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A snapshot of today:
What happened today?
ASX 200 down 20.3 points to 5099.2. Banks pare losses as the cavalry arrives to save the day,dragging the ASX200 off the day’s low of 5047 in the last hour. M&A activity continues in Asciano and Devine. BHP steadies but still looks vulnerable. Shanghai continues to march to the beat of a different drummer, up 0.12% with Japan up slightly. US futures up 31 points.
Another slightly sad day on increasing afternoon volume as the market heads toward 5000. All sectors were hit again with the Financials suffering on fears of global slowdown and tighter capital requirements. Banks are struggling at the moment and the sector was again down around 1% but a long way off its bottom with Australia and New Zealand (ANZ) +0.71% the best performer. We fell from the open and then bounced around at the bottom of the market for most of the day before a late rally saved us a little. Selected resource stocks turned positive towards the close saving our blushes as US futures remained positive for the day.
- REITS was also hit hard with Vicinity Centres (VCX) -3.17%, the old Federation Centres, one of the hardest hit. Sceptre (SCG) -1.74% and Westfield Corp (WFD) -1.12% are also heading south.
- Resources are trying hard to find their feet with BHP +0.7% and RIO +0.8% plusFortescue Metals(FMG) +4.55%. Gold stocks tried to rally with Regis Resources(RRL) +5.14%, Evolution Mining(EVN) +1.96% and OceanaGold Corp (OGC) +4.4%.
- Energy stocks were easier: Origin Energy (ORG) -0.78%, Caltex (CTX) -1.2% and Z Energy (ZNZ-0.96% underperforming.
- In the Industrials, Healthcare saw more selling CSL -0.47%, Sonic Healthcare (SHL) -0.76% Virtus Health (VRT) -3.58% and animal health stock Greencross (GXL) -3.22% all suffering some flu symptoms.
- Stand out superstars today were Bellamy’s Australia (BAL) +8.86% as it continue to push towards 1000 cents as the feeding frenzy in baby formula continues. The media is doing its bit to stoke the fires given the scare mongering shortage stories in the papers helping the stock higher.
- Also in the winners’ enclosure today was Lynas (LYC) +10.53% having a stunning day, as the company rerates following the Malaysian court dismissal in October.
- Speculative winner for the day was Decimal Software (DSX) +16.28% after a report forecast the ‘Robo advice’ market could be worth US$7.8 trillion. DSX have one of the first software platforms to address this huge market. A stock to watch with a market cap of only $12m.
- Asciano (AIO) +2.98% was back in the headlines as Qube (QUB) -3.54% launched a formal takeover bid for the company. The bid values AIO at 925c a share with 25% of the bid in scrip. Qube would need to issue around $2.2bn in equity being similar to its current market cap.
- Santos remains suspended.
- Devine (DVN) +25.62% following a takeover offer from CIMC (CIM) -4.49% at 75 cents. The board has recommended shareholders take no action. CIMIC already owns 50.63% of Devine.
- Incitec Pivot (IPL) -1.58% announced its full-year profit rose 12% thanks to stronger earnings from its Australian fertiliser business. Net profit rose to $398.6m from the year earlier $356.3m. Revenue rose 8.7% to $3.64bn from the year earlier $335.2m. Incitec Pivot said it would pay a final dividend of 7.4c up from the year-earlier 7.3c.
- Surfstitch (SRF) +4.09% expects earnings to rise as much as 134% this year but has warned shareholders they will have to wait to see a maiden dividend. SRF has reaffirmed its guidance for EBITDA between $15 – $18 million, more than double last year’s pro-forma EBITDA of $7.7 million.
- Nuts. Webster (WBA) -8.88% announced a nut set issue with its walnut operating business. The yield may be reduced by 20% and shows things can and do go wrong with Agri products companies.
- Ozforex (OFX) +2.92%, active clients up 16%, transactions up 17% and EBITDA up 14% and reaffirmed guidance. Debt free and positioned for growth.
- ANZ consumer sentiment indicator rose 1.2% to 116.6 reaching its highest level since January 2014.
- Lending to investors fell at the fastest monthly pace in eight years in September, down 8.5% to a seasonally adjusted $12.3b in August. In the 12 months to September lending to first home buyers rose 1.6% to $34bn.
- The latest National Australia Bank monthly survey reported sentiment fell back to 2 Index points in October, just above the 1 point registered in August.
- Freelance economist Saul Eslake won himself a bunch of new friends at the International Mining and Resource Conference in Melbourne when he suggested that the last mining boom would be the last ever. Not sure he was speaking to the right audience for this forecast. He also said the current commodity price weakness had not reached its low yet and saw little prospect of a pickup in the near future. Suspect he won’t be getting asked back next year.
Maybe he has a point. 16 year low for Bloomberg Commodity Index.
- In China, the consumer-price index rose 1.3% in October from a year earlier, compared with a 1.5% median estimate from analysts and 1.6% in September. The PPI fell 5.9%, extending its streak of negative readings to 44 months.
Shanghai marches higher
- In Japan, PM Abe has told parliament that he is willing to cut corporate tax by more than the 0.8% already in train for next year.
- Japan’s current account was a surplus in September for a 15th consecutive month as low oil prices and a weak yen helped boost income from overseas. Japan had a 1.5 trillion yen (US$11.9 billion) excess in its broadest measure of trade, the finance ministry said Tuesday.
In India, Interglobe Aviation, which runs the IndiGo brand, listed today following a US$450m capital raise. The stock was up 18% on debut.
European and US Market Preview
- The big news is once again on banks and the capital requirements to buffer balance sheets and ensure the GFC never happens again. The big banks may need to raise more money to meet the TLAC requirements. Total Loss Absorbing Capacity needs a buffer of 18% of risk weighted assets by 2022. Until now emerging market banks have been largely exempt but these new proposed rules could mean they have to raise EUR415bn. China has the world’s biggest banks but nowhere near the capital adequacy that they would need.
- Trouble too in Portugal as the austerity government given the boot and communists and radical left bloc look to be in power. Not that it is as big an issue as Greece or the refugee crisis but they were one of Germany’s staunchest allies on the austerity ticket.
Ahead in European Markets
- FTSE -72.50 points.
- DAX -175.50 points.
- CAC –72.50 points.