WHAT HAPPENED TODAY?

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The ASX 200 Index tumbled by 77 points to close at 4875, as the bears crept back in. The promising rally we had earlier this week has all but faded. So much for the bull market. Shares took a dive today after some bearish remarks from the Saudi oil minister sparked a panic sell off in the oil price which reverberated in global markets. Iran joined in on the commotion and labelled the recent deal between Saudi Arabia and Russia as “ridiculous”. This saw some heavy selling in our market with the big banks and miners taking the brunt of it. BHP and RIO shares were slammed, BHP having its worst sell-off in 7 years.

Once again results dominated headlines. Wesfarmers (WES) shares were hammered on its profit results after losses from the group’s coal mines partly offset Coles’ and Bunnings’ strong gains. Also reporting today was Fortescue Metals (FMG), WorleyParsons (WOR), Flight Centre (FLT), Sirtex Medical (SRX), Westfield (WFD), and McMillan Shakespeare (MMS). Long-serving Telstra (TLS) chair Catherine Livingstone step down to be replaced by Asciano boss John Mullen. Slater & Gordon (SGH) shares were suspended as the firm prepares to announce more bad news with a writedown of it UK acquisition.

Wage growth has eased, rising just 0.5% in the December quarter or 2.2% over the year. It is the slowest annual pace since series started 18 years ago, and means wages are just staying ahead of the inflation of 2.1% or 1.7% (headline rate)

STOCKS AND SECTORS

  • The big banks did the most damage wiping some 40 points off the market today after heavy selling saw ANZ -3.46%, WBC -3.91%, NAB -3.81% and CBA -2.76%. IOOF (IFL) shares fared ok closing only slightly down -0.91% on its profit results. Clearview (CVW) shares did much the same, closing -1.12% on its profit results.
  • Energy stocks were one of the hardest hit following all the ruckus affecting oil prices overnight. WTI futures fell $1.52 or 4.55% to $31.87 a barrel after remarks from Saudi Oil Minister Naimi ruling out production cuts, although he added that the production freeze may be agreed at March meetings. WorleyParsons (WOR) shares fell -13.06% after scrapping its dividend following its profit results. Santos (STO) -6.57%. AWE -5.10% on its profit results and Origin Energy (ORG) -5.79%.
  • Resources stocks were belted in a similar fashion to the energy sector. BHP was the main victim, its shares falling -8.22% following a terrible set of results yesterday. The miner scrapped its progressive dividend policy and posted headline numbers which missed consensus forecasts. Despite all this, broker reports this morning were saying any weakness is an opportunity to buy. Fellow miners South32 (S32) -5.83% and RIO -5.83%.
  • On the flip side, gold stocks triumphed with Evolution Mining (EVN) +5.19%, Newcrest Mining (NCM) +4.68% and Norther Star Resources (NST) +4.50%.
  • Wealth Managers fared relatively OK in comparison with other sectors. AMP closed -1.63%, BT Investment (BTT) unchanged and Henderson Group (HGG) -0.65%. Suncorp (SUN) closed -2.24%.
  • Industrials stocks was the only sector to close in the black led by Seven West Media (SVW) which closed +10.78% following a bumper set of results yesterday, brokers were out this morning upgrading target prices. Macquarie upped its target price by 19%. Qantas (QAN) also riding the same wave, closing +4.75% on its profit results yesterday, the company also benefiting from a dip in the oil price.
  • Healthcare also closed in the red with Sirtex Medical (SRX) shares falling 6.72% on its profit results. But on the flip side Mesoblast (MSB) shares closed +12.35% after it launched an Adult Stem Cell Product in Japan.
  • Consumer Staples performed poorly as well, the index driven lower by Wesfarmers (WES) -4.86%. Shares were sold off following. The group’s retail businesses were behind the profit growth, offsetting the company’s resource business which slipped into the red due to low commodity prices. Woolworths (WOW) was dragged lower as well, shares closing -2.66% after reports indicate that Coles looks to have
  • High flying consumer stocks did OK. Bellamy’s (BAL) +3.33% after going Ex Dividend, Domino’s Pizza (DMP) +0.86%, A2 Milk (A2M) +0.60% and Bega Cheese (BGA) +2.14%.
  • Stock of the day goes to Pilot Energy (PGY) which rose 50% on some very positive commentary from its AGM.

RESULTS

  • Atlas Iron (AGO) shares rallied hard today rising +33.33% on a positive set of results. The iron ore miner slashed costs and posted a good result.
  • Asciano (AIO) shares closed unchanged. Results were slightly below expectations. FY16 Guidance of Flat-to-Low Single Digit Underlying Ebit Growth.
  • BC Iron (BCI) shares were sold off, falling -7.69% on a poor profit report.
  • Clearview (CVW) shares closed -1.12% despite a beat on consensus forecasts.
  • Pact Group (PGH) shares closed +1.91% after the company reaffirmed FY16 guidance.
  • RCG Corp (RCG) posted a positive set of results which beat expectations, but shares were placed in a trading halt pending an announcement on a capital raising.
  • Wesfarmers (WES) shares were sold off, falling -4.86%. The retailer announced plans to restructure its department store business after a strong result. But its coal division offset any positivity. Bunnings has also confirmed it is interested in about 15 Masters’ sites.
  • Westfield (WFD) shares rose by +0.21%. Profit results were above expectations. The company expects growth of between three and four per cent in 2016.
  • APA Group (APA) shares closed -0.11%. Results were a touch below expectations but the company did reaffirm guidance.
  • Bega Cheese (BGA) shares rallied by 2.14% on what was a solid profit number. Bega Cheese’s focus on Australian and international consumer markets, strong branding and distribution alliances such as Blackmore’s and investment in higher value dairy nutritionals means that we are well positioned to take advantage of unfolding market opportunities.
  • Flight Centre (FLT) shares closed a touch lower -0.54%. The company did reaffirm FY16 Underlying Pretax Profit Target of $380m-$395m.
  • Fortescue Metals (FMG) shares fell -4.76% despite a solid profit figure. It was a beat on broker forecasts coupled with lower cost guidance of US$13/Wet Metric tonne by FY16-End. Net Debt was also lowered at US$6.1bn at December-End.
  • IOOF (IFL) shares closed -0.91% after its NPAT more than doubled.
  • Sirtex Medical (SRX) shares tumbled by -6.72% after its profit results disappointed and the company cut its dividend.
  • WorleyParsons (WOR) shares were pounded by -13.06% after the company cut its dividend and posted its profit result.
  • Vitaco (VIT) shares have been under selling pressures most of the year and fared even worse today. VIT shares fell -% on its profit results. The company poseted a statutory NPAT loss of $15.4m. Despite this 2H16 earnings are forecast to exceed 1H16 due to the elimination of legacy non recurring Musashi costs.
  • McMillan Shakespeare (MMS) shares were down -3.29% on its profit results.

There’s a lot of doomsday talk about an impending property crash in Australia. The below chart shows that bank loans in Australia are heavily geared towards residential mortgages.  Mortagage Choice (MOC) CEO John Flavell dismisses the whole property bubble talk by saying “

At the end of the day it comes down to the macro level and at that level, our housing system is based on supply and demand, Australia’s population is growing at twice the rate of other western nations.”

IN ASIA

  • In Bloomberg – Hong Kong’s economy could grow slower than expected as a slump in tourist arrivals and exports continue to worsen. The economy could grow at 1%-2% in 2016, slower than the 2.4% gain last year.
  • China has deployed fighter jets to a contested island in the South China Sea, the same island where China deployed surface-to-air missiles last week, two U.S.

Ahead in Europe

  • FTSE  -27 points.
  • DAX  -147.50 points.
  • CAC -60 points.

Clarence

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NT Markets

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