ASX 200 grinds higher to 5342.8 for a gain of 22.1 points today. Financials and REITS lifting the market against a backdrop of weaker resources stocks. AUD trades briefly at US73c before a rally back to 73.3. Asia markets positive with Japan up 2.15% and China up 0.2%. US futures up 57.

A tale of two cities today with the best of times for the banking sector and the worst of times for resources.

66-point trading range after initial falls. Volume was a standout today too at over $6bn.

The banks started slowly but gained confidence and momentum as the day wore on. The switch out of resources to the financials continues as traders exit an expensive sector and re-enter the value that emerged in the big four especially. REITs another sector in the sun today.

The bubble in iron ore is continuing to unwind in China on the futures exchange with another near 5% fall to US$58.92. The spot price fell to US$54.99. Stockpiles of iron ore at China’s ports expanded to almost 100mt, and rebar inventories climbed for the first time in nine weeks.

Volume was pretty good after the opening fall to 5290. From there it was all one-way traffic as bargain hunters emerged in the banks. Economic news from China was also slightly better with the CPI and PPI out in the morning. Shanghai up 0.2% and Japan up 2.15% on the back of the falling yen.

Despite global markets falling in May, our market has remained steadfast and one of the best performers with a gain so far this month of 1.5%. So far. Remember in the land of the blind the one eyed man is king. It remains to be seen what happens to the banking sector though once the dividends have washed through.

ASX 200 Index & Aussie dollar charts – Today

STOCKS AND SECTORS

  • Resources were under pressure again today as the iron ore price fell in local trade. BHP -3.15%, RIO -2.87% and Fortescue Metals (FMG) -6.25% with Bluescope Steel (BSL) -6.94% under heavy pressure following an accident. Sims Metal (SGM) -10.11% had no such excuse, just the effect of lower commodity prices. Lithium stocks though were in profit taking mode with early gains giving way to losses following a broker report into the sector. Orocobre (ORE) -0.27%, Galaxy Resources (GXY) -1.16% and Pilbara Minerals (PLS) +0.67% all peaked early.
  • Energy slipped again on weaker crude as the Canadian wild fires do not seem to have halted production for more than a day or so. Woodside (WPL )-3.29%, Santos (STO) -3.59% and Oil Search (OSH) -1.61% with Whitehaven Coal (WHC) -5.67% giving back some recent gains.
  • Gold shares weaker as traders focused on the falling USD bullion price rather than the AUD bullion price at a near high of $1727. Newcrest (NCM) +1.49%, Evolution Mining (EVN) -5.56%, Regis Resources (RRL) -5.02% and St Barbara (SBM) -2.47%.
  • Financials and Banks were the rock stars today with Commonwealth Bank (CBA) +2.93% the front man followed on rhythm guitar by National Bank (NAB) +1.65% and the drummer Australia and New Zealand Bank (ANZ) +1.31%. No one remembers the bass player but Macquarie Group (MQG) +4.31% continued to push higher.
  • REITS were also continuing to stay well bid with the ASX REIT index at near 8 year highs. Insurers did miss out a little. Low interest rates are not great for them holding cash. NIB Holdings (NHF) -2.15%, Medibank Private (MPL) -1.56% and AMP  -1.02%
  • Industrials: In the consumer space we saw gains again. Blackmores (BKL) +1.53%, Coca Cola Amatil (CCL) +1.49% and the A2Milk Company (A2M) +5.79%. Gaming stocks came up aces with The Star (SGR) +2.16%, Aristocrat Leisure (ALL) +2.85% and Tatts Group (TTS) +1.27%. Flight Centre (FLT) +3.64% also bounced back as did Sydney Airport (SYD) +2.22% and Qantas (QAN)+2.4%. Healthcare stocks benefiting from a lower AUD did well, CSL -0.16%, Resmed (RMD) +2.21% and Cochlear (COH) +2.2%
  • Speculative stock of the day: IOT Group (IOT) +30.43% after a tech investment conference in Hong Kong. Remember this one we mentioned a few days ago, it has the drone flying selfie which follows you and takes your picture. It is called the ROAM-E for obvious reasons. They also have a range of smart watches with new products in the pipeline like a senior’s safety watch. A driver fatigue alert watch and a kid’s smart watch.

Corporate News

  • Bluescope Steel (BSL) -6.94% after an explosion and fire at the steelmaker’s North Star plant on Sunday. The company is expecting a loss of production of around 350,000 for a pre-tax hit of US$5m.
  • One of Blackmore’s (BKL) +1.53% main competitors, Suisse, has lifted its market shares to 19% to be No1 at the retail level in Australia. There was also a broker upgrade today for Blackmores from JP Morgan with a price target of $215.
  • Macquarie Group (MQG) +4.31% has quietly bought some pastoral holdings owned by the Oxenfold family’s Western Grazing Company. Paraway Pastoral, a MacBank subsidiary, has paid $100m for two cattle stations with QIC buying an 80% stake in North Australian Pastoral Corporation for more than $300m.
  • Incitec Pivot (IPL) +9.09% following results today showing a 78.5% fall in profits due to the write down of its Gibson Island Plant of $105.6m. Excluding the write-down, the net profit fell 6.4% to $137.1m. The company will pay 4.1 cent dividend compared to 4.4 cents last year.
  • QBE Insurance (QBE) +0.09% after holding an investor day with a positive outlook for its North American business as the company plans to source US$1bn of gross written premiums from the US$85bn specialty insurance market. QBE is looking to grow its specialty book to $US600 million this year, and branch into three new sectors over the northern hemisphere summer.
  • Another one bites the dust as Murray Goulburn (MGC) -3.08% has lost a third director since its profit downgrade. Duncan Morris has resigned, he had been a director since 2013.
  • Mesoblast (MSB) -3.38% after its 3rd quarter results and update today. Cash reserves of US$100m and a cash flow burn of $22m for the third quarter bringing it to $42m for the second and third quarter in 2016. Reduction of 25% in comparison to Loss before tax improved by 14%.
  • Singapore listed Frasers Centrepoint, which bought out Australia’s $2.6 billion Australand Property Group, is expecting residential prices to moderate in Sydney and Melbourne after delivering a lower $311.6 million half year profit following lower contributions from its development portfolio in China and Australia.

Economic News

  • The ANZ-Roy Morgan weekly consumer confidence index was unchanged at 113.9 points. The read-out is also close to the four-week average and 1.2 points above the average since 1990.

IN ASIA

  • Data out this morning on Chinese CPI and PPI. The CPI jumped 2.3% with the price of pork up 33.5%, accelerating from a 28% surge in March. This rise was despite a release of frozen pork from the strategic pork barrel.
  • Chinese PPI fell 3.4% yoy, compared to -4.3% yoy previously and -3.8% expected.
  • China’s passenger-vehicle sales rose for the eighth time in nine months, with General Motors Co. and Toyota Motor Corp. reporting increased deliveries in April as dealers offered discounts to reduce stockpiles. Retail sales of cars, SUVs and multipurpose vehicles climbed 6.4% to 1.72 million units last month. Sport utility vehicle jumped 36 percent last month and multipurpose vehicle sales rose 2.7%, while car sales declined 4.5%.
  • The Philippine peso rose the most since March after an anti-establishment candidate claimed victory in a presidential election.

EUROPE AND THE US

  • Support for ‘Brexit’ amongst business is growing as PM Cameron tries to link an exit with a looming war with Russia and the Chancellor of the Exchequer said that ‘tens of thousands’ of jobs in the city would be at risk.
  • Credit Suisse has reported a net loss of 302 million Swiss francs ($311 million) in the three months through March, compared with a profit of 1.05 billion francs a year ago. Analysts predicted a bigger loss of 344 million francs.
  • Remember these guys; Greece says it is hopeful it will receive the next instalment of its bailout loan from Eurozone nations, after talks in Brussels.
  • The US doughnut company Krispy Kreme has agreed to be bought by Kenco coffee owner JAB Holding for US$1.35bn.

And finally,

The global market for commercial applications of drone technology, currently estimated at about $2 billion, will balloon to as much as $127 billion by 2020, consulting group PricewaterhouseCoopers LLP said in a report.

FINANCE SUMMARY 

                                    

52 WEEK HIGHS / LOWS

SECTOR PERFORMANCE 

                              

 

BEST AND WORST STOCK PERFORMERS

Clarence

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NT Markets

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