ASX 200 falls another 56.4 points to 4775 as heavy selling continues, although some bottom picking helping. Resources join the banking sector to lead us down despite Commonwealth Bank cheering markets. Japan continues its slide down another 3.7% as China still closed. US futures down 71 with AUD steady at 70.56 cents
Well, it could have been worse. At one stage it was. Despite the semi-positive US lead and an inline report from Commonwealth Bank,the negative sentiment kicked in barely 20 minutes after the opening and the market slid from there. More weakness from our friends in the North added to the nerves and at one stage the ASX 200 was down to 4706, a big 126 points on top of yesterday’s 140-point fall. All this carnage despite better than expected corporate results from Cimic (CIM), Boral (BLD), Commonwealth Bank (CBA) and Oz Minerals (OZL). When the mood is this sour even a good result cannot turn it around. After the forlorn hope that the CBA numbers could turn things around it seemed like a fresh wave of selling hit the market. Maybe this was margin calls as the lenders hit the phones for more collateral…whatever it was, it got ugly. Some semblance of reason crept back in as the day wore on, halving previous losses with the shorts covered ahead of Janet Yellen’s testimony tonight.
Commodity price falls took the wind out of the resource sector and the banks are in danger of catching a rare contagious disease from Deutsche Bank and other Euro trash. This disease has no basis in reality but that has not stopped the bears. Their argument that our banks look expensive against their global counter parts is erroneous given the relative minimal exposure of our banks to resource bad debt and the European issues. Considering our banking system sailed unscathed well relatively through the GFC it would be logical to believe that they deserved a premium to their global peers.
STOCKS AND SECTORS
- Financials were once again the target as regional banks were aggressively sold off again following Bank of Queensland (BOQ) -6.8% news yesterday. Bendigo and Adelaide(BEN) -4.5% and new listing Clydesdale (CYB) -2.2% slid away. The big four were mixed as Commonwealth Bank (CBA) +1.8% rallied but failed to inspire the other three. Australia and New Zealand Bank (ANZ) -1.62% again the most affected. In wealth managers and financial engineers, the losses continued at apace. BT Investment Management (BTT) -4.27%, Magellan Financial (MFG) -3.43% and a horror show at K2 Asset Management (KAM) -26.56% not helping. Macquarie Group (MQG) -1.2% escaped some of the carnage as there were rumours that an international rival is casting an acquisitive eye over the company. Highly unlikely given the strong corporate culture at the bank. The assets walk out the door every night.
- Resources were down too but off their worst levels. BHP -2.49%, RIO -1.17% and Fortescue Metals (FMG) -3.06%. No respite today in gold stocks either as profit taking on weaker bullion prices was the name of the game. Newcrest (NCM) -3.27%, OceanaGold Corp (OGC) -6.98% and Northern Star (NST) -3.03%. In the base metals Oz Minerals (OZL) -0.94% tried hard to rally on better numbers whilst Iulka Resources (ILU) -0.77% slipped, but Syrah (SYR) +0.27% rose.
- Energy shares fell after steep falls in the oil price last night with Santos (STO)-2.61% and Oil Search (OSH)-2.74% the worst in the sector.
- In the industrial space Telstra (TLS) -3.21% had a shocking day as media speculated that the outage yesterday may have been its ‘Vodafail’ moment. The big winner from the outage seems to have been Hutchison (HTA) +12.33%. Consumer stocks fell Wesfarmers (WES) -1.7% and Woolworths (WOW) -3.25% with some of the clean and green stocks also losing their lustre Bellamy’s (BAL) -6.78%, Freedom Foods (FNP) -7.4%, Bega Cheese (BGA) -3.45% and Blackmores (BKL) -2.17%.
- Infrastructure stocks lost ground, Qube (QUB) -4.19% wase one of the biggest casualties with Aurizon Holdings (AZJ) -3.76% joining in together with Seven Group (SVW) -3.26%.
- Speculative stock of the day: Emu (EMU) +28.57% following the first drill hole started at its Speedway gold project in the US.
- Crisis. What Crisis? Commonwealth Bank (CBA) +1.83% as its cash profit hit a new record. $4.8bn. Not too shabby you would think given Deutsche bank just announced a US$7.2bn loss. Importantly the dividend came in unchanged at 198 cents and a payout ratio of around 71%. So out of the profit of $4.8bn it pays out $3.3bn in dividends. Return on equity fell 1.4% to 17.2% after the $5.1bn share issue last year. Still a very positive number by any standard. Mining, oil and gas accounts for 1.8% of its loan book. Hardly a disaster. Net interest margin was flat on the prior half at 2.06%.
- OZ Minerals (OZL) -0.94% as profits almost tripled to $130.2m. The result was slightly below analyst forecasts, but much better than the $48.5m statutory profit posted in 2014. Shareholders will be paid a 14 cent unfranked dividend on March 10, taking the total shareholder returns for 2015 to 20 cents; well above the 10 cents paid during 2014.
- Boral (BLD) +3.5% raised its dividend to 11 centsfrom 8.5 cents after profits were up 30.7% to $136.6m. Looks like the company has been a major beneficiary of the increased infrastructure spend with new road building on NorthConnex in the next 12-18 months.
- Computershare (CPU) -7.78% following a 2.4% fall in revenue and a 10.5% drop in underlying profit…with a warning of worsening conditions ahead. Guidance was restated but the outlook was for a ‘softening in the operating environment’. A share buy-back is continuing and a 16 cent fully franked dividend.
- Carsales (CAR) -3.43% after half year profit rose 10% to $51.34m. Carsales’ core online advertising business boosted revenue 9% to $115.8m. Revenue in the international businesses rose 24% to $1.7m while revenue in its finance business climbed 17% to $33.4m. Carsales will pay a 17.8c interim dividend to be paid on April 15.
- AGL +1.06% after writing down the value of its gas exploration assets last week. Underlying earnings rose 24% to $375m beating estimates. The company also plans to seed a $3bn renewable energy fund with its solar projects and up to $200mn together with a broad range of funds and banks to contribute as part of their commitment to lower carbon fuels.
- Consumer confidence has risen despite the woes on the share market
- The Westpac-Melbourne Institute of consumer sentiment jumped by 4.2% in February to 101.3 points, up from 97.3 in January.
- The latest survey also found that people’s assessment of their family finances over the next year was also strong, up by 3.8% for the month.
- The winner and losers from the low oil price: China, India, Korea, Japan, Spain, Poland and Holland – and a small concentrated group of losers – Saudi Arabia, Russia, Nigeria, Canada.
Demand still rising for oil just not as fast as supply according to the IEA
And still the Saudis wage their war. No winners just casualties so far.
Markets are gradually reopening again after the New Year break with China, Hong Kong and Taiwan off-line. Japanese shares extended their big losses of Tuesday with another 3.7% fall as the yen continues to attract safe haven buying despite negative interest rates.
Europe and US
Tonight we get Janet Yellen trying hard to justify her GBPB (Great Big Policy Blunder) as her rate rise two months ago seems to have unleashed the bear spirit in the markets. Back in the halcyon days of naivety as we ran into Xmas, it is hard to believe that the ASX200 was around 5100. 10% above where we currently stand.
Early Euro calls
- FTSE -21.5
- DAX -66
- CAC -69
Talk again in Europe of the so called ‘Doom Loop’. A destructive vortex as yield spreads on sovereign 10-year bond spreads are increasing and credit markets stress over corporate debt.
Deutsche Bank will once again try to dispel rumours on balance sheet problems with a potential multi billion bond buyback. Hopefully they have more luck tonight.
Ahead in Europe
- FTSE -19 point.
- DAX -66 points.
- CAC -69 point.