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ASX 200 falls 56 points to 5147 as the technical levels broken and selling accelerates in last hour. Banks lead the falls although trading was subdued for most of the day pre the SPI expiry tomorrow. Asian markets rallied after days of losses with Japan up 0.7% and China up 1.6%. AUD 73.67 and US futures up 8.

After a sloppy start the index gave into the inevitable despite the improving Asia markets. Volume improved on yesterday’s numbers with a big day from Chi X. The index tried valiantly to turn positive at one stage with a rally to 5195 before falling over and slipping heavily in the last hour closing at 5147 down 56 points. We have SPI expiry tomorrow and June is usually a bog expiry and futures volume has been high.

Once again the banks were the big drag on the index with falls of around 1.8%-2.3%%. Support starts to come in around 5125 before the next move down to 5000 again.

Stocks and Sector Highlights:

  • Good bounce today from Mesoblast (MSB) +12.2% but questions still remain after Teva walked away from funding trials. The Israeli company still has a 16.5% stake in MSB.
  • Gold stocks were moving sideways to downwards led by Newcrest (NCM)-% and Evolution Mining (EVN)-%.
  • Stand out recent performer Metcash (MTS) +2.3% continued to defy the bears on hopes for their hardware business. Green and clean theme back on eth menu with Huon Agriculture (HUO)+1.6%, Bellamy’s (BAL)+3.5% after A2M update although Select Harvest (SHV) -4.7% and Blackmores (BKL)-1.8% missed out.
  • Telstra (TLS) -1.3% continued to get bad news with news out that ‘Vodafail’ are fast catching up.

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  • Speculative stock of the Day: Wolf Petroleum (WOF)+70.6% after returning from suspension complete with a strategic partner and an investment of around $3.2m from China Sam Group.;

Corporate News

  • Virgin Australia (VAH)-11.9% sank to a new low after announcing a $852m rights issue with a one for one at 21 cents. So far a number of key investors have given their support including Air NZ (AIZ) +1.51%. Most of the company is owned by the Chinese now and Etihad together with Singapore Airlines.
  • A2 Milk (A2M) +13.6% announced a profit upgrade today. The company has now upgraded four times since listing and despite the changes to regulations in China seems to be weathering the storm admirably. EBITDA now expected to be around $52-54m and free cash at $50m in the second half.
  • Oz Minerals (OZL) -3.8% has settled a long running class action going back to 2008 with the old Zinifex shareholders. The out of court settlement cost OZL $24m. The result will be recorded ion the FY 16 results.
  • Gold Road (GOR)+3.2% after results from the Yaffler and Toppin Hill RC Drilling showed gold mineralisation over 3km.
  • Suncorp (SUN)-2% after announcing their Banking and Wealth CEO, John Nesbit, is set to retire.
  • Oil Search (OSH)-0.4% following an investor update.
  • Santos (STO)-0.7%/ AWE +2.4% announced an update on their JV in the AAL G sand project. They reported a mechanical obstruction and the proposed drill stem tests could not be completed. Sidetrack operation now commenced.
  • Elders(ELD) in a trading halt pending a capital raising.

Economic News

  • Melbourne Institute and Westpac Bank showed its index of consumer sentiment eased 1 % in June, from May when the index jumped 8.5 %. The slight dip still left the index 7.2 % higher on June last year at 102.2, with optimists outnumbering pessimists.

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  • A number of new questions have been added this month. It seems that business that is taking control of its destiny with new technology and sales and marketing is doing better than those that simply rely on the economy to grow their business.

In Asia

China was a little miffed by the rejection from MSCI on inclusion in the emerging market indices. Miffed but fairly sanguine with the Shanghai market actually bouncing after some days of losses. Up 1.24%. Pakistan though got the nod from MSCI and jumped 2% on the news. Pakistan in. China out. Strange days indeed.

Samsung Pay is set to take on Apple Pay after being launched here today. The banks are welcome to join its digital wallet and they do not pay any fees.

Japanese Government Bonds or JGBs move ever closer to zero. 40-year notes yield 25 bps. 30-year notes 0.22%.10-years you pay them 0.2%.

Europe and the US

  • Brexit and FOMC will again dominate. Scare tactics from both sides. George Osborne (UK Chancellor) says he will have to slash public spending and increase taxes in an emergency Budget to tackle a £30bn “black hole” if the UK votes to leave the European Union.
  • A pro-Brexit flotilla, organising by the Fishing for Leave group, will sail up the Thames.
  • Uber set to tap debt markets for US$2bn.
  • US yield curve according to Deutsche Bank is signalling a 55% chance of a recession in the US within the next 12 months.



And finally……

“I used to go out with a giraffe. Used to take it to the pictures and that. You’d always get some bloke complaining that he couldn’t see the screen. It’s a giraffe, mate. What do you expect? ‘Well he can take his hat off for a start!'”

Thanks to Paul Merton




NT Markets

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