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ASX 200 kicks another 66.5 points to 4910 in a choppy day taking heart from Asian moves and turning positive after a weak start. CBA, ex-dividend, hurt the banks early. Resources once again the standouts with BHP and RIO leading the charge. Asian markets continue in the green, Japan up 1.1% and China up 3.01%. US futures up 264 points. Oil breaks through $30.

A very positive day despite struggling to find its way initially. Commonwealth Bank (CBA)-2.29% was ex-dividend 198 cents today and wiped around 15 points off the index. The other banks were the swing factor as they failed to fire following the National Bank (NAB) update this morning However in the afternoon session they found their mojo. Down the back of the sofa all the time it seemed.

ASX 200 Index Today                                    Aussie Dollar Today US71.47c.

     

The market slipped into negative territory mainly on weaker banks before rallying after the Asian markets opened and holding good gains into the close. Resources were well sought-after and remained well bid throughout the day. There appeared to be some nerves heading into the Asian market opening but after a more than 1000-point rally in Japan yesterday, the Nikkei surprisingly turned positive  together with a strong showing from China, which cheered the bulls. With US futures up over 280 points, the market was happy to continue the rally as banks recovered well. Good turnaround from all four big banks with CBA fighting back from its ex-div and rallying 160 cents off the lows, while National Bank turned slightly positive.

The market had a low of 4814 at midday and closed on its high at 4910 with a near 100-point trading range. Adding back the 15 point of dividend for CBA and a 82-point rally is a very positive result.

Stocks and Sectors

  • Resources were once again the place to be with iron ore and nickel stocks especially strong. BHP +3.82%, RIO +2.32% and Fortescue Mining (FMG) +9.97%. Base metal stocks also improved with Lynas (LYC) +5.48%, Oz Minerals (OZL) +6.18% and Independence Group (IGO) +0.68%, while gold stocks took a breather as the bullion price has had two bad nights. Newcrest (NCM) -5.61%, Evolution Mining (EVN) -4.66%, Resolute Mining (RSG) -7.61% and OceanaGold Corp (OGC) -4.28%.
  • Energy stocks were once again very firm as oil futures moved nearly 5% higher on short covering in local trade. Oil Search (OSH) +5.77%, Woodside (WPL) +5.69% and Santos (STO) +5.9% with Origin Energy (ORG) +7.03% joining in the fun. Talks tonight between Russia and Saudi Arabia the key.
  • Industrials had a positive day with healthcare, consumer discretionary and services doing well. CIMIC (CIM) +3.86% continues to push higher and Aurizon Holdings (AZJ) +7.31% recovering well. Orora (ORA) +5.38% also reported good numbers today. SG Fleet (SGF) +8.71%, SAI Global (SAI) +3.17% and GWA Group (GWA) +5.82%. MYOB (MYO) +4.66% steam rolled Reckon (RKN) -11.76% with Telstra (TLS) -0.37% unable to rouse itself from the recent outage related slump.
  • Financials had a roller coaster ride with losses turning to profits as the day wore on. Commonwealth Bank (CBA) -2.29% was the big mover having gone ex-dividend 198 cents, National Bank (NAB) +0.93% also updated the market with positive spin on margins and falling bad debts. Wealth managers looked especially good today. They have been very oversold and are geared to gains in the equity market so it is no surprise that they are crawling out from under the rock. BT Investment (BTT) +2.61%, Henderson Group (HGG) +5.0%, Macquarie Group (MQG) +5.98% and Magellan Financial (MFG) +4.45%.
  • Speculative stock of the Day: Activistic (ACU) +37.93% which has created a digital micro donation platform that seamlessly connects your smart phone to a charity or a cause. Today they announced a new head of product in Jeremy Bassett-Smith.

Corporate News

  • National Bank (NAB) +0.93% updated the market on its first quarter as a recent divorcee now that Clydesdale Bank (CYB) +2.17% is gone. Net Interest Margins (NIM) are better as they show the power of raising rates against the RBA cycle.
  • Asciano (AIO) unchanged, has recommended the Qube (QUB) bid after Brookfield failed to match Qube’s offer. The boys at Brookfield will pick up a handy $88m break fee plus they have made money on their stake in Asciano.
  • Challenger Financial (CGF) +4.66% after first half normalised profits rose by 17.6% to $182.1m on improved sales and investment gains. Annuity sales continue to track positively with 10% growth in the first half of 2015. The dividend was increased to 16 cents from 14.5 cents.
  • CSL +1.5% announced a 3.8% rise in first half profits to US$718.8. Group revenue was up 10.3% to US$3.1bn. The dividend was maintained at US58 cents.
  • Monadelphous (MND) +3.53% announced poor results but rallied after being so oversold. The net profit was $37.6m -37.9% however a push into international contracts seems to have cheered the market. The company cut its dividend to 28 cents from 46 cents as they remain focused on cost cutting and margin protection. Another ‘challenging year ahead’.
  • Greencross (GXL) +8.56% reported a 18.7% rise in underlying profits to $21.2 as it tries to fend off the warm embrace of private equity. During the half it established nine new vet clinics with a target of 30 instore clinics by the end of 2017. The company said it saw ‘no value’ in the bid from TPG and Carlyle.
  • Orora (ORA) +5.38% with NPAT rising 27.2% to $87.9m. Net debt down from $645m to $593m. The dividend was raised 28.8% to 4.5 cents. The outlook statement was also a positive with the company forecasting a higher earnings in 2016.
  • Pacific Brands (PBG) +10.26% is looking for a 14% rise in earnings to around $73-75m above previous estimates of $66m. Net profits rose 44.4% to $24.3m beating forecasts of $23m. For the first time in seven years the company declared no restructuring or asset write-downs.
  • The Star Entertainment Group (SGR) +1.68% after revealing a winning run due to the Chinese government clamp down on Macau. The casino group revealed a 26% rise in normalised profits for the first half, however the win rate of 0.88% was below the previous period of 1.33% and the normalised rate of 1.43%. This led to an actual fall of 2.6% in gross revenue to $1.1bn. The win rate is beyond the control of the casino and it should average out over time. About three-quarters of The Star’s VIP revenue stems from visiting Chinese players. Apparently the VIP high rollers losses were a ‘freakish’ result where 6 punters took the Star for $80m in the last six months. Looks like Rainman is in the house.
  • Iluka Resources (ILU) -0.6% will suspend output at its Jacinth-Ambrosia project, the world’s largest zircon operation, after prices fell. Production at the mine in South Australia will be curbed for 18 to 24 months from April 16, depending on market conditions for zircon.
  • Cover-More (CVO) -13.83% will be changing its name following a nasty update showing earnings were down 16.4% due to higher claims costs. EBITDA fell 9.8% and it is hoping to lift its prices and increase margins. Actual numbers are due out on February 19th.

Scorecard 8/9 positive reactions to results (Cover-More a update though)

Economic News

  • RBA Board minutes released today with no real new information. Its outlook for the real economy remains broadly unchanged.
  • To quote the minutes “Members noted the challenges for the Chinese authorities in managing the exchange rate in the face of depreciation pressure from private capital outflows.”
  • The value of new personal loans has risen 2.1% to $7.03bn. Commercial loans fell 7.3% but lease finance arose 1.7%.

Consumer confidence is back up again

In Asia

  • We now seem fixated on the PBoC setting the rates at 12.00pm. It set the official midpoint rate for the yuan at 6.5130 per US dollar prior to the market open, weakening slightly from the previous fixing of 6.5118
  • Chinese credit has risen to record levels.
  • Aggregate financing rose to 3.42 trillion yuan (US$525 billion) in January, according to a report from the People’s Bank of China on Tuesday, compared with the median forecast of 2.2 trillion yuan in a Bloomberg survey. New yuan loans jumped to 2.51 trillion yuan, also a record and beating the median estimate of 1.9 trillion yuan.

Meanwhile bad loans have risen to the highest in a decade.

  • Non-performing loans jumped 51% from a year earlier to 1.27 trillion yuan ($196 billion) by December. The bad-loan ratio climbed to 1.67% from 1.25%, while the industry’s bad-loan coverage ratio, a measure of its ability to absorb potential losses from soured credit, weakened to 181% from more than 200% a year earlier. The lenders’ core Tier-1 capital ratio improved to 10.91% from 10.56%, the data show.
  • Japan’s telecoms giant Softbank Group has announced its biggest share buyback to-date, sending its shares up more than 16% today. In a surprise move designed to boost investor confidence, software said it would buy back up to 14.2% of its total number of shares issued – worth some 500bn yen (US$4.4bn).

Europe and US

  • Tonight the Saudis and the Russian will sit down to discuss the state of the oil market. The rumours of some sort of agreement on production cuts has lifted the oil price and with it equity markets. It would be extremely unlikely that these two will make the cuts that are necessary to bring the supply/demand back into equilibrium. It is in both of their interests to keep pumping as much as they can. They both have come a long way and it would appear that neither really is about to blink but at least they are talking and that is a positive sign. Not sure higher oil prices are a positive for consumer spending but they do help out on the inflation front and put some price pressure back into the system.
  • Negative interest rates are now the new abnormal

$1m in the Bank in Japan gets you $10 interest!

Here is a handy graphic of interest rates around the world.

Ahead in Europe

  • FTSE  +68 point.
  • DAX  +266 points.
  • CAC +120 point.

Clarence

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NT Markets

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