ASX 200 falls 20.4 points to 5137.1 after energy shares fell heavily on Doha disappointment. Qantas (-10.84%) belly flopped following disappointing growth projections and McGrath Real Estate (-30.77%) slumps on profit warning. Asian markets very weak with Japan down 3.4% and China off 1.24% US futures down 103. AUD 76.675 cents.

Dead as a Doha.

A surprisingly strong (well relatively) start to the week following predictable news that the meeting in Doha was an abject failure and no agreement in production was reached for any freeze. Initially the market dropped, as oil fell 6 % and the ASX 200 touched 5118 early before some residual buying from last week crept back in and for a minute we even turned positive around 11.30 before a gradual drift off in the afternoon. Volume was on the skimpy side but it is Monday during school holidays. Continued weakness in energy and materials was offset by a good move in Telstra following news it was selling out of its Chinese Autohome business and was going to get another $2.1bn into the war chest. Share buy backs and capital returns are in order as growth left the building some time ago. Banks remain under pressure and McGrath news on the property market did little to dispell nerves.

Surprisingly the local market continued to be well supported despite the significant weakness in regional markets and US futures. We have BHP and RIO production numbers this week plus the governor speaking in NY to keep currency traders aroused.

ASX 200 Index & Aussie dollar charts – Today

Stocks and Sectors

  • Resources were easier led by BHP -3.01% and RIO -1.56% but Fortescue Metals (FMG) +2.3% back in favour. South 32 (S32) -3.55% fared worst as did Iluka Resources (ILU) -2.05%.
  • Energy understandably damaged today on Doha news. Santos (STO) -6.95% Oil Search (OSH)-4.31% and Origin Energy (ORG) -5.8% whilst Woodside (WPL) -1.38% escaped the wrath mainly as they have failed to extend gains last week whilst all around were bud up in the sector.
  • Gold companies back in the limelight with Newcrest (NCM) +2.26%,Perseus Mining (PRU) +6.82%, Regis Resources (RRL) +1.99% and Saracen Mining (SAR) +1.88%
  • Industrials slightly better, Telstra (TLS) +1.72% played some catch up after missing out on rises last week. Corporate news helped and consumer stocks were back in demand with Dongfang Modern (DFM) +7.37% having another very strong day as were recent listing China Dairy Corp (CDC) +7.27% whilst Select Harvest (SHV) +6.04% finally had something to smile about after a broker upgrade. Healthcare stocks improved on a falling AUD with CSL +1.7%, Ramsay Health (RHC) +1.51% and Viralytics (VLA) +3.76%. Domino’s Pizza (DMP) +3.34% hit another all-time high
  • Banks and financials continued to drag with Westpac Bank (WBC) -1.49% and Commonwealth Bank (CBA) -1.09%. REITS were a bright spot with Westfield Corp (WFD) +1.59%, Stockland Group (SGP) +1.16% and Vicinity Centres (VCX) +1.25%
  • Speculative stock of the day: Tasman Resources (TAS) +33.33%following an update on its Eden Energy (EDE) +20% shareholding in Edencrete with a contract for a highly abrasive application in Georgia now completed. This slab replacement used the same EdenCrete enriched concrete mix that has recently been approved for use in its 24-hour concrete repair mix.

 Corporate News

  • Recent IPO McGrath Real Estate (MEA) -30.77% was passed in today following disappointing results from its newly acquired business in the north and north western suburbs in Sydney. FY16 revenue is now expected to be around $136m-140m and EBITDA of $26-27m. The words ‘challenging popped up in the statement.
  • Qantas (QAN) -10.84% surprised the market today with an announcement on its capacity growth plans and cited weaker consumer sentiment and a looming Federal election as reasons why the frequent flyer is less frequent at the moment. The company has halved its domestic capacity growth forecasts to between 0.5 % and 1 % for the final three months of the year ending June 30 from the previous forecast of 2 %. This could be a good buying opportunity given the big falls in the price and the weakening oil price.
  • Murray Goulburn (MGC) +2.36% following news from the company that they are resuming sales through their cross border platforms.
  • Transurban (TCL) +2.66% has lifted its March quarter revenue 13 %to $451 million thanks to increased traffic and collections at its major projects. Proportional toll revenue for the period was up 14.9 %from a year earlier to $473 million, with big increases in average daily traffic on its Brisbane and US roads contributing. Average daily traffic in Sydney increased 5.2 %to 614,000 trips, while an increase in toll rates for trucks on the M7 motorway also helped sharply boost revenue. Traffic on the company’s American roads was up 19.2% to 78,000 daily trips.
  • Telstra (TLS) +1.72% following news they would postpone the sale of the Foxtel business. The Netflix effect has knocked 5% off the viewing figures for Prime time FTA  viewing. Foxtel numbers are also down 5.3% this year.
  • Better news though as Telstra has sold its 47.7% stake in their Chinese online Autohome business to Ping An Insurance for US$1.6bn. Why sell a growth business? Strange decision.

Economic News

  • Inflation in NZ picked up again in March with the CPI up 0.2% as higher prices for cigarettes and food together with housing costs raised the annual CPI to 0.4% in line with annual expectations.

New Car Sales numbers.

  •  In another sign of the strength of the local economy. New car sales rose to their second highest month on record. Sales increased by 2.2% to 100,295 vehicles in March, slightly below the 100,538 record struck in September 2015. By sales of SUVs rose by 14.7% from 12 months earlier, marginally shading an increase of 14.4% in sales of “other” vehicles. Offsetting those increases, sales of passenger vehicles slumped by 7.5%.

In Asia

  • In China, new-home prices excluding affordable housing climbed in 62 cities in March, compared with 47 in February, among the 70 cities tracked by the government, the National Bureau of Statistics said Monday. They dropped in eight cities, compared with 15 a month earlier.
  • Of the seven largest cities, monthly increases in prices of existing properties accelerated across the board. Beijing and Shanghai jumped 6.3 % and 6.2 %, respectively, over the month, with Shenzhen and Guangzhou up 4.7 % and 3.5 %.
  • Zhejiang Ant Small & Micro Financial Services Group has been profitable for three years, enabling it to meet the listing requirements and may look to IPO as early as this year in one of the biggest offerings since 2010. Ant Financial, which is controlled by Alibaba founder Jack Ma, dominates payments on China’s biggest e-commerce platforms through Alipay and also manages Yu’E Bao, the nation’s largest money-market fund. The company is currently targeting a private round of fundraising for at least $3.5 billion at a valuation of about $60 billion.

Europe and elsewhere

  • The ‘Brexit’ fight has heated up over the weekend with UK Chancellor George Osbourne revealing that that the loss to the economy from leaving Europe would be around GBP4300 by the year 2030 as GDP growth would stall and the economy 6% smaller by then.
  • Meanwhile in the Middle East cushioning some of the fallout from the Doha deadlock with news that Kuwait is in the grip of an open ended labour strike. Production has tumbled 60% and refineries have scaled back operations on emergency measures.
  • In Brazil, President Rousseff is closer to be impeached by the congress  after a crucial vote in the lower house moved against her.

SECTOR PERFORMANCE                                                        52 WEEK HIGHS / LOWS



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