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ASX 200 see saws from positive to negative and back again as BHP holds the swing vote. At the close we were up 8 points to 5279. NAB lead the sector out of the wilderness. Asian markets remain closed in places but China down 0.18%. AUD 75.05 cents with US Futures up 53.

We tried so hard to claw our way out of the BHP/Samarco mud today. At one point BHP was up and the ASX 200 looked like it would touch 5300. The positive results from NAB coupled with an unexpected rise in Woolworths, helped the industrials and banks to a good day. Unfortunately, the unwinding of the resource rally continues, with BHP leading the charge down, $58bn is an awfully big number and although it will be substantially reduced (hopefully) at the moment the market can only focus on the down side.

The switch from resources to banks seems to be under way with positive news on bad debts and a solid performance from action man Thorburn. Support will continue as they are stuffed full of those lovely fully franked dividends. What comes next may be more of a concern but that is for another day. The bears have been slightly wounded but of course they will be back. The most important thing is that housing and mortgage stress seems to be a non-event. Bad corporate loans and the NZ dairy industry more of a concern but then they will not do that again. The experience of lending to these high profile causalities will not be easy to shake off and may limit lending growth going forward. Macquarie Bank results tomorrow.

The bucket of banks is currently trading at $158 and cum dividend. Low at $146 recently.

So far for the week that was, we are currently up 26 points after a surge on RBA cuts and a swoon on BHP and Budget concerns. High today at 5294 and a low of 5249. Coincidence. Probably.

ASX 200 Index & Aussie dollar charts – Today


Stocks and Sectors

  • Resources again a battle ground dominated by losses in BHP -1.92%. RIO +0.44% on AGM comments as Fortescue Metals (FMG) -3.19% suffered on profit taking and iron ore weakness. Base metal stocks were also mixed with Pilbara Minerals (PLS) +7.14%, Oz Minerals (OZL) -0.52%, South 32 (S32) +1.62%, Syrah (SYR) +6.42% but Iluka Resources (ILU) -1.79%. Alumina Limited (AWC) -2.78%.
  • Gold stock continue in profit taking mode despite the solid AUD bullion price around $1710. Newcrest (NCM) +0.16%, St Barbara (SBM) -2.51%, OceanaGold Corp (OGC) -2.05% and Perseus Mining (PRU) -1.65%
  • Energy stocks rallied on the back of better crude prices, Origin Energy (ORG) +3.54%, Caltex (CTX) +1.68%, Santos (STO) +2.62% although Woodside (WPL) was unchanged.
  • Financials and Banks: The big four all rallied today with NAB +1.98% the stand out with the others trailing in their wake. Macquarie Group (MQG) +2.88% report tomorrow with insurers and wealth managers mainly moving sideways. Covermore Group (CVO) +17.96% after an investor presentation following a profit downgrade and a change in CEO jockeys in the last few days The stocks was hit hard yesterday and the rebound today was welcome news for shareholders.
  • Industrials were led by good news for Macmillan Shakespeare (MMS) +8.01% and SmartGroup (SIQ) +4.14% after a letter from Shorten. Woolworths (WOW) +1.01% seemed to find some friends today with a switch out of Wesfarmers (WES) -1.64% on a contrarian view. Telstra (TLS)-1.07% slipped as did TPG Telecom (TPM) -0.45% but Macquarie Telecom (MAQ) +6.86% on thin volume. Healthcare was under the cosh today with CSL -1.56%, Sonic Healthcare (SHL) -1.05%, Ramsay Healthcare (RHC) -0.52% and Cochlear (COH) -1.51%.
  • Speculative stocks of the day: Jacka Resources (JKA) +33.33% following production starting at their oil field AJE in Nigeria. Coal of Africa (CZA) +66.67% also had a strong day after reaching an agreement on their mediation process with Rio Tinto and Kwezi Mining to defer and amend the consideration still due.

Corporate News

  • Gemworth (GMA) -2.81% AGM Today with the CEO ‘wary’ of the housing market due to the influence of Chinese buyers. They have cut back their writing of mortgage insurance in the mining states WA and Queensland.
  • Crown Resorts (CWN) +4.91% after James Packer reduced his stake in Melco Macau from 34.3% to 27.4%. Melco has been the buyer. Thoughts are that Jamie is getting set for the telegraphed tilt at Crown Resorts
  • NAB +1.98% recorded a 6.5% rise in cash profits to a nice $3.3bn Revenue rose 3.3% and bad debts actually fell. The dividend was unchanged at 99 cents giving a payout ratio of 79% slightly higher than the stated 70-75% range. NZ is proving to be an udder story altogether as profits fell 3% as a jump in bad debt provisions for dairy farms weighed.
  • Fonterra (FSF) -0.56% have joined our own Mural Goulburn (MGC) in cutting the Farm Gate Price (FGP) that dairy framers receive to $5.00 per kg as the milk glut continues.
  • RIO -0.44% AGM in Brisvegas today with Chair Jan du Pleiss vowing not to expand iron ore production beyond 360m tonnes a year. Oversupplying an already oversupplied market is not an option at present. RIO has built rail and port capacity to export 360 million tonnes, and will export between 330 million and 340 million tonnes in 2016.
  • Super Retail Group (SUL) +7.41% after taking a $43m write down as it revamps Ray’s Outdoors. Same-store sales at Super Cheap Auto had risen 5 % in the 18 weeks to April 30, compared with 3.9 % in the December-half. Same-store sales at Rays Outdoors and BCF had risen 7 %, a big improvement on the 2.6 % in the December half. Same-store sales growth at Rebel Sports and Amart eased to 6% compared with 6.1 % in the first-half.
  • Caltex (CTX) +1.68% despite a decline in refiner margin from $15.65 to $10.65 a barrel a year ago. replacement cost of sales basis, the first quarter profit after tax was $151m down from $162m for the same quarter in 2015. Earnings before interest and tax rose 28% to $178m.
  • MacMillan Shakespeare (MMS) +8.01%, Smart Group (SIQ) +4.14% both received a letter from Bill Shorten today which has assured them the Labour Party has no interest in changes the playing field for the salary sacrificing and car leases businesses if elected in July.

Economic News

Philip Lowe has been appointed the new head of the RBA

  • Moody’s has warned that the Budget may not be enough to curb future deficits. It has said that although debt was low by international standards ‘it is rising faster than lower rated countries like the US and Finland’. More worryingly Australia’s debt burden – measured as interest payments as a share of revenue – has increased since 2009 by the most out of all the countries Moody’s regards as AAA-rated.
  • Our trade deficit shrank 29% in March as commodity prices rallied. On a seasonally adjusted basis, exports jumped 4.3%, while imports rose just 0.7 % beating forecasts and helping the AUD rally a little.

  • Official numbers from the Australian Bureau of Statistics showed a deficit of $2.16 billion for the month, down from $3.41bn in February. March retail sales rose 0.4 %, up from a flat reading the previous month and ahead of predictions for a 0.3% rise.

  • New homes sales rose 8.9% in March, following a 5.3 % fall in February, according to the Housing Industry Association.
  • Detached house sales jumped 7.0%, while multi-unit sales leapt 16.3 % in March.

Housing affordability has worsened in all cities except Perth with households now spending 27.6% of their monthly income on mortgage repayments. In Sydney the number is now 35.6%. God help us if rates go up one day. Melbourne not far behind in 30%.

In Asia

  • Financial markets are shut for holidays in Indonesia, Japan, South Korea and Thailand.
  • Seven days of falls for the Asian markets. The MSCI Asia Pacific Index excluding Japan is at its lowest level in four weeks.
  • The great Chinese commodity stampede seems to be ending as futures volumes on the Dalian market have dropped significantly to be half of what they were at their April peaks. Back to similar levels as a year ago. Open interest has remained relatively unchanged throughout, indicating that the trading was short-term speculation, with traders holding positions for a few hours and cashing out before the end of the day. At the peak of the trading boom, daily aggregate volume across the contracts was more than three times open interest. It was 1.4 times by May 4.

Europe and US

  • Trump is now 3:1 for the White House.








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