ASX up a staggering 172 points to 5329 closing on highs for Best. Day. In five years. Snapback Thursday. Resources soar as funds grab anything not nailed down. Banks perform in heavy trade. Asian markets rallied hard with Japan up 6.39% and China a more modest 1.15%. AUD at 76.66c and US Futures sanguine up a mere 33 points.

  • Not sure which day is more remarkable. Yesterday we had a 260-point trading range, today we have had 40-point range. Never happened it seems and business and money has swung behind Trump. Interestingly we are pretty much back to the same level we were before the proverbial hit at lunch time yesterday.
  • Apparently Australian resources are a massive winner from the infrastructure spend. That is if it happens. Not sure where the money will come from. More good news from the AGM season with a stunning result from Bluescope Steel (BSL) +%. Shame Arrium could not hang on.

STOCKS AND SECTORS

  • Resources were the stand outs as commodity prices soared on hopes of increased infrastructure spending by the Trump team in the US. BHP +8.24%, RIO +8.19% and Fortescue Metals (FMG) +10.68%. Base metal stocks were running hard on copper gains and nickel. Sandfire (SFR) +10.83% Independence Group (IGO) +7.96%, Oz Minerals (OZL) +8.25% and Bluescope Steel (BSL) +13.51% as underweight fund managers piled back in.
  • Energy shares also back in the winners’ enclosure with Beach Petroleum (BPT) +11.27%, Karoon Gas (KAR) +6.61% and Sundance (SEA) +9.68% doing especially well in the small to mid-caps.
  • Gold stocks predictably mauled after the gains yesterday. Newcrest (NCM) -4.42%, Saracen Minerals (SAR) -8.57%, St Barbara (SBM) -8.81% and Evolution Mining (EVN) -6.27%
  • A dark day for REITS as the irrational exuberance unwinds due to rising US bond prices. 10 year bonds back over 2% are sapping the will of the bulls in the sector as punters cash in. Not only in the REITS but also in other bond like stocks like Sydney Airport (SYD) -1.79%, Transurban (TCL) -3.04% and APA Group (APA) -1.65%.
  • Banks and financials joined the party with the big bank basket rising from $153 to $158.50 up around 3.60%. Macquarie Group (MQG) +8.34% with insurers going hard especially QBE Insurance (QBE) +11.82% which would be a significant beneficiary of a higher US bond yield as most of their money is parked in Treasuries.
  • Healthcare stocks mirrored the performance of yesterday and then some with CSL +5.48%, Resmed (RMD) +5.91% and Sigma Pharma (SIP) +6.00%. Mayne Pharma (MYX) +6.15% jumped out of the blocks and withered a little as the inquiry is still set to be announced by year end into generic drug collusion.
  • In other industrials, IT stocks were launched as sentiment changed. Computershare (CPU) +12.02%, Altium (ALU) +6.61%, Wisetech Global (WTC) +6.67% and Aconex (ACX) +13.74% a big winner as it provides software for the engineering and construction industry and may benefit from Trump spending.
  • In telcos the response though was more muted with bond like Telstra (TLS) +0.21% although Vocus (VOC) +2.94% and TPG (TPM) +0.71% managed small gains. Data storage though rose, maybe security is a bigger issue now. Superloop (SLC) +4.38%, Nextdc(NXT) +5.33% and Macquarie Telecom (MAQ) though unchanged and pretty much untraded.
  • Consumer stocks Wesfarmers (WES) +1.75%, Woolworths (WOW) +2.02% and Costa Group (CGC) +5.82%. Chinese facing dairy and vitamin stocks frothed Bellamy’s Australia (BAL) +4.60%, A2Milk (A2M) +5.43% and Select Harvest (SHV) +8.26%.
  • Speculative stock of the day: IOT Group (IOT) +31.82% after reaching a settlement with former co-shareholders in Roam Systems as agreed with the NSW Supreme Court. Atlas Iron (AGO) +30.77% also had a strong day on the iron ore price.

CORPORATE NEWS

  • Treasury Wine Estates (TWE) +7.51% following a positive update at the AGM today. MD Clarke said the company would deliver better than expected savings by fiscal 2020, stronger cash benefits from its acquisition of Diageo Wine, and boost its earnings margin in the high teens by fiscal 2018. The company also said its US business is uniquely positioned to take advantage of the Trump victory as Democrats drowns their sorrows. (Not really).
  • Westpac (WBC) +4.38% is raising interest rates for foreign loan customers. Its new “non-resident reference rate” will be 0.5% higher. Local applications to Westpac that include foreign income will require a lower maximum LVR of 70%, down from 80%.
  • Bluescope (BSL) +13.51% said it expects to achieve underlying earnings growth of around 50% to $510 million in the first half of the financial year despite higher raw material costs.

ECONOMIC NEWS

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“No, Mr Bond I expect you to die.”

  • The RBNZ has cut rates this morning to 1.75% citing uncertainties in the international outlook. Understatement of the week.
  • ABS said new investor loans rose to their highest level in more than a year in September even as owner occupiers took a step back. Lending to investors rose 4.6% from August to $12.4bn, the largest monthly total since August last year, when the figure was $12.7bn.

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  • And more from the ABS with short term arrivals.
  • In trend terms, short-term visitor arrivals to Australia during September 2016 (702,500 movements) increased 0.4% when compared with August 2016 (699,800 movements). Currently, short-term visitor arrivals are 3% higher than in September 2015. Very positive for tourist stocks.

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God help spellcheck as Trump may be considering Steven Mnuchin (yes that is the spelling) for the position as Treasury Secretary. Ex Goldman Sachs of course.

ASIAN NEWS

  • The yuan slipped to a six-year low as concern about China’s trade relationship with a more protectionist U.S. provided a new reason to sell the currency that’s heading for a third annual loss.
  • Iron ore jumped by the daily limit on the Dalian Commodity Exchange to the highest level since October 2014.
  • In India, the finance minister has cancelled all 1,000 and 500 rupee notes. The move is designed to flush out tax evaders. People can change their high denomination notes at the bank but from Tuesday they were not legal tender.

EUROPE AND THE US

  • General Motors will lay off 2,000 employees at two car plants in the US Midwest, the latest sign that the US car industry is suffering from softening demand, especially for some smaller models.
  • Trump has signalled spending of more than US$500 billion to rebuild U.S. infrastructure and also pledged to lower taxes.

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Should it read Make Inflation Great Again?

  • Makes the Italian referendum in December far more interesting as nothing can be taken for granted.

And finally…..

Clarence

XXXXX

 

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NT Markets

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