ASX finishes the week on a high up 21 to 5359 as consumer stocks rally together with Telstra. Asian markets mixed as Japan rallies 0.78% though China drops 0.16%. AUD drops through support to under 74c. US futures down 14.

Once again we ended the week with sector rotation and some book squaring with oversold and heavily shorted having a pop.

A much quieter week this week with currencies and bonds where the action is for the big players. For the record the ASX 200 is down a mere 11 points since last Friday. Aussie dollar is under pressure as the RBA rubs its hands in glee. Aussie bonds too have resumed the sell off with 10-year bonds rising to a 10-month high of 2.737%.

Chinese iron ore futures have fallen nearly 16% from Monday’s 33-month peak.

STOCKS AND SECTORS

  • Telecoms better today led by Telstra (TLS) +1.86% as analysts pour over the runes of the investor day yesterday. Capital management is a big question with some doing the sums on some sort of BNBN Windfall Bond. The company though is still looking for growth. Here’s an idea split the company up and let smaller units search for their own growth. Others in the sector benefitting today included TPG (TPM) +0.14% and Vocus Comms (VOC) +0.95%
  • Banks held firm but the action was elsewhere. Platinum Asset (PTM) -3.17% got whacked as the company lost FUM and performance is uninspiring. A couple of broker downgrades adding to the pressure. Other wealth managers eked out small gains Magellan Financial (MFG) +1.73% and Henderson Group (HGG) +1.50%
  • Industrials were the bright spots today especially in consumer stocks with Myer (MYR) +14.42%, Kogan (KGN) +2.07% and Automotive Holdings (AHG) +5.72% all giving positive updates. There were other pockets of buying. Some stronger USD winners Resmed (RMD) +3.10% and Ansell (ANN) +1.89%. IT stocks also back in favour after a recent drubbing. Computershare (CPU) +1.30%, iSentia (ISD) +12.18% bounced hard after the savage drop yesterday. We also saw the same in Aconex (ACX) +4.02% but one swallow does not a bull market make. Normal service will resume next week.
  • Resources mixed BHP +0.17%, Alumina (AWC) +1.80% and Sims Metal (SGM) +2.08% whilst Syrah Resources (SYR) -3.29%, Orocobre (ORE) -5.94% and Iluka Resources (ILU) -1.31%
  • Energy stocks weaker in the falls in WTI overnight and more falls in Asian time. Santos (STO) -1.52%, coal stocks especially hard hit as the world turns seller of coal assets after the recent coking coal spike. Whitehaven (WHC) -8.93% unwinding the huge adrenaline rush to the head, Yancoal (YAL) -2.44% and Soul Pattinson (SOL) -1.58%
  • Gold smashed again overnight as the USD heads higher and Yellen gives the nod. One and done in 2016. Newcrest (NCM) -2.99%, Resolute Mining (RSG) -1.62%, St Barbara (SBM) -2.64% and Regis Resources (RRL) -2.14%
  • Speculative stock of the day: Xped (XPE) +31.03% after completing porting to chipset manufacturers (whatever that is) Sounds impressive though and the company is progressing the MOUs it signed this year.

CORPORATE NEWS

AGM Season continues

  • Kogan (KGN) +2.07% upgraded its guidance by up to 30% and tipped a “strong Christmas trading period”. At today’s AGM the company upgraded pro forma earnings before interest, tax, depreciation and amortisation of between $8m and $9m this financial year. This is up from the $6.9m EBITDA forecast
  • Myer (MYR) +14.42% classic short squeeze as the company announced Same-store sales for the October quarter rose 1.6%, beating growth at arch rival David Jones for the first time in two years. CEO Umbers reiterated his forecast for a return to underlying profit growth in 2017. The latest sales exceeded market forecasts and are likely to boost confidence in the New Myer strategy.
  • Kathmandu (KMD) -3.39% said it expects profit for the first half of the current financial year to match last year’s, amid pressure on sales growth. The company reported a 2.8%increase in sales, on a constant currency basis, compared to a year earlier. Same store sales rose only 1.4%, compared to 4.8% a year earlier.
  • Altium (ALU) +6.53% some relief finally after the company AGM forecast US$100m in revenue in 2017 and up to US$150m by 2020.
  • Commonwealth Bank (CBA) +0.27% suffered a deliberately lit fire in Springvale in Melbourne where nearly 30 people have been injured.
  • IAG +2.07% has warned that the latest earthquake in NZ could cost the company $200m of net costs.
  • Carsales (CAR) +3.04%, iCar Asia (ICQ) +31.58% after Carsales denied press speculation that it was either looking to takeover iCar, or sell its stake.
  • Guinea has demanded a full account of the $10.5m payment linked to the RIO iron ore project which has so far claimed the scalps of two senior executives. So far the PR and IR people at RIO have done a fine job keeping this one slightly under the radar but it is not a good look for fans of good corporate governance.
  • Automotive Holdings (AHG) +5.72% the company expects a significant improvement on the first half number of EBITDA of $62.7m as the revenue pipeline starts to pay off in refrigeration and logistics.
  • Cappuccino kings Silver Chef (SIV) -10.57% had a day they would rather forget as the company has been hit with an elaborate fraud in its GoGetta equipment leasing business to the tune of $3.3m. I Unfortunately the company thought cyber risk insurance was too expensive. Doh!

ECONOMIC NEWS

The federal government is loaning NBN Co another $20bn to finish the project after the company has abandoned plans to tap the debt markets. The government has now dished out $50bn for the project. The pollies are hoping the company will repay the new loan by 2021. The initial funding of $29.5bn was not a loan but an investment the government expected to recoup by privatising NBN Co once the roll out had finished.

For the first time in two years, the experts are forecasting a greater chance the next rate move will be up rather than down. Even a stopped clock is right twice a day.

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ASIAN NEWS

  • In China, New-home prices, excluding government-subsidized housing, gained last month in 62 of the 70 cities tracked by the government, compared with 63 in September. New-home prices in Shenzhen, the nation’s hottest property market earlier this year, fell 0.5% in October from September, the first decline in two years, the data showed. Prices in Beijing fell 0.4% in the second half of October, and declined 0.1% in Shanghai.
  • Would have liked to be a fly in the wall for this meeting. Abe and Trump at Trump House. Abe said Trump was a trustworthy leader after meeting in the US. Probably didn’t translate too well from Japanese.

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The rising son and the orange one in the gold house.

EUROPE AND THE US

  • Aren’t those people at Apple good guys. The company has offered to fix the problem with its iPhone 6 plus called ‘touch disease’. The very generous Apple team will fix it for US$149.
  • The Premier League has agreed a major new deal for its TV rights in China, which could be worth up to US$700m. China’s President Xi Jinping has led a drive for the country’s businesses to invest more in football in a bid to turn China into a footballing superpower. He has set a target for the nation to be the world’s biggest sports economy by 2025
  • For those in the UK a new model is in favour one that is already in use in Jersey. Despite not being in the EU, the Channel island has access to the EU as it has shown its rules are as tough as the EU ones. Jersey allows free movement of EU citizens but restricts work and new arrivals are limited by the availability of housing and benefits. Of course it is easy to implement in a population of 100,000 people and only around 120square miles of land.
  • And finally a paper bike helmet has won the Dyson design award in the UK. The helmet uses a honeycomb structure to protect the head. Anyone?

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And finally….as its the Aussie Open this weekend…

A guy stands over his tee shot for what seems an eternity: looking up, looking down, measuring the distance, figuring the wind direction and speed. Finally his exasperated partner says, “What’s taking so long? Hit the damn ball!” The guy answers, “My wife is up there watching me from the clubhouse. I want to make this a perfect shot.” “Forget it, man,” says his partner. “You’ll never hit her from here.”

Bonus golf gag!!!

A husband and wife were golfing when suddenly the wife asked, “Honey, if I died would you get married again?” The husband said, “No sweetie.” The woman said, “I’m sure you would.” So the man said, “Okay, I would” Then the woman asked, “Would you let her sleep in our bed?” And the man replied, “Ya, I guess so.” Then the wife asked, “Would you let her use my golf clubs?” And the husband replied, “No, she’s left handed.”

Have a great weekend

 

Clarence

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