END OF DAY REPORT
ASX 200 gains 41.4 points to 4922.3 as intraday volatility centres on banks, Resources and energy shine as we close near highs. RBA holds rates unchanged at record low whilst Chinese PMI disappoints prompting more stimulus speculation. Japan slips 0.3% with China down 0.3%. US futures -42. AUD 71.29 cents
Another day where banks held the key. Resources and energy were very positive and remained so as the banks swung around from positive to negative to positive again and sent the index with them. After a near fifty point gain the enthusiasm evaporated as banks turned negative and the ASX 200 slipped into negative territory. Downbeat Chinese PMI numbers did not help. Once again the initial bullishness was not able to be sustained with a high of 4931 and a low of 4868 around lunch time.
However the market resumed its upward trajectory after the RBA announcement and closed at 4922 up 41 points as Asian market turned positive and buyers regained confidence. A ‘buy’ on Australian banks from UBS, hitting the media, helped turn around sentiment in the big four too.
The RBA kept interest rates at a record low with no movement at the station from Glenn and his lunch buddies. This is the ninth straight meeting where rates have remained unchanged..
From the announcement.
“The Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target. The Board therefore decided that the current setting of monetary policy remained appropriate.”
“Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand.”
Stocks and sectors
- Resources were the stars of the show again as BHP +2.95%, RIO +2.53% and Fortescue Metals (FMG) +6.86% all put in good performances. Gold stocks were especially strong given the bullion price is close to a ten year high in AUD terms. Newcrest (NCM) +4.23%, Evolution Mining (EVN) +4.57% ,Oceana Gold (OGC) +5.9% and Resolute Mining (RSG) +11.61%. Base metal stocks were also in demand South32 (S32) +4%, Iluka Resources (ILU) +6.24%, Independence Group (IGO) +1.95% and Oz Minerals (OZL) +2.38%.
- Energy stocks were firmer across the board with Woodside (WPL) +1.78%, Oil Search (OSH) +1.8% and Origin Energy (ORG) +3.61%. Coal stocks are also having a renaissance led by Whitehaven Coal (WHC) +10%.
- Financials were the swing vote today as the jury still seems to be out on the big four. However after the RBA meeting the banks pushed ahead with ANZ +2.99% and NAB +2.03% leading the way. Bendigo and Adelaide Bank (BEN) -5.96% after losing a 34c dividend. REITs were positive and taking comfort from the latest housing reports showing modest increases still and thoughts of a market crash receding.
- Industrials were a little fruit salad today with some red, some green. Telstra (TLS) -4.76% was ex dividend 15.5c with consumer stocks also feeling unloved. Treasury Wine Estates (TWE) -2.59%, Woolworths (WOW) -1.31% and Wesfarmers (WES) -0.1% all eased back with the clean and green theme remaining under pressure from profit taking. Bellamy’s (BAL) -5.6% and Bega Cheese (BGA) -4.11% the worst hit.
- Consumer discretionary turned green Harvey Normal (HVN) +1.88%, Super Retail (SUL) +3.56% finding support and RCG +3.45%.
- Building stocks were unloved with Boral (BLD) -2.74%, CSR -2.36% and Fletcher Building (FBU)-1.06% missing out. As did Dulux Group (DLX) -1.84%.
- Speculative stock of the day: Alicanto (AQI) +109.3% after signing a US$10m earn in with Barrick Gold.
- ANZ +2.99% have hired high profile Maile Carnegie, the head of Google Australia, to head up their newly created role of head of digital banking. Looks like new CEO Shayne Elliott is getting serious about technology.
- Slater and Gordon (SGH) -45.69% again under pressure on media reports of the looming debt issue and the banks’ exposure to the law firm. Analysts are now starting to question the very survival of the firm. Amazingly the board turned down Andrew Grech’s resignation.
- Beach Energy (BPT) +8.49% and Drillsearch (DLS) finalise their merger as the latter ceases to exist.
- Origin Energy (ORG) +3.61% announced that it has signed a non-binding heads of agreement with ENN LNG Trading Company Limited for the supply of 500,000 tonnes of LNG per year for a period of five years. By mutual agreement, the parties have the ability to extend the supply period by an additional five years.
- Magellan Financial (MFG) -2.69% today announced the appointment of Hamish Mclennan to the board. McLennan was a former executive chair and CEO at Channel Ten
- RBA keeps rates on hold. Leaves the door open as we await Q4 GDP tomorrow.
- The manufacturing sector in Australia continued to expand in February, and at a faster pace, the latest survey from the Australian Industry Group showed on Tuesday with a PMI score of 53.5. Up from 51.5 in January, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.
- ANZ-Roy Morgan consumer confidence index dropped 2.6 % in the week ending February 28 and is back below its long-run average.
The truth will set you free.
- Thanks to Corelogic and RP Data for the real position in Australian housing.
- Capital city dwelling values increased by 0.5% in February, however the trend in annual growth has moderated over the past seven months from 11.1% down to 7.6%.
- In China: The official Purchasing Managers’ Index (PMI) stood at 49.0 in February, down from the previous month’s reading of 49.4 and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts had predicted a reading of 49.3.
- Iron ore futures have risen to a multi month high in Shanghai as construction is picking up due to a warmer spring in China. The May Dalian Iron Ore contract was up 4.4% before easing back to 2.9% up at 374.50 yuan a tonne.
- In Japan the government sold a ten year bond at a negative interest rate for the first time ever. They are now paid by investors to borrow money. If you read that phrase out loud you will see how ridiculous that is. The Japanese sold US$20bn of debt with a yield of minus 0.024%. The sale was 3.2 times oversubscribed as demand for the auctions has been declining this year.
Ahead in Europe and the US
- Argentina has signed an agreement with US hedge funds to settle a protracted dispute over its failure to repay billions of dollars’ worth of bonds. It will pay the funds who sued the nation about US$4.6bn to settle claims. They had bought the bonds at heavily discounted prices after the country’s economy collapsed in 2001.
And finally Super Tuesday tonight in the US when we should see the two nominations for the Presidency emerge. President Trump? Stranger things have happened. Ronald Reagan was an outsider too. Maybe not as delusional though.
Ahead in Europe
- FTSE -29.50 points.
- DAX -61.50 points.
- CAC +39 points.
- Volume was $6.386bn (Daily average $4.656bn financial year to date)
- Dow Jones Futures down 42 point.
- Dow Jones was down 123 points overnight.