ASX 200 fails again and closes up 14.9 points at 5183.1 after a strong start gave way to caution. Industrials mixed as healthcare decline but resources and banks keep things ticking over. Asian stocks mixed as Japan slips 1.52% but China up 1.95%. AUD 76.51 and US Futures up 13.
Yet again we failed to hold the 5200 level as the banks turned a little soggy mid-morning as did energy stocks and USD earners. Maybe traders were worried about the US ‘quadruple witching’ tonight or just happy to square up before the Easter four-day week is upon us. The strength of the AUD is now starting to hurt those stocks that have done well with the lower to 65 cent view, that has been ‘groupthink’ for the last year or so. 77 cents and predictions of 80 cents from Macquarie are sending economists and strategists back to their spreadsheets. This was not supposed to happen. The RBA will be reluctant to cut rates given they did nothing much when the dollar was parity, except use the good old fashioned jawboning technique. It seems that any cut in rates would be unlikely to be passed on by banks anyway and may send the wrong signal. With so many countries going the full NIRP (negative interest rate policy) then it is hard to compete with that. 25bps will not cut it. With an economy growing at 3% and unemployment at 5.8% and inflation at 1.7% apart from the AUD, what justification would there be for Glenn to move.
ASX 200 Index Today Aussie Dollar Today US74.85c
To put things in perspective we ended last Friday at 5166. Today at 5183. Big week though for central bankers.
At the close of business today we see the S&P Indices changes come into effect. May make for some interesting moves in the next few days.
STOCKS AND SECTORS
- Resources had yet another positive day with BHP +4.68%, RIO +0.96% and Fortescue Metals (FMG) +3.77% all doing well as did gold stocks. Northern Star (NST) +8.83%, Evolution Mining (EVN) +6.81% and Newcrest (NCM) -1.25% the odd one out. Base metal stocks were also in demand with Western Areas (WSA) +4.27%, Oz Minerals (OZL) +1.53% and South32 (S32) -0.63% slipping at the close.
- Energy though failed to inspire especially given WTI pushed through $40. Origin Energy (ORG) +2.09%, Woodside (WPL) +1.69% and AWE +6.47% showing positives but Caltex (CTX) -1.62% and coal stocks New Hope (NHC) -11% all slipping.
- Industrials were mixed but mostly lower. Healthcare stocks took some pain as the AUD rise seems to be taking the gloss off the story. Moves from the Chinese to buy a stake in Primary Healthcare (PRY) -2.6% should have fired up the sector a little but not to be. CSL -1.7%, Mayne Pharma (MYX) -0.3%, Mesoblast (MSB) -3.5% and Cochlear -0.5%. Treasury Wine Estates (TWE) -3.8% was a casualty today again feeling the pain of 77 cents and the lower pound too.
- Banks were a bit of a disappointment as they failed to kick although Commonwealth Bank (CBA) +1.0% behaved. Solid early gains slipped away as apathy kicked in. Reports of billionaire Solly Lew predicting danger for property buyers at these elevate levels and REITs slipped away led by Westfield Corp (WFD) -2.36% and Scentre Group (SCG) -0.46%.
- Speculative Stock of the Day: Top End Minerals (TND) +38.3% following an agreement to buy an Israeli Facial Recognition business. Due diligence has been completed and the company hopes to execute the contract in the coming days.
- Primary healthcare (PRY) -2.63% may well be in play today as news that a Chinese group Jangho, had bought a 11% stake. The same group paid $198m last year for Vision Eye Institute. Ironically Jangho bought its initial cornerstone 19.99% from Primary in the Vision deal. The stock was ex-dividend today.
- Premier Investments (PMV) +4.08% after announcing the results of the UK expansion of the Smiggle stationery business. Net profit rose 26% to $71.5m with total revenue up 15.1% to $565m.The company has hopes for $100m in online sales by 2020.
- Telstra’s (TLS) -0.76% Andy Penn was out in front of the press early wearing his hair shirt and muttering ‘mea culpa’ as yet another outage in their mobile network caused more issues than a Madonna concert starting two hours late.
- Sirtex (SRX) -5.98% following news that President of the Americas region, Mike Mangano, is leaving to explore new challenges.
- More deals in the media sector as Southern Cross Media (SXL) -4.24% finds it has a new 9.99% shareholder in Nine Entertainment (NEC) +2.55% after the group paid Macquarie Bank 115 cents for part of their stake.
- Sydney Airport (SYD) +2.36% released more numbers today showing the boom in international tourism continues. Up 12.7% thanks to a strong rise in tourists from China Korea and the US. 3.3m people passed through Sydney airport in in February while Melbourne was not far behind at 2.7m. A new luxury precinct is in the pipeline at Sydney and a restaurant run by Luke Mangan. The company still has first right of refusal on building Badgery’s Creek and has four to nine months to decide. With numbers like these no wonder they are in no hurry.
- RIO +0.96% announced late last night that Sam Walsh the present CEO will be stepping down to be replaced by Jean-Sébastien Jacques, the current head of the copper and coal business at RIO, in July.
- AWE +6.47% has appointed David Biggs as chief executive and managing director.
- More media moves with news that Henderson Group (HGG) -2.39% has snapped up a 5.05% stake in Fairfax (FXJ) +4.43% as the strike continues following news that the company is sacking 120 journalists. The market is taking this as a positive. Plenty of deals to be done in media in the coming months.
The RBA Head of Stability Luci Ellis was let out into the big wide world at a conference today in Sydney.
- “There are things going on in other markets domestically that are worthy of consideration”
- “That’s not to say that we think these things are red-light, shining risks, but we look at everything and we’re alert to the fact that risk could come from where you least expect it.”
- One area of concern for Ellis was the record low interest rates spurring a growing household debt burden. Sounds like rate cuts are off the table.
Chicken or the egg?
- Scott Morrison announced today that the government would require foreign investors who are buying infrastructure assets to face a ‘critical infrastructure’ test by the FIRB. The government is also looking at the prospect of selling 30 year bonds to fund infrastructure assets. Horse? Bolted.
- Macquarie Bank has come out with an 80 cent target price now for the AUD.
- The PBoC strengthened its peg today by the most since November to 6.4628.
- China’s home prices rose at their fastest rate in almost two years in February thanks to strong demand in big cities. Average new home prices in 70 major cities climbed 3.6% in February from a year ago, quickening from January’s 2.5% rise.
- New-home prices gained in 47 cities in February, compared with 38 in January, the National Bureau of Statistics said Friday. They dropped in 15 cities, compared with 24 in the prior month, and were unchanged in eight cities.
- North Korea today fired a medium range ballistic missile into the sea. Not sure why they would do that. Plenty of other things to aim at.
- Bank of Japan released the minutes of its January board meeting where 5-4 voted to go “Full Negative’ on interest rates. The one board member who opposed the move is being replaced with someone who will vote the right way.
- Japan’s ten-year bond has fallen to another record low of 0.135%.
EUROPE AND US NEWS
- Norway cut its benchmark interest rate to a record low and signalled it’s prepared to ease policy further to ward off a recession in western Europe’s biggest crude oil producer. The overnight deposit rate was lowered by 25 basis points to 0.50%, as expected by most economists. The bank predicted that its rate will bottom at 0.2% in the first quarter next year.
- The Swiss National Bank left interest rates unchanged at record lows, but cut its economic outlook and forecast a deeper bout of deflation as cheaper oil and slowing global growth weigh on Toblerone and watch sales.
- Is this why the Fed isn’t raising rates?
Export prices of Salmon in Norway have hit a 30-year record. Good for Huon and Tassal perhaps?