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A snapshot of today:
What happened today?
ASX 200 down 95.5 points to 5119.5 on weak banks and BHP. Santos taps the market for $2.5bn in a long overdue rights issue. Job ads show no need for a rate cut. Regional strength was once again ignored as worries persist on commodity prices and the bank growth outlook. China pushes ahead up 1.7% with the Japanese Nikkei up 2%. US futures up 15.
Another dismal start to the week and we’ve now have had 7 down days out of 10. After a tentative start we went from bad to plain horrible in the space of a few hours. ANZ job ads didn’t help the already weak sentiment, showing the RBA will struggle to justify any rate cuts. At one point we were in the pavilion clapping as the century came up on the scoreboard before some bargain hunters appeared to take some of the sting out of the fall. We did see a low of 5102 before the rebound but it faded into the close. Volumes were strong for a Monday which was a worry. Santos tapped the market for $2.5bn, certainly not helping, but banks continue to lose more friends as growth outlook clouds. There were also some rumours of an international fund switching out of Australia and into Japan.
Bond markets are proving interesting with three year yields spiking to 2.063% to its highest level since mid July.
It seems that overseas investors are selling Australia by the dollar as we follow our currency down. Even previously defensive sectors like utilities and IT service felt the pain today. Nowhere was safe.
- BHP -5.64% at its lowest level since March 2009. RIO -3.54% but at least Fortescue Metals Group (FMG)-1.35% not quite so bad.
- Energy stocks were understandably sold off today as the Santos (STO) rights issue was absorbed. Origin Energy (ORG) -5.32%, Caltex (CTX) -4.17% and Woodside(WPL)-2.5% took it badly. Other resource stocks also suffered, Oz Minerals (OZL) -4.17%, Sandfire Resources (SFR) -4.9% and Metals X (MLX) -10.7%.
- Banks were once again sold down heavily as Macquarie Group (MQG) -2.58% went ex-dividend and growth fears continue to plague the sector. National Bank (NAB) -1.99% and Australia and New Zealand Bank (ANZ) -2.35%.
- One of the few bright spots was Bellamy’s (BAL) +4.64%, as media reports continue on mass buying from Chinese to sell their ‘contraband’ for exorbitant prices back in China. Other clean and green fared less positively. Select Harvest (SHV) -3.62%,Tassal Group (TGR) -1.7% and Bega Cheese (BGA) -1.69% all falling away.
- Telecoms were also sold down heavily led by Telstra (TLS) -1.69% and TPG (TPM) -0.9%
- It’s all over now baby blue. Gold goes from hero to villain in the space of two weeks. The sector is down 23% from its October high, leaving it up 15% for the year.
- Newcrest (NCM) -5.52%, St Barbara (SBM) -8.27%, Evolution Mining (EVN) -6.93% and Regis Resources (RRL) -7.27% the worst of the bunch. In AUD terms the bullion price is off from $1650 to around $1540. Looks like the index got well ahead of itself in October.
- A couple of standouts on a grim day, AP Eagers (APE) +5.24% following an acquisition on Friday and RCG Corp (RCG) +6.3%. CSR unchanged also put in a good performance going against the trend again.
- Speculative winner of the day goes to Norwood (NOR) +37.31% touching a high of 9.7 cents on punters piling into this new app allowing local calls in far off lands. The Andrioid release is set for the end of the month and this seems to be what is driving the share price. We featured the stock as a TRADING IDEA on Friday and it’s now up 60% since.
- Santos (STO) today entered a trading halt as it announced the long awaited band-aid to its balance sheet. It was a three pronged attack with a 1:1.7 share non-renounceable entitlement issue, a sale of part of its interest in the Kipper Gas field and controversially a placement to a China based private equity group of 15% of the shares at a 15% premium to the close. The placement, if it goes ahead, will ensure that Santos is once again bid proof and makes it nigh on impossible for the mystery Spectre bid to go anywhere. New CEO has also been announced for 2016.
- BHP -5.64% were hit hard today as the news from Brazil is absorbed by the market. The full impact will not be known for some time but it looks possible that two of the three tailings dams have broken in its JV with Vale, with a large loss of life. This will affect production and possibly force other mines to check and rectify design issues in other tailings dams. Falling iron ore prices and other commodity are not helping either.
- BHP is not winning any friends with its contractors either as it looks to push out the payment terms from 30 days to 60 days. The period could push out even longer with some timing issues making it possible for 90 days in some cases. This is not going to help an already struggling sdector. Monadelphous(MND) -1.94% is one of BHP’s largest suppliers in Australia.
- Asciano (AIO) -2.46% as Brookfield has said it will not support carving the company up. It announced today that it would amend the implementation deed to reflect an off market takeover. The current bid if allowed by the ACCC is worth up to 960c after taking into account special dividend payments and franking credits. It is looking increasingly like stalemate in this one at the moment.
- Macmahon (MAH) -0.53% is now being sued by ACA lawyers in a multi-million dollar claim for failing to reveal the impact of delays to the Hope Downs project in the Pilbara.
- Nine Entertainment (NEC) -2.22% announced that David Gyngell is stepping down from the CEO job leaving new CEO Hugh Marks the man in the Millionaires hot seat.
- In the telecommunication sector, NBN Co is launching a six week inquiry aimed to work out how to slash the cost of broadband. The industry has long been angry at the charges they are being forced to pay for access and to guarantee bandwidth for customers. Many believe they will be impossible to sustain profits as services like Netflix increase internet usage and speed demands.
- Australian job ads up for a third month, an encouraging sign that the demand for labour is holding up. Total ANZ job ads rose 0.4 % to 154,358 per week on average in October, from September when they rose 3.9%. Ads were 12.1% higher on October last year. Rate cuts slipping off the agenda.
- Another set of bad import and export numbers from China at the weekend is bad enough to warrant further stimulus. Or so the theory goes. Shanghai up 1.7% and Japan up 2.07%.
- China has announced that it will allow IPOs again following a ban during the recent letdown. Singles day is looming in the biggest online marketing campaign in the world.
- In Japan, base pay climbed 0.4% in September from a year earlier, the labour ministry said Monday. Overall labour cash earnings, which include overtime and special payments, increased by 0.6% and wages adjusted for inflation advanced 0.5%.
- Coal consumption is poised for its biggest decline in history, driven by China’s battle against pollution, economic reforms and its efforts to promote renewable energy.
- One reason oil consumption is set to fall in China, is the rise of hybrid and electric cars and the fall in average fuel consumption.
- Local governments in the world’s largest car market now have to dedicate 30% of their fleet purchase to battery, hybrid, and fuel cell-powered cars, and will lose fuel and operating subsidies if they fall short. They still have a long way to go though. The Bloomberg New Energy Finance estimates the total number of new energy vehicles sold in China will rise to 1.9 million by 2020 from 154,000 over the past five years. That’s still little more than a month’s worth of total Chinese car sales, and well short of the government’s 5 million target.
European and US Market Preview
Saudi Arabia says it has no plans to cut oil production. Punters are now placing bets on a rising oil price as US production gets shut in. Not sure who is going to win this one.
- UniCredit, Italy’s largest bank by assets, plans to unveil as many as 12,000 job cuts and propose asset sales including its Austrian retail operations as management seeks to avoid a capital increase that is widely acknowledged would lose them their jobs.
- Nordea, the £135.6 billion Scandinavian fund manager, has become the first major investor to signal it is preparing to sue Volkswagen over its manipulation of emissions tests.
Ahead in European Markets
- FTSE +26 points.
- DAX +94 points.
- CAC +4 points.