ASX 200 down 109 points to hold 5200 just as we close at 5209. Financials, health and energy bear the brunt of the selloff. Asian stocks wounded slightly but they had bigger falls yesterday. China up 0.07% and Tokyo down 1% AUD around 74 cents with US Futures up 10.
We started badly and the selling accelerated as the worries over Brexit and end of year tax loss selling contrived to push us below 5200 if only briefly. The market bottomed at 5197 but the buying lacked conviction and we saw no real follow through on bargain hunting.Across the board heavy selling although volume was hardly spectacular. With two days of selling to catch up on it was hardly surprising to see a strong downward reaction. It does look a little overdone and expect a solid bounce tomorrow as buyers move back in if we get no more panic on Brexit.
Iron ore futures in China have fallen around 3% too, adding insult to injury to the big miners. A-VIX up 25% to 20.4.
News from Mesoblast did not help optimism whichever way the company tried to spin it. Financials suffered heavy losses of around 2.5% as resources were a mixed bag.
Stocks and Sector Highlights:
- Gold stocks were the only bright spot. Regis Resources (RRL)+3.3% and Perseus Mining (PRU)+6.7% the stand outs.
- Healthcare stocks were in the ICU today with CSL-3.25% leading the way down. Sirtex (SRX)-3.9% took their cue from Mesoblast (MSB)-42% and Primary Healthcare (PRY)-4.6%, Paragon Healthcare (PGC) -5.2% and Fisher and Paykell (FPH)-3.9% the worse hit.
- Banks down around 2.5%as REITS too succumbed to the selling pressure.
- QANTAS (QAN)-4.7% struggled having announced the end of the buy back despite media reports that they may be next in line for Chinese attention. Metcash (MTS)+4.8% and Super Retail (SUL)+0.6% bucking the trend on some short covering.
- The steam is coming out of the lithium sector with Orocobre (ORE)-2% and Galaxy (GXY)-4.8% whilst in graphite Magnis Resources (MNS)-13.9% suffered a serious attack of vertigo.
- Energy stocks badly hit Santos (STO)-7% and Oil Search (OSH)-2.2% together with LNG -10.8%.
- Speculative stock of the day: Plymouth Minerals (PLH)+40% after announcing a partnership to develop a lithium-tin project in central Spain with their new partners San Jose.
- IPO of the day: Graphex (GPX)+82.5%. The company is behind a graphite project called Chilalo in Tanzania.
- Primary Healthcare (PRY)-4.5% following a decision to sell the health insurance business Transport Health to Railway and Transport Health Fun d for $27m. This is the fourth major divestment from new CEO Peter Gregg. Following an asset review the business is now medical centres, pathology and radiology.
- Mantra Group (MTR)-6% announced the resignation of their CFO today after 10 years with the firm. He will remain with the group top oversee the next set of results and his replacement.
- Mesoblast (MSB)-42% Teva has walked away from the deal to fund the Phase III trials of their heart failure platform. Despite the company trying to put a positive spin on the announcement that it has regained the rights to the technology for zero cost the market took it badly. The company has arranged equity finance funding for the remainder of the trail.
- Regis Resources (RRL)+3.3% after announcing further high graded results at Tooheys We’ll gold deposit.
- MMA Offshore (MRM)-15% announced a trading update in the ‘challenging ‘oil and gas market. EBITDA slightly lower than previously stated with a new number of between $75-85m.
- Newcrest (NCM)+1.1% after restarting production at the Kencana Gold mine as part of Gosowong.
- National Australia Bank’s monthly survey of more than 500 firms showed its index of business conditions held steady at +10 in May, above the long-run average. Its business confidence index slipped two points to +3, perhaps reflecting uncertainty over the local election.
- Local 10-year bond rates are knocking on the door of 2% with a new low in place at 2.06%. The US rate has dropped to 1.63% and in Germany the 10-year bund is paying 1 bps. If you lent them money for 100 years you would only get 1%. Very appealing.
- Foreign investors in apartments in NSW will have to pay more after the budget is handed down later this month. They will get slugged with a 4% surcharge on stamp duty plus a 0.75% increase in land tax.
- In Japan: Industrial production in April rose 0.3 % from the previous month, coming in well above expectations for a 1.5 % contraction in the wake of disruptions caused by an earthquake.
- Household spending in April rose 0.2 % from the previous month, compared with forecasts for a 0.6 % drop. On a year-on-year basis, household spending fell 0.4 %, but that still beat forecasts for a 1.4 % drop.
- Bank of Japan now being urged to stimulate as rising yen threatens to hurt exports even more as Brexit rears its head.
- D -Day today. Chinese stocks await the MSCI decision on whether to include A Shares in emerging markets index.
Currency wars continue.
Quote of the day from Jack Ma from Alibaba.
- “The problem is that the fake products today, they make better quality, better prices than the real products, the real names.”
- Alibaba expects to reach 423 million online shoppers around the world this year, mostly through its Tmall.com and Taobao Marketplace sites. Counterfeiting is a huge problem and the lack of integrity is making it hard for Alibaba to expand internationally.
Europe and the US
- FOMC meeting kicks off tonight. Two days of deliberations.
- A poll for the Telegraph in the UK shows ‘Leave’ at 49% and ‘Remain’ at 48%. First time the leave campaign has been ahead since the start of April with only one week to go. Murdoch’s The Sun comes out in support of Brexit. Final 10 days will be dominated by live debates and Euro 2016 football matches which may also play their part in voting intentions. One large Investment Bank has concluded sport in their key events for the next week on Brexit referendum.
Two flies are playing football in a saucer. One says to the other, “Make an effort, we’re playing in the cup tomorrow.”
I spent the last three days, alone, trying to learn escapology. I need to get out more.