ASX rises 45.4 points to 4821.1 as buyers emerge from the gloom. Industrials, healthcare and financials leading the way with results the focus. Telstra had a good day and Cochlear joined the $100 club. Japan closed but HK back on line falling 3.86%. Dow futures down 91 points. AUD at 70.87.
A better day today after the bloodshed of the last couple of days. Nerves still frayed but some buying creeping back in after the Yellen Senate hearing last night. Results once again dominating, and the ones that the market likes, continue to perform for days after the initial jump. Selling once again hit the market until mid-day hitting a low of 4771 after a 30-point burst at the opening. Seemed that margin call pressure continued, but once it had washed through we pushed higher and rallied into the close. With no Chinese market or Japan today, due to a holiday, there seemed no reason for the bears to get aggressive and as the PM session wore on we closed near our highs for the day. Material stocks were under pressure in front of the RIO result due after the market but banks tried hard to post solid gains as bank p/e ratios are now below the dividend yields when franked up. Strange days indeed.
No significant results tomorrow as the next two weeks will be the big ones.
Stocks and Sectors
- Financials were better today with the insurance sector pushing ahead. Insurance Australia Group (IAG) +2.76% and QBE +0.93% doing well together with AMP +3.39%. Suncorp Group (SUN) unchanged initially fell hard but bargain hunters stepped back in and bid the stock back up. Wealth managers have had a tough time recently but we finally got some green on screens today with some modest recoveries taking place in Platinum Asset (PTM) +0.34%, K2 Managament (KAM) +11.7% and Henderson Group (HGG) +1.84%
- The banks managed some small gains but investors would probably be happy with that given the turmoil of the last week. Commonwealth Bank (CBA) +0.13% rose a little following results yesterday but it was heartening to see regional banks back on the shopping list again. Bank of Queensland (BOQ) +0.46% and Bendigo and Adelaide (BEN) +2.48%
- In resources iron ore and base metal stocks remained under pressure. BHP -2.62%, RIO -1.25% and Fortescue Metals (FMG) -2.58%. RIO results out after market.
- Gold has jumped to a nine-month high in AUD terms at around $1700. Second liners are starting to perform as the recent gold rally gains credibility and the big name buying spreads to the smaller caps. Silver Lake (SLR) +18.37%, Gold Road (GOR) +5.95% and Doray Minerals (DRM) +10.14%.
- Energy shares held steady and in some places even put on some cents, Woodside (WPL) +0.76%, Santos (STO) +2.35% and Z Energy (ZNZ) +6.78%. AGL -2.53% fell a little after results yesterday and uncertainty over their green fund they are setting up.
- In industrials, we saw good gains in healthcare stocks after the Cochlear (COH) +14.11% numbers plus Sonic Healthcare (SHL) +3.14%, Sirtex Medical (SRX) +2.81% and CSL +2%. The service sector also piled on the points today with CIMIC (CIM) +3.26% as investors continued to buy post the good results.
- In clean and green stocks, it was Tassal Group (TGR) -6.13% to come in for more profit taking whilst Bellamy’s (BAL) +2.16%, and new kid on the block BWX +13.08% following a Fairfax report extolling the Chinese love for a skin care range whilst Blackmores (BKL) -2.09% and Vitaco (VIT)-5.56% failing to fire.
- ASX +1.86% reported a 7.5% rise in profits with a 7.4% rise in dividends. Its biggest business, derivatives, recorded flat revenue growth at $126.8 million. Although revenue from futures and over the counter derivatives grew by 6.4%, that was offset by cuts to its fees amounting to $4.6 million that began in October 2014 and a further decline in income from equity options of 11.4 %. Strong IPO activity also helped the numbers with a 15.6% jump in revenue to $105m, however this looks unlikely to be repeated given the banks should be unlikely to need the same level of capital from the market as they did last year.
- Cochlear (COH) +14.11% joined the $100 club today on better than expected results. The falling AUD helped them lift profits from $71.37m last year to $94m this year. Sales revenue rose too up 32% to $581.7m with a 110c dividend declared. The company expects the falling AUD to continue to support their full year forecast of $180-190m.
- Suncorp (SUN) -0% recovered from steep early losses after announcing a $530m profit, a 16% drop, due to higher natural disaster claims. This came in below consensus and the stock dropped considerably to 1011 before a rally took it back to 1060 cents.
- Transurban (TCL) +0.74% raised its guidance as EBITDA rose 15% to $729m. The company raised its dividend guidance too from 44.5 cents to 45.5 cents.
- Virgin Australia (VAH) -6.12% reported underlying earnings before interest and tax (EBIT) of $130 million in its domestic division, up from $69.7m a year earlier. Virgin’s revenue per available seat kilometre rose by 7.1 % in the domestic market, a positive. Virgin said it remained on track to meet its target of 30 per cent of domestic revenue from the corporate and government market by the end of financial year 2017.
- Mirvac (MGR) +2.78% reported a 69% jump in profit to $472.7 million for the December half, boosted by residential developments and acquisitions across the rest of the portfolio. Operating profit after tax was $164.6 million, down from $231.2m in the previous December half due to one-off charges, although the group’s profits are traditionally stronger in the second half due to residential settlements. It made a half-year distribution of 4.7c per stapled security.
- Hong Kong came back on line for the first time this week falling 3.8% whilst Japan was closed for a holiday and China remains offline due to the lunar new year celebrations.
- HK got off to the worst start to a new year since 1994 as they played catch up with global markets.
- Big trouble for the Japanese mum and dad investors that took up the Japan Post Bank shares, now down 32% for the year.
- And it seems that the move from the BOJ to go all NIRP has not really had the desired effect on the Yen which is pushing higher. What is Japanese for Doh!
Europe and US
This could be the new market flash point as the weather in Europe warms up. Suspect that ‘Schengen’ or open borders will have to go. They will need a bigger fence.
- Some corporate deals in drugs with Mylan bidding US$7.2bn for Meda and Asahi looking at buying Peroni and Grolsch off Anheuser-Busch for US$2.9bn.
- Twitter reported a net loss of US$90mfor the last three months of 2015 versus a loss of US$125m a year ago.
- The social media site saw its user growth stall, with 320 million average monthly active users – the same number as the previous quarter. Twitter lost two million users in its last quarter if you take out the SMS accounts that are doubled up.
Meanwhile in the UK, the chances of a rate rise in the UK once almost a sure thing has been pushed out until the end of the decade according to a Morgan Stanley survey of traders. In fact they are betting on a 50% chance of a cut this year.
And finally spare a thought for Venezuela as they desperately try to talk up the oil price. Not difficult to see why they want the Saudi and the Russian to agree production cuts.
Ahead in Europe
- FTSE -46.50 points.
- DAX +118 pointss.
- CAC +63.50 points.