ASX 200 falls 27.9 points to 4882.1 as results dominate. Energy and materials slid on OPEC deal with healthcare and industrials helping curb losses. Asian markets weaker with Japan down 2.29% and China down 0.16%. Dow futures down 27 points at the close of play.

Another day of swings as ‘Super Wednesday’ in results season dominated headlines and analysts worked the spreadsheets. After opening slightly down we slipped further before Asia came on line, rallying to a high of 4926 before falling away again after lunch as Japan slipped into negative territory as did China.

ASX 200 Index Today                                   Aussie Dollar Today US70.87c

Volatility was again extreme in some companies following results and with weakness in the energy sector industrials were unable to lift the profit taking mode from yesterday. Banks were again the swing factor but were generally positive. Materials and other resources weighed on the market as enthusiasm waned. Healthcare was a bright spot following strong results and ‘clean and green’ themes bounding ahead. Early gains in stocks like Domino’s (DMP)+6.04% were tempered after the initial burst to the upside at one stage the shares topped 6199 cents before closing at 5552 cents.

Stocks and Sectors

  • Resources were back in the dog house today on profit taking following disappointment on oil price negotiations. BHP-3.68%, RIO-2.52% and Fortescue Mining (FMG unchanged). Energy stocks were very weak as Woodside (WPL) -6.94% reported numbers. Oil Search (OSH) -3.82%, Santos (STO)-3.52% had no excuses with Liquefied Natural Gas (LNG) -9.84% the worse affected.
  • Base metal stocks were also waker led by Western Areas (WSA) -3.79%, Oz Minerals (OZL)-2.01% and Independence Group (IGO) -3.73%. Gold stocks took the bullion falls in their stride, holding surprisingly steady given the falls in the gold price recently. Silver Lake (SLR) +11.32% Gold Road (GOR) +5.75% were moving ahead nicely as the trickle down to the smaller companies takes hold. Evolution Mining (EVN) +2.99%, Resolute mining (RSG) +10.59% and even Newcrest (NCM) +0.46%
  • Financials were mixed. The big four meandered around not really sure whether they were going to go up or down. National Bank (NAB) +2.16%, ANZ -0.56% and Westpac (WBC) +0.69%. Wealth managers gave back some of yesterday’s big gains with Macquarie Group (MQG) -0.87%, Henderson Group (HGG) -3.46% and Magellan Financial (MFG) -1.5% slipping whilst Challenger Financial (CGF) +3.9% continued their momentum from yesterday.
  • Industrials were generally better with Seek (SEK) +3.2%, McMillan Shakespeare (MMS) +4.82% pushing higher. Good gains for our clean and green themes. Bellamy’s (BAL) +6.61%, Blackmores  (BKL) +4.1%, Elders (ELD) +8.01% and even Select Harvests (SHV) +1.76%
  • Healthcare had a day in outpatients as good results boosted the sector with Primary Healthcare (PRY) +20.45% and Sonic Healthcare (SHL) +3.75% doing well. CSL -3.7% unfortunately gave back some of yesterdays’ gains
  • Speculative stock of the day: Beadell Resources (BDR) +30.56% following an investor presentation showing progress with the turnaround after a change in management and the board. Good exploration potential and AISC costs forecast at US$715-US$815 a decrease of between 19-29%.

Corporate News

‘The Good, the Bad and the Ugly’.

‘The Good’

  • Domino’s Pizza (DMP) +6.04% after the company stunned the market with a huge result and upgraded guidance yet again. This one had all the toppings. Now known as just Domino’s as they have dropped the pizza, never a good thing, with half year earnings rising more than 50%. By 2025 they hope to double their growth engine in Europe with 4250 stores and delivery time falling to just 10 minutes. Net profit of $43.3m up 56.7%. Fully franked dividend of 34.7 cents.
  • A2Milk (A2M) +2.67% with the company riding the baby infant formula wave to a profit of $9.3m. Revenue surged 86% with baby formula now 53% of sales. Chief executive Geoff Babidge said it was “realistic” for the infant formula to grow to 60 % of revenue in the near-term. a2 has lifted its forecast for earnings before interest, tax and amortisation from $NZ33-37 million to $NZ45-49 million. It expects full year revenue to be $NZ335-350 million, compared with $NZ155.1 million in 2015.
  • Ardent Leisure (AAD) +3.84% has posted a 20% increase in profits driven by the US expansion in the Main Event division. Operating revenue increased by $48m to $333.8m. Group earnings though fell 5.1% to $30.5m. The company has said the numbers will be weighted to the second half with another two Main Events opening towards the end of the year.
  • Coca Cola Amatil (CCL) +4.14% back in the black on a 4.8% increase in underlying profits to $393.4m as the company slashed costs and invested heavily in marketing. The result was better than forecasts as CEO Alison Watkins vowed to ‘stabilise earnings before returning to mid-single digit earnings over the next two years. Final Dividend of 23.5 cents taking the full year to 43.5 cents.
  • Lend Lease Group (LLC) +4.65% said its first-half net profit rose 12.1 % to $353.8 million from $315.6 million in the year-earlier period. Revenue rose 24.5 % to $7.34 billion from $5.898 billion in the year-earlier period. An unfranked dividend of 30 cents up from 27 cents.
  • Primary Healthcare (PRY) +20.45% after announcing that it would pass on extra costs involved in pathology and imaging to recoup the rise in co-payments. The company reported an 28.5% rise in interim profits to $68.6m. The huge rally today was off an extremely low base after falling heavily in the last twelve months.
  • Sonic Healthcare (SHL) +3.75% on track to achieve full year guidance. Revenue growth of 21.8% EBITDA growth at 16.7%. Solid performance in parts of Europe. Net profit of $188m on revenues of $2.453bn.
  • The Reject Shop (TRS) +23.76% posted its first profit growth in four years, reporting a 43% jump in net profit from continuing operations to $18.3 million after slashing costs and tweaking its product range. The net profit result was ahead of market consensus forecasts around $13 million and even beat analysts’ full year consensus forecasts around $17 million. Sales rose 5.6 % to $424.6 million, underpinned by solid same-store sales growth of 4.4 % and the opening of eight new stores.

‘The Bad’

  • Australian and New Zealand Bank (ANZ) -0.56% slipped into negative territory following the numbers today. Worrying the market was the rise in bad debts to $800m from its Asian growth expansion strategy that has now been wound back. Cash profit was $1.85bn up 3.5%. despite conditions had become more difficult in early 2016.
  • Woodside Petroleum (WPL) -6.94% Big write downs as the oil price fall has hurt the company. Net income slumped to just US$26m a fall of 99%. Net profit dropped by more than US$1bn to US$1.126bn. The biggest impairment was at the $US865m on its stake in Chevron’s US$29bn Wheatstone project. They declared a final dividend of US$43cents down from US$144 cents last year.
  • Insurance Group Australia (IAG) -1.33% Insurance profit fell 12% to $610 m from $693m. However, the good news was the announcement of a special dividend of 10 cents plus the normal 13 cent final dividend. Challenging market was mentioned in the commercial insurance space.  Net profits were hit by significantly lower contribution from investment income on the increased volatility

And the ‘Ugly’

  • Arrium Limited (ARI) -23.8% after warning that it may need to place its Whyalla steelworks on care and maintenance complete with job cuts of 300 in the first half and 400 in the second half. The company disclosed a $60m shortfall. Revenue fell from $3.2bn to $2.8bn. A net loss of $235.8m in the December half. Strategic reviews to be finalised.
  • Flexigroup (FXL) -17.83% after first half profit rose 4% to $44.3m. and confirmed guidance for next year at around $92-94m. The number was slightly disappointing as forecast around $46m were in. The dividend was also cut from 8.75 cents last year to 7.25 cents this year.

Once again though the good far outweighed the bad and the ugly. Another positive sign.

Economic News

  • Scott Morrison fronted the Press Club today with his new stand-up routine. GST is now officially dead buried and cremated until the next time it is discussed anyway. Apparently he is playing a ‘Test Match not a Big Bash Twenty 20 game’. Coalition had clocked up more than $70 billion in new spending since winning office in 2013 and he was now basically starting from scratch in trying to find further revenue to cut taxes.

Seems the adults in Canberra are unlikely to do anything at all. Budget should be interesting.

In Asia

  • China has weakened its yuan fix by the most in 5 weeks. The PBoC fixed around 107 points weaker against the USD.
  • Here is something else to worry about.
  • Banks in China are getting creative it seems. They are using trusts or asset management plans to lend and recording them as funds to be received rather than as loans, which are subject to stricter regulatory oversight and capital limits. Commerzbank AG estimates this may result in losses of as much as 1 trillion yuan ($153 billion) over five years in the shadow financing world.

Europe and US

  • Hell make not freeze over but Russia and Saudi Arabia oil production will. At least for now.
  • Meanwhile David Cameron is attempting to bring something better home to the UK with many countries now looking at blocking reforms fearing that contagion will be an issue with others trying to negotiate similar deals. Looks like the ‘Brexit’ vote will get really interesting this year.
  • Not everyone likes the new ‘Super Mario’ plan for more money printing. Jens Weidmann, head of the Bundesbank and a member of the ECB’s governing council, said QE was “no longer necessary” for the Eurozone, despite the widespread expectation that more stimulus will be announced as early as next month.

Ahead in Europe

  • FTSE  +37.50 point.
  • DAX  -103 points.
  • CAC -4.50 point.

MARKET STATS

  • Volume was $6.30bn (Daily average $4.656bn financial year to date)
  • Dow Jones Futures down 26 points.
  • Dow Jones was up 222 overnight.

Clarence

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NT Markets

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