ASX 200 rises 38.1 points to 5043.6 on International markets reaction to Japanese interest rate moves. Healthcare stocks outperform as energy shares improve. Chinese markets fell again down 1.45%, Nikkei rose 1.65% whilst HK fell 0.8%. US futures down 13.

A jump out of the gate this morning, as we took our cue from overseas markets and central bank intervention. We saw across the board gains with energy and healthcare the stand outs. Banks and financials also helped with ANZ +1.7% continuing to rally hard.

The disappointing numbers out of China seemed to be largely ignored and the market pushed higher in anticipation of further stimulus measures from the PBoC, peaking at 5071 at lunchtime before cynicism crept back in and we slid a little into the close. RBA meeting tomorrow with no expected change to interest rates.

Are we set for more gains?

According to Morgan Stanley, the S&P/ASX 200 is trading at its long term average of 14.4-times forward earnings and company earnings were expected to worsen. Miners and energy companies will be the worse affected this reporting season.

Stocks and Sectors

  • Banks and financials were stronger with a bounce in wealth managers after the savage sell down on Friday. Platinum Asset Management (PTM) +2.32%, Magellan Financial (MFG) +1.76% and Macquarie Group (MQG) +0.64%. The big four were mixed with Commonwealth Bank (CBA)-0.57% and Westpac (WBC) -0.65% slipping slightly. Insurers were also mixed as QBE Insurance(QBE) -0.37% and AMP +1.3%.
  • Resources were mixed. BHP -0.65%, RIO –0.41% and Fortescue Metals (FMG) -3.18% whilst Independence Group (IGO) +6.85%, Iluka Resources (ILU) +2.03% put in good gains. Gold stocks also did well today with Newcrest (NCM) +4.04% bouncing back as did St Barbara (SBM)+6.08% and Resolute Mining (RSG) +7.69%.
  • Energy stocks started very well but failed to follow through Santos (STO) -3.48% remained under pressure following news reports that it is examining whether to sell their PNG LNG stake worth around $1bn. Japan’s Marubeni is one rumoured to be in the frame as a potential buyer.
  • Industrials were mainly positive with the exception of Blackmores (BKL) -7.51% where some analysts have been pouring cold water on the rise. A similar story with Bellamys’ (BAL)-6.51% and A2 Milk (A2M) -5.29% coming in for profit taking.
  • Telcos also put in a good performance today with Telstra (TLS) +0.71% and M2Group (MTU) +2.54% and Vocus (VOC) +2.16% following the vote last week.
  • Healthcare was a very bright spot led by a recovering CSL +3.84% and Ramsay Health (RHC) +3.8%. Good gains too for Regis Healthcare (REG) +5.05% and Japara Healthcare (JHC) +4.9% as they announced the release date for the figures for the 17th February.
  • Speculative stock of the day: Farm Pride Foods (FRM) +27.82% following an earnings upgrade. EBITDA should now be in the range of $7.5-$8.5m. The company is engaged in the production and processing of eggs.

Corporate News

  • Bega Cheese (BGA) -10.48% announced that it had lost the Coles contract to supply house branded cheese and potentially puts a $100m hole in revenue figures. The contract was won by Murray Goulburn (MGC) +2.1%. They have a 10-year supply deal now worth an estimated $130m annually in sales.
  • Blackmores (BKL) -7.51% has confirmed it was not acquiring Nature’s Care despite market speculation.
  • EDI Downer (DOW) +2.57% had an extremely volatile day after a broker flip flopped from a sell recommendation to a buy. Having touched 350 cents early the stock closed well off its highs at 319cents.
  • Redflex (RDF) -14.29-% following news that a former employee was being investigated by the AFP over their conduct on a former contract with the city of Chicago between 2002 1nd 2012. The company is co-operating fully.
  • Kathmandu (KMD) +11.59% upgraded its profit forecast upgraded first-half profit forecasts following healthy trading over Christmas and January. Kathmandu now expects EBITDA between $NZ21.0 million and $NZ22.0 million for the six months ending January.

 Economic News

  • Today’s survey from TD Securities and the Melbourne Institute showed consumer prices rose 0.4 % in January, from December when they edged up 0.2 %.
  • The Australian Industry Group performance of manufacturing index remains above the 50-point level separating expansion from contraction despite falling marginally in January, by 0.4 points, to 51.5. It’s the seventh consecutive month of growth, continuing the longest run of expansionary readings since the survey began in 2010.
  • RBA meeting tomorrow with the board expected to leave rates unchanged.

In Asia

  • The purchasing managers index dropped to a three-year low of 49.4 in January, the National Bureau of Statistics said Monday. That compared with a median estimate of 49.6, and represents the longest stretch of readings in data since the start of 2005.

  • Hong Kong home sales slumped to the lowest in at least a quarter-century last month, Centaline Property Agency Ltd. estimated, adding to evidence that prices have further to fall. Centaline estimated January sales of new and secondary homes would reach 3,000 units, the lowest monthly figure since it started tracking figures in January 1991.
  • Police have arrested 21 people involved in a peer-to-peer lending business in China. Apparently 95% of the online financing projects were fake and have claimed around $7.6bn form 900,000 investors. China has a $2.6 trillion wealth management product industry.
  • Chinese margin debt continues to fall as the Shanghai Composite slips away.

  • Macau January Casino Revenue Falls 21.4% on Year.

Europe and US

  • Swiss prosecutors believe that $4bn has been misappropriated in Malaysia from a government fund 1MDB.
  • Looks like austere times are coming to Saudi as they are burning through their foreign assets at an alarming rate. Another reason perhaps that the oil price has seen the bottom.

IMF calculations suggests Saudi Arabia could be running a deficit of around US$140bn , far above the government’s own estimates of around US$98bn, or 15pc of GDP.

Early Euro calls

  • FTSE -50.50.
  • DAX- 132.50.
  • CAC- 95.

Clarence

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NT Markets

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