monday

ASX 200 ends a roller-coaster session up a very strong 28.7 points to 5320.7 after the CBA update and a decent rally in the match out. Asian markets mixed with China down 1.7% and Japan up 0.8% with AUD 73.66 and US Futures up 20.

A slow start to the week as the market didn’t seem able to make up its mind. We tried heading down but banks remained stubbornly well-supported given the relatively solid Commonwealth Bank update. We finally decided the path of least resistance was up, with a strong afternoon rally taking out the 5300 level and pushing onwards to close at 5320.7, up 28.7 points. This was despite the Shanghai market falling 1.72% at lunchtime and iron ore off around 6% in Dalian Futures trade. A range of 5264 on the downside and 5321 on the upside with volume around $4.5bn. Once again our market seems to be a regional outperformer with China down 1.67%, suffering its biggest two-day loss in 10 weeks. The index has lost 20% this year to be one of the worst performers amongst its global peers.

ASX 200 Index & Aussie dollar charts – Today

STOCKS AND SECTORS

  • Resources turned down after falls in the iron ore price in China today. BHP -0.27%, RIO -2.12% and Fortescue Metals (FMG) -2.25%. However, in the lithium sector things went from strength to strength. Pilbara Minerals (PLS) +6.43%, Orocobre (ORE) +6.57% and Galaxy Resources (GXY) +14.67%, whilst base metals suffered with Oz Mineral (OZL) -2.75% and Sandfire Resources (SFR)-1.77%.
  • The Energy  sector was slightly positive on the rise in the crude price with the Canadian wildfires helping take 1m barrels a day out of the supply chain. Woodside Petroleum (WPL) +1.41%, Santos (STO) +1.7%, Oil Search (OSH) +1.18% and Senex (SXY) +2.13%.
  • Gold stocks were better, although off their highs with a fall back in the bullion price in local time. Newcrest Mining (NCM)+1.82%, OceanaGold Corp (OGC) +5.08% and Northern Star (NST) +4.08% together with Regis Resources (RRL) +4.25%.
  • Industrials were a slightly green hue today with Wesfarmers (WES) +1.41% and Woolworths (WOW) +1.46% to the good. Healthcare stocks with USD exposure also doing well, CSL +0.78%, ResMed (RMD)+0.79% and Ansell (ANN) +1.69%.
  • Financials and banks today dominated by the Commonwealth Bank (CBA) +1.92% MArch quarter update. Macquarie Group (MQG) +2.92% had a positive day on the lower AUD and a number of broker upgrades although there is a large divergence of opinion and price targets in the stocks at the moment. National Bank (NAB) +0.92% was firm again but ANZ -3.02% suffered as it went ex-dividend 80 cents (only closed down 76c) or around 7 index points.
  • REITS came off the boil. The sector has outperformed the ASX 200 this year so it’s no wonder they need a break. Westfield Corp (WFD) -0.29%, Scentre Group (SCG) -0.64% and GPT -0.38% today.
  • Speculative stock of the day – Abundant Produce (ABT) +10.59% although only a slight rise today in comparison to some, it is now up 400% since listing at 25 cents. Abundant Produce produces seeds that grow under non-ideal conditions and are being developed for markets in the Middle east and Asia, where crops are not grown in high tech greenhouses. Tomatoes are its target market in India and China. Corporate appeal too given the substantial competition in this space from majors like Monsanto.

CORPORATE NEWS

  • Commonwealth Bank (CBA) +1.92% third quarter earnings update with cash earnings at $2.3bn but bad and doubtful debts rising from $256m to $427m, net interest margin was 2.06% with Common equity tier 1 capital at 10% down from 10.2% in the previous three months.
  • Orica (ORI) -12.31% posted a 29% plunge in net profit (continuing operations or 33% fall in statutory proft), citing a “deterioration” of the global mining industry. Revenue, meanwhile, plunged 9% on a continuing operations basis of 22% in the statutory result. The result included a “$41 million expense” in relation to its settlement with the Taxation Office. The company has avoided tax by using “round robin” financing arrangement it put in place a decade ago to boost its profit and ward off takeover bids. Excluding this expense, net profit fell 10% to $190 million. The progressive dividend policy was scrapped and the dividend fell from 40 cents to 20.5 cents.
  • APN News and Media is in a trading halt today as the market waits for a capital raising and a demerger of its Kiwi business to be announced at the AGM on Wednesday.
  • News today that both ANZ and Westpac Bank have discovered they have approved ‘hundreds’ of home loans backed by fraudulent Chinese documents including income statements and pay slips. Hard to believe.

ECONOMIC NEWS

  • Job ads slipped in April but remained broadly unchanged since October.
  • Job ads appearing on the internet and in newspapers fell 0.8% in April, compared with March.
  • Job ads rose 6.3% on the same month a year ago, seasonally adjusted.

NAB economist Peter Jolly is somewhat worried that the ratings agency Standard and Poor’s has not moved quickly to reaffirm our AAA rating. Some likely scenarios from S&P, according to NAB:

  1. Affirm the AAA – retains the status quo.  S&P may include stronger wording than previously.
  2. Negative outlook –  a lower level warning that indicates the rating “may change in the coming 6 to 24 months”. 
  3. CreditWatch with negative Implications – a more severe warning that indicates the rating may change in the near term – “usually within 90 days”.
  4. Downgrade –  An immediate downgrade in the sovereign rating to AA+ with no or little warning.  We view this as unlikely for Australia.

IN ASIA

  • Shanghai down to an eight-week low at lunch time with copper also slipping in the Asian time zone. Imports into China slipped last month from a record.
  • Chinese trade figures released over the weekend showed exports fell 1.8 percent in dollar terms in April and imports down 10.9%, the 18th consecutive monthly fall.

EUROPE AND THE US

  • Set your alarm clocks if you are a classic rock fan. The mega line up for the Festival of the Century has been announced with the Rolling Stones, Roger Waters and The Who taking the stage with Bob Dylan, Neil Young and Paul McCartney in October. The event takes place in California and tickets go on sale in the early hours of Tuesday morning.
  • So set your alarm Clocks – Tuesday morning at 3am and good luck.
  • USD$199 gets you a day pass and $299 gets a three-day pass but then the sky is the limit.
  • All the prices are in US dollars unfortunately and have a few charges above and beyond so it would have been better a week ago when the AUD was pushing 78 cents but what is a few USD between friends. Stay up and listen to Fiona on ABC National Radio at 5:05am.
  • For more information, the web site is a font of knowledge and is where the tickets are going on sale.http://www.deserttrip.com

The Saudi government are looking to float its Aramco oil company on the London Stock Exchange. This is a $2.5 trillion company although it would be only raising around 5% of that in an IPO. London’s hopes for the IPO may have increased with the election of Sadiq Khan as London’s first Muslim mayor.

The Aramco sale is planned as soon as 2017 or 2018 and would in theory be five times larger than any initial public offering (IPO) in history, a huge prize for the London Stock Exchange.

FINANCE SUMMARY

 

52 WEEK HIGHS / LOWS

 

SECTOR PERFORMANCE  

 

BEST AND WORST STOCK PERFORMERS

Clarence on the TV today

Clarence

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NT Markets

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