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ASX 200 falls 9.2 points to 5243 after a shock drop to 5182 early on bad banks. Resources continue to show strength with focus on macro events. A solid bounce from a 1.7% fall early today on defensives and resource strength. Asian markets mostly closed for holiday except Japan under pressure on a stronger yen. Nikkei down 3.11%. AUD 76.005 and US futures up 14.

Any optimism was dashed this morning by the result from Westpac (WBC)-3.54%. A miss on cash earnings coupled with a $250m rise in bad debt provisions was enough to give the bears the ammunition they required for a mass selloff in the sector. Big short positions (around 2.5%) in the banks now being leveraged. The rise in corporate debts should not have come as a huge surprise to the markets but it did. The failure of all four banks to communicate with the market is astounding given the remuneration of their executives and the many consultants who must be on call to avoid these reactions. Analysts also seemed to expect too much given the high profile corporate failures recently. The lunch time media briefing from the new CEO did little to dispel the negative vibes in the sector but at least they all recovered from their lows, at one stage the market and the banking sector especially looked like an episode of Game of Thrones with red across the screen everywhere…but a rally in resources and industrials especially Telstra helped lift the gloom. Once again though the resource stocks were the standouts. The index fell 9 points today with a 31-point negative contribution from the big four. Tomorrow we get ANZ -2.22% results and hope that its softening up of expectations was better than Westpac’s.

Of course there is more to tomorrow than ANZ results, with both the RBA decision at 2.30pm and Scott Morrison’s first budget in the evening. Plenty for pundits to discuss but expect volumes and investors to sit astride the economic fence until the dust settles.

ASX 200 Index & Aussie dollar charts – Today

STOCKS AND SECTORS

  • Resources were again the bright spot after a tentative start BHP +1.16%, RIO +1.65% and Fortescue Metals (FMG) -0.29%. Base metals stocks also doing well with a lower USD, Oz Minerals (OZL) +4.76%, Independence Group (IGO) +4.9% Alumina (AWC) +2.68% and Western Areas (WSA) +6.0%
  • Gold another starring show today with bullion prices around $1700 in Aussie dollars. OceanaGold Corp (OGC) +8.94%, Northern Star (NST) -5.17%, Newcrest (NCM) +4.59% and Evolution Mining (EVN) +9.69%.
  • Energy stocks missing out on the big gains and mixed at best. Woodside (WPL) +1.41%, Beach Energy (BPT) +4.79%, Santos (STO) -1.67% and Oil Search (OSH) -0.85%.
  • Financials and banks were in the bears’ sights today and nowhere was safe. The big four were hit hard on the Westpac Bank (WBC) -3.54% results. Australia and New Zealand Bank (ANZ) -2.22%, National Bank (NAB) -2.06% and Commonwealth Bank (CBA) -2.1% all badly mauled. Regional banks also saw selling with Bank of Queensland (BOQ) -2.31% and Bendigo and Adelaide (BEN) -2.47%. Macquarie Group (MQG) -1.62% due to report Friday was not spared the sword either although other insurers and wealth managers performed slightly better. BT Management (BTT) -0.81% and Magellan Financial (MFG) -1.4%.
  • Industrials better, Telstra (TLS) +2.8% the big cap star after news from its investor day. In the telco space both Vocus (VOC) +2.9% and TPG (TPM) +3.45% joined the party line. Healthcare stocks better led by CSL +0.78% and Cochlear (COH) +1.64%. The flight to the expensive defensives was back in fashion as the banks cratered. Transurban (TCL) +1.47% Domino’s Pizza (DMP) +1.27% and Cimic Group (CIM) +1.45%
  • Speculative stock of the day: Was, up there Cazaly Resources (CAH) +61.76% after an announcement to join forces with Lithium Australia (LIT) +8.89% to strengthen its position in the Goldfields region of WA. The company has combined its lithium assets for a minimum period of five years.

CORPORATE NEWS

  • Westpac Bank (WBC) -3.54% after cash profits came in at $3.9bn below forecasts of $4.1bn. Dividend at 94 cents. Big change was the rise in BDD due to corporate lending exposure to a bunch of high profile names like Arrium and Slater and Gordon. The net interest margin, the spread between interest the bank earns on loans and its cost of funds, stood at 2.14 % from 2.11 % in September. The lender’s common equity tier 1 capital ratio, a measure of its ability to absorb future losses, stood at 10.5 % as of March 31, compared with 10.2 % three months earlier, it said.
  • Virgin Australia (VAH) -5.71% Virgin Australia will reduce its capacity by 5.1 per cent in the June quarter after forecasting a loss in the 2H. The airline reported an underlying loss before tax of $18.6m in the March quarter, better than the $22m loss in the year-earlier period. Virgin now expects a total underlying profit before tax of $30-60m this financial year, having reported an underlying profit before tax of $81.5m in the first half.
  • Slater & Gordon (SGH) +100.00% announced this morning that the banking syndicate had agreed to the strategic plan from management and had extended the banking facilities in place. Under the new agreement, Slater & Gordon is due to repay $480m of debt in the 2018 financial year and $360m in 2019, which are now in the form of “term loans”. The banks are firmly in control and will be issued warrants to give them upside as well.
  • Telstra (TLS) +2.8% will give shareholders back at $1.5bn as a capital management initiative as a result of its sale of the Chinese Autohome stake. The company will decide whether it is a special dividend or a share buyback later this year.

ECONOMIC NEWS

  • Business confidence and conditions slipped in April. Conditions fell by 3 points to +9 index points in April in the latest NAB monthly survey, but they remained well above the long-run average of +5, while confidence dropped 1 index point to +5, or slightly below the long-run index.
  • A surprise today with data showing that house prices rose 2.4% over the three months to April nationally
  • Sydney dwelling values were up 3.9%, while Melbourne grew 0.8% over the quarter.

IN ASIA

Most Asian markets were closed today for Labour day holidays with only Japan as the major market open. The stronger yen continues to take its toll with the index down 3.11%

EUROPE AND THE US

  • UK is closed tonight for May Day holiday.
  • Puerto Rico’s government will not make nearly $370m in bond payments due Monday after a failure to restructure or find a political solution to its spiraling public debt crisis.

FINANCE SUMMARY

                                    

52 WEEK HIGHS / LOWS

 

SECTOR PERFORMANCE

          

BEST AND WORST STOCK PERFORMERS

 

Clarence

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