ASX 200 closed on its high, up 37 points at 5395.9 on stronger resources, energy and the banking sector. AUD jumps to 73.50 following RBA minutes which raised the possibility of a ‘one and done’ rate cut. Asian markets mixed with China flat and Japan up 1.13%. US Futures up 18 points.

Another good day from the market despite National Australia Bank (NAB) -3.07% and Macquarie Group (MQG) -1.47% going ex-dividend. Combined, the two knocked around 10 points off the index which had another assault on the 5400 level to peak at 5395 during the day and at the close.

Once again it was unable to break through the psychological level but the underlying support is there. We are now in the ‘buy the dip’ mode rather than ‘sell the rallies’, as the fall in interest rates and the AUD is supportive of equities. The buyers were active all day and the pullbacks were slight with a steady undertow. Volume was not too bad at around $4.9bn.

Big stocks were in focus which suggests futures buying and the arbitrage players being active.

RBA minutes at 11.30am showed the decision to cut rates was not an easy one and the RBA may well be ‘one and done’. The AUD rallied on the back of the statement to 73.50 cents as the chance of a further cut faded. The chance of a June cut is now at 16%. It was around 50% before the release.

ASX 200 Index & Aussie dollar charts – Today

 

STOCKS AND SECTORS

  • Resources: Seems that iron ore is back in vogue with hopes for a slowdown in steel production from China helping Bluescope (BSL) +9.29%. Dirt diggers BHP +3.50% and RIO +1.46% together with Fortescue Metals (FMG) +7.9% also did well. Base metal stocks were higher, Western Areas (WSA) +5.08% bounced hard from the recent sell off. Independence Group (IGO) +6.93% rallied hard as did Sandfire (SFR) +3.21%, Iluka Resources (ILU) +3.28% and Oz Minerals (OZL) +3.76%.
  • Energy stocks bounced strongly as oil continues to move higher, dragging analysts’ forecasts with it. Woodside (WPL) +2.88%, Santos (STO) +6.3% and Oil Search (OSH) +3.11%. Senex (SXY) +17.02% had a terrific day with Caltex (CTX) +0.91% underwhelming. Not sure why the price of fuel is where it is given the AUD and the WTI crude price?
  • Gold back in demand but the rise in the AUD has hurt the momentum a little given that bullion is now AUD$1740. Newcrest (NCM) +0.76%, Northern Star (NST) +1.28%
  • Banks and financials were mixed with the big four higher around 0.75% apart from National Bank (NAB) -3.07% 9c after going ex-dividend 99 cents today. Macquarie Group (MQG) -1.47% down 106c after going ex 240c. AMP -1.08% continued to be sold off. PSC Insurance (PSI) +10.76% and Magellan Financial (MFG) +2.48%. REITS continue to be well supported.
  • Industrials were dominated by blue chips Wesfarmers (WES) +0.93% and Woolworths (WOW) +1.2%. Healthcare stocks continued their rally from yesterday’s LNP party announcement on rental caps for pathology labs. Sonic Healthcare (SHL) +1.87% and Primary Healthcare (PRY) +3.75%. Telstra (TLS) +1.23% continued its bull run. Consumer discretionary stocks like Nick Scali (NCK) +4.07%, Vita Group (VTG) +2.55% and gaming stocks also doing well The Star Group (SGR) +0.9%.
  • Speculative stock of the day: Emerald Resources (EMR) +28% to commence works at Okvau gold deposit in Cambodia. The company can earn up to 51% interest in the project from Renaissance Minerals by funding a DFS and an EIS together with 2-year exploration program. Sounds expensive. The company does have $18m in cash and liquid investments.

CORPORATE NEWS

  • Australia and New Zealand Bank (ANZ) +0.82% has announced job cuts of 200 from its mainly Melbourne workforce.
  • OzForex (OFX) -3.07% announced its annual profit fell 10% to $21.8m from the year-earlier $24.3m. Underlying net profit fell 2% to $23.89m from $24.27m. The result was slightly below forecasts. The company though was confident about the outlook, aiming to double revenue within three years, nut said margins would be lower next year.
  • Dulux Group (DLX) -2.96% reported a 3.7% rise in interim profit to $63.7 million, underpinned by its market-leading Australian paints and coatings business. Revenue for the half rose 1.7% to $851.1m, while EBIT rose 4.5% to $98.3m. Including $11.9m of one-off items incurred in the previous corresponding period, Dulux profit rose 28.7%.
  • Boart Longyear (BLY) -4.0% after reporting revenue fell another 24% to just $US45m in the March quarter. Drill utilisation was just 28% in the quarter, down from 35% a year earlier – even with a 2% reduction in its rig count to 911.The net loss fell to $US61m due to cost-cutting along with productivity improvements.
  • Clive Palmer is suing the administrator of Queensland Nickel for $1.2bn.
  • Westpac Bank has launched a $750 million hybrid securities offer to retail investors. The Tier I raising will be marketed to investors with a margin of 4.90-5.10% over the bank bill swap rate, or around 7%.
  • Vanda Express is a courier company that delivers infant formula from Australia to China. Today it suspended deliveries indefinitely due to regulatory uncertainty. The company has cited tax increases and it was unclear when shipments would resume. This is likely to impact Bellamy’s (BAL) -2.74% and A2Milk (A2M) -1.79% together with Blackmores (BKL) +2.13%

ECONOMIC NEWS

  • Seems the RBA decision was far more complicated than the market thought with the board very spilt on whether to move or not.
    • Members discussed the merits of adjusting policy at this meeting or awaiting further information before acting,” the minutes said.
    • “On balance, members were persuaded that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing policy at this meeting.”
    • “Members noted that there had been no material change to the forecasts for growth in the Australian economy, although the unexpected strength recorded in the latter part of 2015 had led to an upward revision to year-ended GDP growth in the near term”.
  • The link to the minutes.

Car sales were once again strong with a seasonally adjusted 97,604 Australia wide.

IN ASIA

  • President Xi Jinping said on Monday that China would push forward supply-side reform and increase the number of middle-income earners.
  • ICBC Standard Bank expanded its push into London’s precious metals market by agreeing to buy one of Europe’s largest vaults from Barclays Plc. The vault, which can store 2,000 tons of gold and other precious metals such as silver, platinum, palladium, was opened by Barclays in 2012 and took more than a year to build. The location of the vault is secret.
  • Mitsubishi UFJ Financial., Japan’s largest bank, gained for the first time in three days as plans for a share buyback outweighed a profit forecast that missed analyst estimates.

EUROPE AND THE US

  • A poll of UK voters showed 55% were in favour of remaining in the European Union, while 40% wanted to leave. The proportion in the remain camp increased from 52% in a similar survey in April.
  • SandRidge Energy became the latest victim of the oil crash, with the Oklahoma City-based shale driller filing for Chapter 11 bankruptcy on Monday. Based on roughly US$4bn of debt, Sand Ridge is the second-biggest oil-focused U.S. company to file for bankruptcy during the current oil bust.
  • The stockpile of the Saudi US Treasuries position stood at US$116.8bn as of March, down almost 6% from a record US$123.6bn in January. China has US$1.3tr and Japan US$1.1tr. For months the Saudis have been threatening that if the US finds they helped the 9/11 bombers they will reduce their exposure.

Seems they are not in that much of a hurry.

How times have changed for the US economy

  • Net issuance of notes and bonds by the US Treasury is now below zero in April as tax revenues surged, a feat last achieved at the end of the global economic boom in 2008.
  • The improvement comes as US federal spending settles at 20.5% of GDP, down from 24.5% after the Lehman crisis. The lack of new bonds has pushed down yields on 10-year US Treasuries to 1.74%, close to the historic lows.
  • The US budget deficit fell to 2.5% of GDP last year

Rates continue to trend down around the world.

Plenty of talk around about Warren Buffet and his move to buy Apple shares. But let’s face it, what is a Buffet without the odd Apple.

FINANCE SUMMARY

52 WEEK HIGHS / LOWS

SECTOR PERFORMANCE

BEST AND WORST STOCK PERFORMERS

Clarence

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NT Markets

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