A snapshot of today:
What happened today?
ASX 200 up 118.8 points to close over 5028 on short covering pre the Fed decision. Banks and BHP lead the charge. Healthcare in the ICU on MYEFO changes. Asian markets positive with the Nikkei up 2.5% and China up 0.39%. The force is strong with US futures up 25.
‘Twas the night before Yellen and all around the market Christmas cheer was in abundance. The 100- point rout on Monday was a distant memory as the market yelled Ho! Ho! Ho! and rallied back above 5000 with shorts aggressively covering. Strong overseas leads coupled with better commodity prices and a market just purely so oversold that it was screaming the fact, all contributed to a triple digit day on very good volumes. Seems only a couple of days ago that the market fell 100 points and we were all running around as if the sky was falling in. Funnily, if you were in Bondi Junction or other parts of Sydney today, it did fall in. Not sure insurers will be having such a merry Christmas. Banks, energy and material stocks led the way and after a muted start up only 50 odd points we gathered confidence and closed near our highs.
Big options expiry both here and the US tomorrow should make things interesting given the FOMC timing. Huge volumes will go through the market tomorrow as Dec SPI Futures contracts expire only 4 hours after the Fed meeting. Should be a big day.
Major moves especially in oversold stocks as Santa finally fires up Rudolf and his mates.
- Some carnage in the Healthcare sector again today following changes to the Medicare rebates on pathology and radiology. The government said it would save $650.4 over four years by cutting bulk-billing incentive payments for certain pathology and imaging tests such as blood test and X-rays. Primary Healthcare (PRY) -9.69% and Sonic Health (SHL) -5.62% the key ones affected.
- Consumer stocks bounced back with Woolworths (WOW) +3.42% and Wesfarmers (WES) +4.02% doing well.
- In financials, REITS were in demand. Dexus (DXS) +3.46%, GPT +4.41% and Mirvac (MGR) +4.21%. Wealth managers Macquarie Group (MQG) +1.87%, Henderson Group (HGG) +2.89%, BT Investment (BTT)+2.35% and Magellan Financial (MFG) +3.07%.
- The big four had a great day off the Death Star, Australia and New Zealand Bank (ANZ) +2.68% the best of the droids followed by Westpac (WBC) +2.81%. Insurers also rallied with Suncorp (SUN) +2.12% bouncing back. QBE +2.85%, IAG +1.15% and Medibank Private (MPL) +3.4%.
- In resource land BHP +5.59%, RIO +3.02% and Fortescue Metals (FMG) +5.26% all did well but the second liners also had a very positive day.
- Industrials had a couple of black sheep today as Collection House (CLH) -6.38% and Smartgroup (SIQ) -5.24% giving back some of their recent gains.
- Telecoms had a positive day with Telstra (TLS) +1.91% despite an independent report suggesting that the move into the Philippines is fraught with dangers of overspending and cost blowouts in its proposed mobile business with San Mig.
- Speculative stock of the day was new float Digimatic (DMC) – Run baby +97.5% on its first day as a listed stock. The company is a global brand awareness enabler. Whatever that is.
- Crown Resorts (CWN) +10.52% as sources revealed that James Packer is in talks to return some of Crown’s casinos to private ownership in conjunction with some private equity funds.
- Domino’s Pizza (DMP) +8.27% announced a profit upgrade today coupled with a JV to buy out Germany’s biggest Pizza chain, Joey’s. The acquisition, which is expected to be completed in the first quarter of 2016, will boost the number of Domino’s Pizza outlets in Europe by 212 to 775 and increase sales by about €143m. Germany is the fourth largest pizza market in the world. Domino’s also upgraded its profit guidance and now expects underlying EBITDA to rise around 30% in 2016. Last month it lifted its growth guidance from 20% to 25%.
- Big run today in Whitehaven Coal (WHC) +6.61% as it announced earnings in the first half could exceed $100m. The big run today is tempered by the fact the stock has fallen 60% since March. Whitehaven reaffirmed it would be profitable during the half and said its cash margin was expected to exceed the $13 a tonne margin achieved last financial year, which would “enable Whitehaven to reduce net debt over FY2016”.
- Flight Centre (FLT) +2.75% after announcing the acquisition of a student travel company Travelonomy in the US. The business currently generates around US$250m in student and youth travel sales.
- Fonterra (FSF) +0.92% The world’s biggest dairy exporter has sold its Australian yoghurt and dessert business for an undisclosed sum to shore up the profitability of its local operations and improve returns for farmers. Fonterra will offload the yoghurt business, which includes the Tamar Valley and Ski brands, to Italian dairy giant Parmalat.
- Capitol Health (CAJ) -18.64% announced that changes from the MYEFO on health could weigh around 7% on earnings.
The end of year interview with Glenn Stevens hit the Financial Review this morning. He remains a ‘glass half full of egg nog’ kind of guy this year. He restated that the RBA has room to cut rates if necessary. More tweaking than Miley Cyrus may be in order but generally he likes what he sees. Or is that Twerking? No big dramatic statements, unlike 2014 where he was talking the AUD down beyond 75 cents. As he enters his final year before turning to a television advertising career, he seems pretty chilled.
Blackrock, the world’s biggest fund managers, believe that Glenn will cut rates in 2016. Housing fragile apparently.
Looking at earnings for 2015 we have seen declines of around 7.5% against hoped for growth of 8.5% at the beginning of the year. Resources mainly to blame for the miss. Forecasting it seems is a tricky business.
- The results are in for the year as Fund Managers add up the scores on the doors for performance numbers. The median return for Australian funds over those periods was 2.2 % for the three months and 4.7% for the year – around equal to the ASX 200’s total return of 5 %. The poorest performer was the Independent Asset Management, whose Australian Equity Core lost 9.1% over the three months to November and 12.6% for the quarter.
- Meanwhile in a land far, far away, China has come up with a plan to ease the steel crisis. Use more. Instead of using only 50kgs in a new house, use 150kgs instead. Genius. Steel framed construction is being pushed hard as a solution to the current malaise in the steel and iron ore market.
In Europe and the US
- Janet Yellen will report around 6am tomorrow morning.
- Donald Trump reiterated his commitment to the Republican Party and promised not to run as an independent if not nominated.
- “Donald is great at the one-liners, but he is a chaos candidate and he’d be a chaos president,” said Jeb Bush in the latest televised debate.
- In the UK Rolls Royce is under siege and serious pressure after a slew of profit downgrades this year. Looks like the new CEO is about to wield the axe on senior management with the head of aerospace departing as is the head of land and sea.
Ahead in Europe
- FTSE +21.50 points.
- DAX +308.50 points.
- CAC +141 points.
And finally ‘The Force Awakens’ at 12.00am. Not sure which is more exciting Janet Yellen or the Millennium Falcon.