of its range on Monday, it will be valued at 0.41 times. Japan Post Holdings will yield 3.3% annually in dividends, the company said. The banking and insurance arms will deliver 3.4% and 2.5%, respectively. In an environment when interest rates are next to zero in Japan no wonder the retail investor is interested.
It is not all about China, South Korean economic growth hit a five-year high in the third quarter of the year, coming in ahead of estimates. The country’s economy grew 2.6% in the three months to September over the same period the previous year. From the second quarter, growth was up 1.2%, marking the biggest jump since 2010.
Ahead in Europe and the US
- After hours results from Microsoft,Google and Maccas wiil help lift Euro and US markets. Microsoft is at a 15 year high.
- Alphabet, the new parent company of Google, has reported profits up almost 50% for the third quarter. Net income was $3.98bn, up from $2.74bn. Revenue was around US18.7bn up 13%.
- More deals being done. Liberty Global looks set to buy Caribean Telecom in a GBP3.7bn deal. Caribean Telecoms used to be known as Cable and Wireless in the 80’s.
European banks are being too cautious as they are losing out to US. Maybe that is why we have Draghi about to deliver some Xmas cheer.
Ahead in European Markets
- FTSE-up 26 to 6402
- DAX-up 129 to 10621
- CAC-up 46 to 4849