ASX 200 fails by a couple of points to hit the closing high of 2016. Up 40 points to 5585. Banks and special situations took the lead today with miners mixed. Asian mixed with Japan up 0.08 % and China down 0.15%. AUD 74.90c and US Futures down 10.
STOCKS AND SECTORS
- Resources stable in the ‘bigs’ but the ‘smalls’ were having a ball. Galaxy Resources (GXY) +11.96% after confirming lithium concentrate prices for 2017. Syrah Resources (SYR) +14.39%. The ‘bigs’ BHP -1.23%, RIO -0.47% and Fortescue Metals (FMG) -1.56%. Base metals were also a little mixed Western Areas (WSA) -0.31%, Independence Group (IGO) +0.24% and South32 (S32) -1.73%
- Energy mixed as Caltex (CTX) +3.09%, Woodside (WPL) -0.73% and Oil Search (OSH) -2.08%. Good to see Karoon Gas (KAR) +2.81% finally. Coal stocks dipped with Whitehaven (WHC) -4.45% and Yancoal (YAL) -1.20% though New Hope (NHC) -1.70%.
- Gold stocks back from the brink as punters bought back shorts ahead of the Fed. Newcrest (NCM) +1.20%, Resolute Mining (RSG) +3.57% and Oceana Gold Corp (OGC) +3.63%.
- Banks and finance ANZ has now soared 17% since the election, NAB up 16%, CBA 15% and Westpac rising 12%. Over in the US the S&P 500 Financials Index still sits about 30% below its peak in 2007, the only group in the index that hasn’t regained its high set before the GFC. The lyrics of Joe Walsh spring to mind and maybe time to take some money off the table. Today the big four were firm again with the Big Bank Basket nudging $173.30. Big recent winner QBE Insurance (QBE) -1.97% slipped as did the rest of the sector though Wealth managers better. Magellan Financial (MFG) +2.01% and Macquarie Group (MQG) +1.69%
- Industrials dominated by two or three corporate deals today. Corporate Travel (CTD) +4.91%, Tatts Group (TTS) +8.45% takeover and the merger of APN Outdoor (APO) +9.26% and oOh!Media (OML) +9.89%. We saw some recent dogs have a day in the sunshine Nextdc (NXT) +8.91%, Aconex (ACX) +7.14%, Carsales (CAR) +2.67% and Bapcor (BAP) +2.66%.
- Healthcare stocks dominated by CSL +1.86%, Sonic Health (SHL) +0.84% and Ramsay Healthcare (RHC) +0.77%.
- Telco stocks mildly positive despite talk of the NBN tax and margin squeeze. Telstra (TLS) +1.21%, Vocus (VOC) +0.76% and TPG (TPM) -0.14%
- Speculative stock of the day: Not for a positive but a negative as Corazon Mining (CZN) -22.73% seemed to disappoint on the recent cobalt results from Mt Gilmore. Excellent high grade copper cobalt grades not enough it seems. New priority targets identified too.
Big day on the corporate front with M&A activity squeezing in just before the Xmas deadline.
- Tatts Group (TTS) +8.45% received an unsolicited takeover offer from a consortium led by Macquarie Bank and KKR with the cash and scrip bid putting the cat amongst the pigeons with a value of between 440c and 500c. Looks like the Barbarians want to play lotto now. Deal is worth $7.3bn potentially.
- A merger of equals? APN Outdoor (APO) +9.26 % and oOh!Media (OML) +9.89%. Under the deal, shareholders in oOh!Media will receive 0.83 APN Outdoor shares for each oOh!Media share held. APN Outdoor will own 55%of the merged group and oOh!Media the remainder. The boards of both companies have recommended the deal to their shareholders.
- Bellamy’s Australia (BAL) has asked to be suspended from trading pending a further trading update. Not looking good for shareholders as Xmas looms. Class action looming as sales locally have been slipping for some time yet no updates.
- BHP Billiton (BHP) -1.23% says its Samarco joint venture has applied to Brazilian authorities to restart operations at the site of last year’s fatal mine disaster.
- Kingsgate Consolidated (KCN) -7.69% following clarification by the on again off again Thai authorities. Not good news for the company with the mine being put on care and maintenance from the end of the year as was expected.
- Corporate Travel (CTD) +4.91% has entered into an agreement to buy Redfern Travel UK and Andrew Jones Travel Australia. The company also upgraded the market with underlying EBITDA between $92-$97m. The acquisitions will be funded by a $71m entitlement offer.
- The Federal Court has ordered fines of $9 million for ANZ Bank (ANZ) +0.37% and $6 million for Macquarie Group (MQG) +1.69% over “very serious” attempts by traders to rig a key benchmark rate in Malaysia’s FX markets.
- Jeffrey Gundlach, chief investment officer of DoubleLine Capital, says yields may climb to 3% on 10-year US Treasuries by next year as deficits and inflation rise under a Donald Trump presidency.
- 5-year bonds down 8bps to yield 2.24%
- 10-year bonds down 7bps to yield 2.78%
Mohamed A. El-Erian (Allianz) has a few things to watch for.
- The Fed will hike rates by 25bps, only the second increase in 10 years.
- On forward guidance, the Fed will keep open the possibility of multiple hikes in 2017.
- FOMC’s “blue dots” — the expectations of individual members of the Fed board for the future path of rates — will not migrate down significantly.
- The Fed’s signals of a somewhat tighter monetary policy will be nuanced, as they wait for the details of Trump’s economic plans.
- Consumer confidence has fallen to its lowest level since April on concerns about the Australian economy.
- The Westpac-Melbourne Institute Index of Consumer Sentiment dropped by 3.9% to 97.3 points in December, from 101.3 points in November and below the 100 point level at which optimists outnumber pessimists.
- RAMS is increasing variable interest rates for both owner-occupiers and property investors, by 0.15%.
Japanese business sentiment is on the rise.
- Sentiment among large manufacturers rose to 10 from 6 three months ago (est. 10) according to the Tankan survey released by the Bank of Japan Wednesday.
- The outlook among the manufacturers increased to 8 from 6 (est. 9).
- Sentiment among large non-manufacturers was unchanged at 18 (est 19).
- Large companies across all industries plan to raise business investment by 5.5% for the year ending in March (est. 6.1%).
Japan has legalised casinos in a vote today. Nothing happens quickly though details of the so-called integrated resorts must be laid out in a second piece of legislation before any casinos can be built, meaning none are likely to open their doors in time for the 2020 Tokyo Olympics.
EUROPE AND US
- Good report coming from the US linking fund performance to the type of car the fund manager drives. Apparently Ferraris are not a good sign with funds run by sports car drivers. Hedge fund managers who purchase performance cars take on more investment risk than do fund managers who avoid performance cars. Specifically, sports car drivers deliver returns that are 1.80 % pa more volatile than do non-sports car drivers. This represents a 16.61% increase in volatility over that of drivers who buy boring cars like an Odyssey. Maybe investors should look in the car park rather than the ‘Sharpe Ratio’ or investment track record.
- Trump nominates Exxon chief Tillerson for US secretary of state.
- US bank Wells Fargo has been hit with restrictions after attempts to fix issues with its bankruptcy plan failed. Wells Fargo will be barred from opening international branches and buying non-bank companies until it satisfies the regulators.
- Asahi to buy SABMiller beer brands in €7.3bn deal.
- Italian bank UniCredit plans to raise €13bn from investors, slash 14,000 thousand jobs, shed billions of euros of bad loans and cut the pay of the CEO by 40% as suggested by the man himself. The Italian banking system is swamped with €360bn of bad loans. Monte Paschi is hoping to find a mere €5bn to plug enormous holes in its balance sheet.
- FOMC in the early hours of the morning. 25bps done. Same this time last year. Dot plots in focus. 6am is the witching hour with press conference soon after. Yellen will probably just tweet the result. Seems the thing to do these days. Or maybe Kanye can announce it.
A guy is going on an ocean cruise and he tells his doctor that he’s worried about getting seasick. The doctor suggests, ”Eat two pounds of stewed tomatoes before you leave the dock.” The guy replies, ”Will that keep me from getting sick, Doc?” The doctor says, “No, but it’ll look really pretty in the water.”
Q: How do you turn a duck into a soul singer?
A: Put it in the microwave until it’s Bill Withers