ASX 200 slides 26.5 points to 4937.6 into the weekend as banks and industrials weigh. Bargain hunting kicks in as index tests 4900. Gold stocks shine. Asian markets mixed with Japan up 0.46%, China down 1.16%. AUD 75.40 and US futures +64.
Well it could have been worse and early this morning it was, as overseas weakness fed into early trading. Volumes were again low as school holidays loom in NSW. As usual the banks were the swing factor as they continue to fall. Calls from Labour for a Royal Commission into the sector will not help sentiment but didn’t we have an inquiry recently with the Murray report back in 2014? APRA and ASIC have oversight for the industry and any inquiry would undermine that authority of both who seem to be doing a pretty good job. Culture apart and one or two bad apples, our banks are paragons of virtue compared to their overseas counter parts. At the current rate it seems we will not be happy until the villagers are streaming down the streets carrying their pitchforks and baying for blood.
Pitchforks will be handed out again on Monday
Most sectors today were in the red but there seemed to be a lack of follow through in the selling today. The golds were in demand following safe haven buying and a lower AUD.
- For the week the index has slipped from 4999.4 to 4937 for a loss of 1.2%.
- Third week of consecutive losses for banks and energy sector. Third week of losses for the market.
- A high today of 4952 and a low of 4893 as we bounced off the low on some bargain hunting.
Stocks and Sectors
- Resources weaker in places like BHP -1.28% and Iluka Resources (ILU) -5.67% whilst RIO firmed +0.67% as did Fortescue Metals (FMG) +3.5%, South32 (S32) +1.74%, Pilbara Mining (PLS) +22.22%, Galaxy Resources (GXY) +10.34% and Orocobre (ORE) +2.4%. Oz Minerals (OZL) -3.3% was harshly treated following news of the continuing cost cutting program. But then again they have been very good performers this year.
- Energy was weaker having seen some volatility this week. WorleyParsons (WOR) -2.39%, Santos (STO) +0.26% bucked the trend though.
- Golds stocks were back in the spotlight. Evolution Mining (EVN) +5.73% showing the benefits of the AUD bullion price. Newcrest (NCM) +2.39%, OceanaGold Corp (OGC) +5.68%, Northern Star (NST) +2.79% and even Beadell (BDR) +7.14%
- Financial and banks continuing to suffer. Bank of Queensland (BOQ) -4.28% gained no friends from their results yesterday and the surprise out of cycle rate rise for mortgage holders. The big four continue to languish down around 1%-1.5% except Commonwealth Bank (CBA) -0.32%. Wealth managers also feeling unloved led by Platinum Asset (PTM) -2.56%, Magellan Financial (MFG) -1.39% and Macquarie Group (MQG) -1.78%
- Industrials mixed and drifting downwards generally. Cimic (CIM) -2.1%, Transurban (TCL) -1.23%, Telstra (TLS) -0.39% and Carsales (CRZ) -1.98%. Media stocks continue to struggle to find the remote. Nine Entertainment (NEC) -1.78%, Seven West (SWM) -3.09% and STW Communication (SGN) -1.56%. Blackmores (BKL) +1.94% up above $200 again.
- Monday we get Wise Tech (WTC) trading and it will be interesting to see what effect that has on other tech stocks and the level of support post listing.
- Speculative stock of the Day: Lithium is hot this year. Yet another one in the frame today. Sayona Mining (SYA) +55% after announcing commencement of the Mt Edon lithium exploration program. 325,000 people cannot be wrong after orders for the new Tesla announced.
- Arrium (ARI) news today that it is business as usual for at least the next two months will be welcomed especially in Whyalla. The administrators are hoping that they can trade out of this period of adjustment with the support of the banks and customers. Given the PR the banks have received coupled with their unsecured exposure, it would be in the banks interests to play along with this hoping for a white knight.
- Nine Entertainment (NEC) -1.78% have named ex CSR executive Greg Barnes as their new CFO today.
- Origin Energy (ORG) -3.87% on news they were looking to sell their interest in an Indonesian geothermal project.
- Evolution Mining (EVN) +5.73% on news of a record quarterly gold production allowing early repayment of debt. They have paid back $207m of debt in the last seven months. They are 12 months ahead of their debt repayment schedule.
- The Department of Industry must know something the rest of the industry doesn’t know as they are now predicting iron ore will average US$45 in 2016 up from their previous forecast of US$41.60. 2017 should see US$56 and US$61.40 in 2017.
With the pricing power that we have together with Brazil it is beginning to look like the marginal producers are finally being squeezed out.
- Hong Kong Sevens this weekend.
- This is not part of the script. The USD/Yen cross rate should NOT be where it is given negative rates in Japan. But it is. It is a ‘riddle, wrapped in a mystery, inside an enigma’. Thank you Mr Churchill.
- Fast Retailing Co. fell the most in three years in Tokyo trading after cutting a profit forecast by a third, saying a stronger yen eroded the value of overseas sales and unexpectedly warm winter weather hurt demand for the company’s down coats and thermal underwear.
Fast Retailing is the largest company on the Nikkei with a near 9% weighting.
- Looks like David Cameron is set to be sucked into the Panama Papers vortex tonight as his admission on his overseas investments will pile pressure on the UK government.
- A bit hit to Wall Street income as Obama has now moved to torpedo almost US$370bn worth of mergers and takeovers.
- A rare sight indeed last night as four present and past Fed chiefs took to the stage. Well Greenspan was via video link the most important person in the room was Janet Yellen.
Janet and the ghosts of Fed Chiefs past.
- ‘We remain on a reasonable path and I don’t think that December was a mistake’ She added that the FOMC would “watch very carefully what is happening in the economy”, and that her “best guess” was that rates would continue to rise, but a gradual pace.
- She also thought the US was NOT in a bubble blown by central bank stimulus.
Look carefully and you will see lift off
- US reporting season kicks off again next week.
- It is being projected that corporate earnings will be down 8.5% for the first quarter of 2016 compared to one year ago. This will be the fourth quarter in a row that we have seen year over year declines, and the last time that happened was during the last recession.
- S&P 500 earnings have now fallen a total of 18.5% from their peak in late 2014.
- The MSCI world index – up 195% since 2008, it has a price-to earnings ratio (P/E) of 16.4, even higher than six years ago.
Has it rolled over?
SECTOR PERFORMANCE 52 WEEK HIGHS / LOWS
BEST AND WORST STOCK PERFORMERS
Have a great weekend