ASX 200 down 33 points 5323 after resources flopped on a rise in the US$ following the FOMC Minutes overnight. Miners and energy threw in the towel whilst banks held up relatively well and rallied into the close. Utilities and some market darlings, most obviously the Chinese facing foodstuff stocks, starting to see some profit taking. Asian markets mixed with China down 0.21% and Japan up 0.01%. AUD bounces off 72c, a two month low, with US futures down 25.
SPI Expiry this morning distorted the opening and made it look better than it was before selling started in earnest and accelerated as the day wore on. The index bounced off its low at 5303. Jobs data was initially greeted with a yawn. Falling iron ore futures in Singapore did not help the miners case.
ASX 200 Index & Aussie dollar charts – Today
Analysts are now talking interest rates below 1%. These are crisis settings. WE have an article in the newsletter today addressing the issue – “What do we do if interest rates go to zero and stay there”
Dr. Egon Spengler: There’s something very important I forgot to tell you.
Dr. Peter Venkman: What?
Dr. Egon Spengler: Don’t cross the streams.
Dr. Peter Venkman: Why?
Dr. Egon Spengler: It would be bad.
Dr. Peter Venkman: I’m fuzzy on the whole good/bad thing. What do you mean, “bad”?
Dr. Egon Spengler: Try to imagine all life as you know it stopping instantaneously and every molecule in your body exploding at the speed of light.
Dr Ray Stantz: Total protonic reversal.
Dr. Peter Venkman: Right. That’s bad. Okay. All right. Important safety tip. Thanks, Egon.
The market does look like it has peaked at the 5400 level short term and we need to hold 5300 tomorrow at 5300 or the next stop could be 5200.
Stocks and Sectors
- Resources in the cross hairs as the USD gains momentum again. BHP -3.71%, RIO -3.34% and Fortescue Metals (FMG) -5.47% with base metal stocks also sold off. South32 (S32) -3.68% and Sims Metals (SGM) -4.05% with Oz Minerals (OZL) -5.36%, Independence Group (IGO) -6.4% and Western Areas (WSA) -5.24%.
- Gold stocks hammered on loss of momentum in the gold price as it hovers around $1745. Some profits being taken in the sector as bullion finds it hard to push higher and the prospect of further rate rises dulls the gold interest. Newcrest (NCM) -%, Northern Star (NST) -7.02%, OceanaGold Corp (OGC) -5.14%, Resolute Mining (RSG) -9.68% and St Barbara (SBM) -10.49%. Sentiment has turned given the bullion price hasn’t really moved in AUD terms.
- Energy stocks were sold off with Woodside (WPL) -1.17%, Oil Search (OSH) -1.71%, Santos (STO) -3.2% and Caltex (CTX) -1.87%.
- Banks and Financials saved the day with the big four holding the line and ending up after an afternoon rally. Only National Bank (NAB) -0.87% was in the red whilst Macquarie Group (MQG) +1.08% and insurers better on the prospect of higher US rates. QBE Insurance (QBE) +1.52%.
- REITS eased off as investors switched from them into the higher yielding banking sector.
- Industrials: More trouble in Chinese facing stocks like A2Milk (A2M) -9.38%, Blackmores (BKL) -7.11% and Bellamy’s (BAL) -4.84%. Chinese dairy company Dong Fang (DFM) +1.77% seems to be enjoying their discomfort.
- Telstra (TLS) -1.4% eased as did Woolworths (WOW) -0.85% and Wesfarmers (WES) -0.86%.
- We also saw traders moving from infrastructure stocks like Sydney Airport (SYD) -0.69% and Transurban (TCL) -1.38% and Qantas (QAN) -2.11%.
- Building stocks enjoyed the rise in James Hardie (JHX) +6.17% to an all-time high post results with Boral (BLD) +1.2% and Brickworks (BKW) +1.33%
- Speculative stock of the Day: Avalon Minerals (AVI) +42.86% looking to build a lithium portfolio (who isn’t) in Finland. The company has lodged and registered an exploration reservation for 500km2 of prime lithium country in the Kaustinen District.
- JB Hi-Fi (JBH) +3.37% has revealed it is in preliminary discussions with The Good Guys over the home appliance chain’s proposed sale. The Good Guys were currently lining up for an IPO. Harvey Norman (HVN) +0.66% may have some competition in the white goods space if the deal comes off.
- James Hardie (JHX) +6.17% expects moderate growth in the key US housing market this financial year after the group saw its adjusted operating profit rise 10% to $US242.9m ($335m). The operating profit fell short of the $245.8m expected by analysts. Net profit in the year ended March 31 fell 16% to $US244.4m ($337.3m) from the year-earlier $US291.3m. Final dividend of US29 cents and share buy back of $100m in the year out to May 2017.
- Mantra Group (MTR) -1.25% returned this morning following the successful completion of their placement to raise $107m at a final price of 395 cents. A good result at only a 1.5% discount to the share price before the trading halt.
- Emmerson Resources (ERM) + 6.82% announced high grade gold intersected at Edna Beryl West with 5m at 27g/t and 2m at 51g/t from 103m. Evolution Mining (EVN) -8.85% is funding the drilling campaign through a JV.
- Unemployment rate is steady at 5.7% after the economy added 10,800 jobs in April and the participation rate slipped a notch to 64.8%.
- Full-time employment contracted for the second month, by 9300, with part-time jobs making up for the drop, climbing by 20,200.
- The Philippine economy grew faster than most other nations in Asia in the first quarter, spurred by spending ahead of the May elections. GDP increased 6.9% in the three months through March.
Europe and US
- Bayer has made a takeover bid for Monsanto, the world’s biggest seed company, as high inventories and low prices for agricultural commodities spur a drive to consolidate the sector. Monsanto currently has a market capitalisation of $US42bn.
- Moody’s Investors Service lowered its growth forecast for the U.S. economy this year to 2% from 2.3% to account for a weak first quarter, while anticipating underlying resilience through 2017.
- Moody’s said it expects the Federal Reserve to raise its benchmark interest rate “at most” twice this year.
- Tesla Motors said it will sell about US$1.4bn in stock to help pay for an expansion that includes its forthcoming Model 3 electric car and boosting annual production to 500,000 vehicles in 2018. The total sale will be about $2bn including some stock from Elon Musk as he pays his tax liabilities on option stock.
- Surprise. FOMC minutes change the odds of a rate rise.
- Unemployment in France edged down in the first quarter, although stubbornly remained above 10%. The country’s unemployment rate fell to 10.2%, as economists had predicted, while the reading for the preceding quarter was also revised down to 10.2%, from an originally stated 10.3%.
- And finally an interesting comment from the Bank of England chief economist, in the Telegraph this morning, on the damage that has been done to reputation of the financial services industry. Could equally apply here.
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