ASX 200 closes down 39.7 points to 5356.2 after a rally peters out on hopes of further rate cuts. Banks and consumer stocks bear the brunt of the selling. Volume around $5bn. Asian markets slip with Japan down 0.05% and China down 1.05%. AUD falls on slowest wages growth in 18 years to 72.75 and US futures down 13.

A volatile day with a somewhat inevitable sinking into the close. After a dismal start on lower overseas markets and some rate rise fears, we managed to pick ourselves up on some buying in the finance sector and almost turn positive briefly before we sank 40 points into the close. For the record we hit 5394 and bottomed at 5347 mainly as a result of bank weakness and the usual blue chip suspects like Wesfarmers (WES) and Woolworths (WOW) reversing together with consumer stocks in the limelight. Resources and energy tried to outperform in places.

The wage growth numbers were enough to stimulate thoughts of further rate cuts and this was the life boat the market tried to climb aboard. However, profit taking and now fears of impending US rate rises dimmed enthusiasm. News out of Japan showing they narrowly avoided a recession also stole some of the recent mojo as stimulus appears to be working a little and more may not be required.

The AUD sank below 73c on the wages news with analysts now talking interest rate cuts to take us down to 1.25% by years’ end. In a world of rising rates in the USD and falling rates here it will be interesting to see how badly affected the AUD could get.

A lower AUD does help resources and exporters like the ‘clean and green’ theme and of course stokes inflation which is precisely what the RBA wants. Maybe in his final months at the helm of the good ship Australian economy, Glenn will take us down an unprecedented rate cutting path reminiscent of the GFC.

Lack of wage growth will ultimately feed through into consumer spending especially as petrol prices rise. That may be why investors took the knife to consumer stocks today.

ASX 200 Index & Aussie dollar charts – Today

 

Stocks and Sectors

  • Resources: BHP +1.15% was the one bright spot in a sea of red. RIO -0.11% and Fortescue Metals (FMG)-0.96% with Bluescope (BSL) -2.5% giving up some of yesterdays’ gains.
  • Energy stocks mixed with Oil Search (OSH) +1.01%, Origin Energy (ORG) +2.13% but Woodside (WPL) -0.83% failed to fire as we await the AGM on Friday to hear the growth strategy.
  • Gold stocks were weaker despite a fall in the AUD Gold Road (GOR) +11.4% was an exception but Evolution Mining (EVN) -0.88%, Northern Star (NST) -1.26%, OceanaGold Corp (OGC) -0.85% but smaller caps that have been left behind, improved. Resolute Mining (RSG) +5.68% as sector rotation persists. In Lithium stocks both Galaxy (GXY) +9.09% and General Mining (GMM) +8.62% improved vastly after announcing a maiden off-take agreement with Mitsubishi.
  • Financials and Banks weaker except for Australian and New Zealand Bank (ANZ) +0.78% whilst Commonwealth Bank (CBA) -1.37% and National Bank (NAB) -2.17%. Macquarie Group (MQG) -2.35% and REITS suffered with Westfield Corp (WFD) -0.66%
  • Industrials in profit taking mode as Wesfarmers (WES) -1.02% and Woolworths (WOW) -1.63% led them lower. Clean and Green stocks also suffering today with Bellamy’s (BAL) -5.54%, Blackmores (BKL) -5.12% and Treasury Wines Estates (TWE) -2.99%. Other consumer stocks also felt the hatred as JB HiFi (JBH) -3.79%, Premier Investments (PMV) -2.41% and Harvey Normal (HVN) -2.99%.
  • Speculative stock of the day: Austin Engineering (ANG) +38.46% after announcing the sale of its engineering COR cooling division for around $14m. The proceeds will be used to reduce the $32m debt

Corporate News

  • Asciano (AIO) -0.34% The long-running $9.05 billion takeover bid for port and rail group Asciano will not be finalised until well after the federal election. Asciano said it had agreed to FIRB’s request and now expects approval to be received “no later than July 2016”.
  • Not such a shining light today as Beacon Lighting (BLX) -21.25% had the power cut as the company issued a trading update. The stock has been falling for some time now so it seems that someone had an inkling of trouble ahead. It seems the positive start to the year has faded with a softening in demand in the last 10 weeks. The market does seem to have overreacted to the news the new range is EBITDA of $28.2m to $29.2m compared with $27.4 last period. The reaction seems overdone especially given the fall before the update.
  • Coca Cola Amatil (CCL) -0.44% after the AGM today with CEO Watkins saying the company is still on track for growth around 5%. She cited subdued demand and price competition in their core Australian markets. Currency weakness in Indonesia also weighed on profits as import costs rose.
  • Freedom Foods (FNP) +6.1% after announcing the launch of a new range of dairy products in Vietnam. Their first venture in Vietnam with their strategic partner International Dairy Products (IDP).
  • Mantra Hotel Group (MTR) have announced an acquisition in Honolulu Hawaii for the Ala Moana hotel. The company has also launched a $100m capital raising at 370c coupled with an SPP to pay for the acquisition of around $71m.
  • The Independent Order of Odd Fellows (IFL) -7.55% fell hard as they updated the market with their financial results and warned of flat profits ahead as H2 revenue comes under pressure due to adverse market conditions. IOOF said underlying full-year net profit after tax would be “broadly in line” with last year’s and in the range of $173m to $176m. The guidance comes despite an 18% lift in the measure to $95m in the first half.

Economic News

  • Looks like the RBA was spot on with their interest rate call. Wages growth hit an 18-year low today with a mere 0.4% rise in the March quarter. Not sure that is enough to sustain the property market in capital cities with record house prices. The year on year rate was 2.1% below forecasts for a rise of 0.5% and 2.2% for the year.

Some of the industries in the survey

  • Is this a sign of what investors must get used to? Future Fund chairman Peter Costello said yesterday that the $120 billion investment vehicle had entered negotiations with the federal government to either lower its return target from the current level of 5% above the consumer price index, or gain approval to invest in riskier assets.

In Asia

  • As one door closes so another opens. As Australian property investment slips away, so the Chinese seem to be back in love with their own markets. China’s home prices posted their fastest growth in two years in April, with gains also seen in regional centres, indicating a broader recovery in the country’s housing market beyond the major cities.
  • Average new home prices in 70 cities climbed 6.2% in April from a year ago, up from March’s 4.9% rise, according to calculations based on data released by the National Statistics Bureau.

  • The world’s third-largest economy expanded by an annualised 1.7% in January-March, much more than a median market forecast for a 0.2% increase and rebounding from a 1.7% contraction in the previous quarter, Cabinet Office data showed on Wednesday.

Europe and US

  • The inflation genie is stirring, in the US, at least.

  • This is not an issue or investors yet but it may well start to get more coverage and more scare campaigning. The US has cleared the way for 9/11 victims’ families to sue the Saudi Arabian Government for damages for any part it may have had in the attack. This has been passed unanimously by the US Senate and now goes to congress and then ends up on Obama’s desk just to make things tricky for him on the 1st tee. So why will this interrupt his swing? It is simple. The Saudis own a whole bunch of US Treasuries and have threatened to sell them if they find themselves in the legal firing line with blame attached to them. There is a controversial 28-page section of a 2002 report which suggests there is evidence that the US ally was involved in the Al-Qaeda plot. Never have two allies been so far apart. Saudi trues to kill US shale producers and now a threat of reprisals. Not an issue yet as we say but may become another risk on the horizon.

FINANCE SUMMARY

52 WEEK HIGHS / LOWS

SECTOR PERFORMANCE     

BEST AND WORST STOCK PERFORMERS

Clarence

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NT Markets

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