ASX 200 treads water, up 7.6 points at 5119 in listless, lacklustre trade. Banks hold the line as resources reverse. Asian markets mixed with China finding friends as the NPC wraps up 0.45%, while Japan falls 0.62% as Kuroda goes rogue. AUD at 74.56 and US futures up 6.
And so we wait. For those who rise early we should get some guidance from Janet Yellen from 4:30am Thursday. Today our market was on hold and bank rises absorbed the losses in material stocks. After the surprise rout yesterday, there was always going to be some support creeping in. We flirted with turning negative a number of times before closing up 7.6 points at 5119. We had a high of 5122 and a low of 5088.
ASX 200 Index Today Aussie Dollar Today US74.56c
STOCKS AND SECTORS
- Resources under pressure today as the iron ore price fell back to levels before the big spike last week. BHP -1.46%, RIO -0.65% and Fortescue Metals (FMG) -4.33%, with gold stocks also slipping away. Newcrest (NCM) -1.78%, Resolute Mining (RSG) -7.38% and Saracen Minerals (SAR) -4.55%.
- Energy stocks were predictably weaker given falls in the crude price as Iran continues to posture on the production freeze. Santos (STO) -1.55%, Beach Energy (BPT) -4.29% and Oil Search (OSH) -1.01%. Woodside (WPL) +1.24% bucked the trend.
- Banks squeezed out small gains after the 1.5% falls yesterday. Commonwealth Bank (CBA) +0.78%, Westpac Bank (WBC) +0.59% and National Bank (NAB) +1.04%. Wealth managers benefited from recent strength in equity markets. Macquarie Group (MQG) +1.09%, Magellan Financial (MFG) +3.12% and Ecplix (ECX) +2.9%. IOOF (IFL) -5.32% was ex dividend 28 cents but continued to fall as the dividend strippers moved in.
- Industrials were mixed as Wesfarmers (WES) -0.7% and Woolworths (WOW) -1.36% slipped on the ‘effects’ test news. Mining services continue to feel unloved given the miners cost cutting continuing. Cardno (CDD) -2.04%, Seven Group (SVW) -5.14%.
- Healthcare back in outpatients and on the mend with Regis Healthcare (REG) +2.7%, Primary Healthcare (PRY) +2.86% and Mayne Pharma (MYX) +4.66%.
- Consumer stocks found buyers today with Adairs (ADH) +4.41%, JB Hi Fi (JBH) +2.78% and Billabong (BBG) +8.28%
- Speculative stock of the Day: Australian Dairy Farms (AHF) +30.23% after confirming the acquisition of Camperdown Dairy Company (CDC) is on track to proceed with the execution of contracts. Seems there was a hold up with the lease of the CDC factory.
- Telstra (TLS) -0.19% announced a couple of high profile hires today with Stephen Elop ex Nokia CEO joining the company as head of technology, strategy and innovation. Is that an oxymoron. The other recruit is gun-for-hire ex CEO of Optus, Kevin Russell. A puzzling couple of new acquisitions but with Elop it is not about money clearly as he trousered $6m to sign onto Nokia and a EUR18.8m bonus when he sold the company to Microsoft.
- BHP -1.46% CEO Andrew Mackenzie was out and about at a conference in Melbourne in a very snappy blue zoot suit talking about the prospect for his company and iron ore. He admitted they had been ’unprepared for the speed and severity’ of the down turn in the commodity cycle. They have learnt their lesson apparently. Importantly he was bearish on the iron ore price as new supply continues to come online. Cost cutting and production efficiencies are the way forward for BHP.
“There are no certainties in the 21st century and the state of the global economy reflects this.” Mackenzie.
- The Federal government has finally done something that has been on the table for some time. The Harper Review recommended that the government abandon its ‘effects’ test for competition policy. The policy basically used to say that the ACCC had to prove intent to limit competition, now they just have to prove that competition has been affected. This will not be popular with big business who now may open themselves up to a plethora of lawsuits as smaller rivals have had the burden of proof lowered substantially. Expect the big companies to be reviewing their donations to Turnbull’s government.
- Fitch ratings agency has reaffirmed our AAA rating. They have said we are underpinned by high income, strong institutions, free floating exchange rate and low public debt. They further said that we are heading towards becoming a reserve currency. Expects low interest rates to continue fuelling consumption growth, resulting in GDP growth of 2.6% in 2016.
- Fitch notes that Australia depends more on primary commodity exports, particularly to China, than ‘AAA’ peers. Exposure to Chinese households through the service sector and capital flows is also increasing.
- “A severe slowdown in China, although not Fitch’s base case, could have a widespread negative economic impact.”
- Other downside risks to Fitch’s economic forecasts include continued weakness of non-mining business investment and a sharper than expected property market slowdown.
- The Chinese premier Li Keqiang has said it is ‘impossible’ for China not to meet its growth targets this year. Now no one will believe any of the numbers coming out of China.
- Meanwhile in a land far, far away the Bank of Japan governor Kuroda says it is theoretically possible for the central bank to cut interest rates to around minus 0.5%. Speaking in parliament, Kuroda said he could not say now which policy tools the BOJ would use in case it decided to expand monetary stimulus again, saying that would depend on economic conditions at the time. This is at odds with what he said yesterday. So nothing changes and noone knows what’s going on.
- In other Japanese news, Sharp felling sharply as the rescue deal from Foxconn was pushed out again after questions were raised on the performance in the last quarter. Foxconn, which agreed to pay more than 600 billion yen ($7 billion) for control of Sharp, has asked the company and its auditor for the latest financial results. Mmm. The bailout will become more frantic and pressing given the expiry of credit lines due at the end of March
EUROPE AND THE US
- Marco Rubio has pulled out of the race for the Republican nomination. Trump is now almost a certainty to take the prize before the Republican caucus in June.
- Remember the ‘dots’. Interesting to see how they change tonight. Markets are putting a 77% of a single rate rise in 2016.
Here’s a question – Why does it take the Fed two days to decide and only a lunch for our own RBA to decide?
Another question – Is the Fed leading the market or the market dictating what the Fed does. Tonight we find out. No change to rates expected.