ASX 200 rises another 27.2 points to 5216, breaking the psychological barrier, though banks wilt under the Treasurer’s gaze while resources continue the big squeeze higher. Asian markets fall away with China down 3.46% and HK down 1.39%. Japan managed small gains of 0.21%. AUD 77.72 having breached 78 cents briefly and US futures down 55.
Another very strong day withered somewhat as resources led the charge again. A falling US dollar is igniting commodity markets and fund managers are short the sector and are playing catch up. Volumes were again low despite the rally. We have now gone six positive days out of seven.
Once again the market failed to capitalise on early gains, topping out around 5232 before Scott Morrison announced that the banks would be footing the bill for the increase in regulator funding. They are now required to pay $120m over 4 years to ASIC. The market seized on this number and the banks sold off but the reality is that the statement says that the $120m cost will be borne by all industry participants overseen by ASIC. Unfortunately the market appeared to disregard this news and instead focused on the “banks footing the bill” headlines. In context this is $120m over four years and it does not even start until the second half of 2017. This is hardly a game changing impost at all and the selling does appear overdone based on this news. At least there is no Royal Commission. Yet.
Further weakness kicked in as China fell the most in two months on fading stimulus hopes, before we stabilised at a tad over 5200. The afternoon saw the market flat line as interest waned and traders stepped away to reassess given the huge rise we have had in the last 10 days, around 5.5%.
ASX 200 Index & Aussie dollar charts – Today
STOCKS AND SECTORS
- Resources marched ever onwards following the BHP +3.41% production numbers, RIO +4.08% and Fortescue Metals (FMG) +4.22%. Base metals stocks also joined in, led by South32 (S32) +4.52%, Iluka Resources (ILU) +3.97% and even Metals Ex (MLX) +15.46%. Syrah (SYR) +4.41%, Sandfire (SFR) +4.26% and Independence Group (IGO) +2.39% all positive.
- Energy stocks were again positive as the Kuwait strike seems to have cushioned the Doha disappointment, although tonight we shall see given that the strike appears to be over. Woodside (WPL) -1.57% announced production numbers that seemed to disappoint the market but good solid gains in Santos (STO) +3.19%, Oil Search (OSH) +4.9% and Origin Energy (ORG) +2.41%. Whitehaven Coal (WHC) +4.05% is continuing its rally with Worley Parsons (WOR) +2.88%.
- Gold stocks were mildly positive in the majors with some better action in second liners like Perseus Mining (PRU) +4.12%, Doray Minerals (DRM) +2.73%, Beadell Resources (BDR) +3.33% and Resolute Mining (RSG) +8.23%
- Financials and Banks promised so much early but then delivered so little after the Treasurer announced his user pay system for regulation and funding. Australia and New Zealand Bank (ANZ) -0.67% the worst affected but the other three struggled to keep their heads above water. Regional Banks fared better with Bank of Queensland (BOQ) +1.82% and Bendigo Bank (BEN) +1.22%.
- Industrials mixed again with media down on the push back of the reform package due to the election timing. OohMedia (OML) -5.12%, Prime Media (PRT) -7.46% and Fairfax (FXJ) -1.27%. IT stocks were also easier with Hansen Tech (HSN) -4.96%, SmartTrans (SMA) -6.38% and Prophecy International (PRO) -4.4%.
- Speculative stock of the day: XTV +188.9% after announcing a letter of intent to purchase 3D CloudTV from AT&T. The order is for 2500 3D Cloud TV units worth around US$93.5m
- BHP +3.41% production numbers have led to a small downgrade from the company after saying that the Pilbara operations would suffer from weather issues and maintenance on the rail network, The Pilbara division will now produce 260m tonnes this year rather than the 270m previously announced. Together with the Samarco disaster, this work will take 18m tonnes out of the market. Guidance for copper, coal and petroleum is unchanged.
- Woodside (WPL) -1.57% had a 30.3% drop in sales for the first quarter as the impact of lower oil and LNG prices hit home. Sales for the first three months of 2016 fell to $US982 million ($1.3 billion) from just over $US1.4 billion in the year-earlier period, despite an 8.7% rise in production to 23.7 million barrels of oil equivalent. Production volumes slid 4.8% from the December quarter, due to maintenance work at the North West Shelf venture’s oil production project and lower oil volumes at older projects.
- Corporate Travel Management (CTD) +0.35% announced the acquisition of Boston based Travizon Travel for at least $28m. The company has been in operation for 40 years and will expand CTD’s footprint and build leverage and scale.
- St Barbara (SBM) +2.62% on its production report showing a lift in guidance for gold production from 354 to 379 Koz to 369-384 Koz. Debt reduction of US$27m and an additional US$10m in April alone. Gold production was 9Koz above company forecasts.
- McGrath (MEA) +14.21% after a vote of confidence from CEO John McGrath after he bought 555,000 shares for himself.
- Qantas (QAN) -1.44% with Chair Leigh Clifford buying 30,000 shares on market and announcing it very quickly and suggesting that the fall has been overdone in the last two days.
- The regulator has been busy with the ACCC delaying the mega-beer merger for a second time to examine the local impact of the merger between Anheuser-Busch IN Bev and SAB Miller.
- In separate news, Scott Morrison announced that the sale of the S Kidman cattle station will be put on hold for 90 days as FIRB examines the implications. And the election is out of the way.
- The NAB Residential Property Index rose to +6 in Q1 2016 (+1 in Q4 2015), but is still sitting below its long-term survey average (+13).
- Survey expectations for house price growth over the next year strengthened in VIC (1.7%) and SA/NT (-0.1%), but were pared back in QLD (1.2%), NSW (-0.2%) & WA (-1%). VIC (1.6%) & QLD (1.4%) expected to provide the highest capital returns in 2 years’ time, with small gains also forecast for WA (0.4%) & SA/NT (0.3%). Prices in NSW however are expected to fall (-0.1%).
- The ANZ-Roy Morgan China Consumer Confidence Index rose to 145.0 in April, up from 138.0 in in the previous month. In terms of personal finances, 46.9% (prev: 41.7%) of the respondents said that their families are ‘better off’ financially. Meanwhile, 16.3% (prev: 20.3%) said that they are ‘worse off’.
ANZ-Roy Morgan China Consumer Confidence Index
- China also injected the most amount of cash in almost two months with a 250bn yuan seven day reverse repurchase agreement with the seven-day repo rate rising two basis points to 2.32%.
- The Shanghai Composite Index dropped 3.4%, with all the losses coming in the hour before the lunch trading break. Consumer and technology companies led declines. The Hang Seng China Enterprises Index slid from a three-month high in Hong Kong as China Telecom Corp and China Shenhua Energy Co. sank more than 4%.
- China’s central bank is signaling less of an appetite for adding monetary stimulus following evidence of an acceleration in growth. People’s Bank of China chief economist Ma Jun said late Tuesday that future policy operations, while observing the need to continue supporting growth, will also pay attention to heading off macroeconomic risks, especially an over-expansion of corporate leverage.
- In Japan, economic numbers today showed overseas shipments dropped 6.8% from a year earlier, while imports declined 14.9%, leaving a surplus of 755 billion yen (US$6.9 billion). That was less than the 834.6 billion yen forecast. Japan’s trade balance was in surplus in March on the back of a stronger yen.
- Again in Japan, Mitsubishi Motors fell around 17% as the company said that it will hold a briefing into improper handling of fuel tests.
AHEAD IN EUROPE AND THE US
- Kuwait oil and gas workers have ended their three day old strike. The strike has taken around 1.7bn barrels of oil out of the supply side in the last few days, offsetting some of the disappointment with the death of Doha. The union has pledged to return production to the previous levels ASAP. Normal production is 3mbpd and recent times have seen that reduce to 1.1m barrels.
- Both Trump and Clinton won the NYC primaries. Trump still pays $6 whilst Hillary is $1.30 favourite.
- US tech giant Intel is shedding 12,000 jobs as it seeks to cut reliance on the declining personal computer market. The maker of computer chips will take a $1.2bn charge to cover restructuring costs. The job cuts, about 11% of Intel’s workforce, will be made over the next 12 months.
SECTOR PERFORMANCE 52 WEEK HIGHS / LOWS