Can we? Can we? No live with it..you broke it- you own it!

brexit

ASX 200 up 24 points to 5137 as some bargain hunters appeared especially in the mining and industrials sector after a cautious start. BHP and FMG led the way as investors looked through the turmoil in the UK and focussed on iron ore moves in the region. Asian stocks recovered too with Japan up 2.25% and China up 1.05%. AUD held above 74.14 and US futures down 35. Gold steady at $1790 in AUD.

After a cautious start which saw the ASX open down around 60 points down the bargain hunters emerged. Margin calls and some jitters dominated but fears of a contagion event have dissipated slightly although it is early days and there are many bridges to cross. The index traded down to 5015 before the bounce and volume was on the thin side again. Banks once again held sway as they flopped from negative to positive. UK exposed financials still in the dog house despite comments from the companies playing down risks. Whether this is a currency issue or a more worrying indictment of their underlying business remains to be seen.

The ASX 200 traded in a volatile jittery range of 5051 to 5155. Tonight will be interesting again but the UK Chancellor is expected to speak before the UK market opens to restore confidence. There does seem to be some backing away from the Brexit camp and a more conciliatory tone emerging with both EU leaders and UK politicians.

Stocks and Sector Highlights:

  • Financials with UK exposure were seriously hit Henderson Group (HGG) -15.92% and BT Investment Management (BTT) -10.22% the two biggest losers but Macquarie Group (MQG) -5.9% and QBE -6.75% also suffered.
  • Miners were the stand outs on bargain hunting. BHP +3.08%, Fortescue Metals (FMG)+7.95% and RIO +2.9%. Base metals were also stronger although lithium producer Orocobre (ORE) -4.78% slipped away on some management changes.
  • Defensive stocks back in vogue with healthcare and Telcos doing well. Telstra (TLS)+2.24% had a strong day aided and abetted by TPG Telecom (TPM)+3.07%.
  • Utilities also bouncing hard. AGL Energy (AGL) +2.72% and APA Group (APA) +2.53%. REITS also back in the green as defensive assets shone. Stockland (SGP) +4.07%, GPT +3.92% and Scentre Group (SCG) +2.78%
  • Speculative stock of the day: Odin Energy (ODN) +44.44% after signing an agreement with Downer EDI for the third party validation of the recently acquired gridComm business for street lighting in Australia.

Corporate News

  • IPO hopeful Guvera has placed two of its subsidiaries in voluntary administration after it was blocked from listing on the ASX.
  • QBE Insurance Group (QBE)-6.75% said it “does not anticipate any material impact on our day to day insurance operations” after Britain voted to leave the European Union last week. They added they “may require a revised approach” in relation to approximately 500 million pounds of insurance and reinsurance premium that QBE currently sources from EU member countries.
  • Newcrest Mining (NCM)+2.72% after a Citi Mining exploration day.
  • BHP Billiton (BHP)-3.08% has said it plans to boost its exploration budget by 29% to about $US900 million next year or around 18% of BHP’s total capital budget of $US5 billion over FY2017.
  • Woodside Petroleum (WPL)+0.31% after approval of the Greater Enfield JV development.
  • One winner of the recent Brexit turmoil has been OzForex (OFX)+5.05% with record transactions, record turnover and record revenue.
  • CBL Corporation (CBL)-5.11% will hold a investor briefing on Thursday following the planned acquisition of Securities and Financial Solution s Europe (SFS) business.
  • Gold Road (GOR)-3.15% after announcing some board and executive changes.
  • APN Property Group (APD)+8.89% announced that it had sold their interests in healthcare real estate investment management platform to Northwest Healthcare Properties.
  • Blackham Resources (BLK)+14.53% announced new resource modelling completed on their Moonlight shear as part of the Matilda Gold project. The resource is now estimated at 48Mt@3.3g/t for 5.1Moz.
  • Pacific Brands (PBG) +0.44% as it is close to delisting following the Victorian Supreme court approving the scheme of arrangement from the takeover from Hanes Brands.

In Asia

  • Japanese 20 year bonds hit an all-time low today.

20 year

  • The PBOC set the reference rate 0.9 % weaker at 6.6375 a US dollar as USD strength on safe haven buying continues. A six-year low of 6.6375 against the US dollar, on the back of the Chinese central bank’s guidance.
  • Chinese Premier Li Keqiang said he was confident China would achieve its economic targets this year and repeated Beijing’s conviction that the world’s second largest economy would avoid a hard landing.
  • Dalian iron ore futures are up nearly 6% in the Asian trading time zone.

In Europe and the US

 

Chancellor of the Exchequer says we got this!

George Osbourne has held a press conference and has said the Bank of England and the regulators have been prepared for this eventuality.

  • Also no rush for an emergency budget.
  • No hurry for Article 50 to be invoked.
  • Business as usual.
  • Work with European partners and a new PM.
  • Will see responsibilities through.
  • Fundamentals are strong.
  • Dealt with immediate challenge to markets but contingency plans in place.
  • UK is open for business.

Cabinet meeting later this evening our time.

From Goldman Sachs on UK economy:

  • Britain likely to enter a recession within the year.
  • Expects Eurozone GDP over the next two years to average 1.25 % (vs. 1.5% before the vote).
  • For the US: expects GDP growth in the second half of 2016 to come in at 2% (vs. 2.25% forecast previously).
  • PM favourite Boris Johnson has written in the Telegraph: “The only change – and it will not come in any great rush – is that the UK will extricate itself from the EU’s extraordinary and opaque system of legislation”.

 

  • European futures seen opening down again but not by much.
  • The FTSE though is still above the level it was mid-June.
  • England play Iceland tonight in Euro 2016. Possibly a chance for the country to unite for the first time in a three days.

And finally…for those who have missed this explanation of why this guys girlfriend was voting for Brexit….

 

Clarence

XXXX

 

And a message from our sponsors

 

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NT Markets

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