Monday 30th January – Australian Market Wrap | Beeks Downunder-Because not all financial news is boring!

End of Day

ASX 200 has another manic Monday as banks and materials lead the index down 52.5 points to 5661.5. Gold shines. At one stage it hit 5643 before afternoon bargain hunters stepped in. Early downgrades in Servcorp (SRV) and Aconex (ACX) adding to the nerves. Most Asian markets closed though Japan down 0.62% with AUD steady around 75.55c with US futures down 36 points.

It’s a Monday. It must be a negative start to the week.

STOCKS AND SECTORS

Banks and financials tore the optimism out of the ASX today as the Big Bank Basket gave back around 0.5% after a good week last week. The Basket closed at $174.29 with Insurer QBE Insurance (QBE) +0.16% bucking the trend in financials on takeover rumours from Allianz. Subsequently denied. At one stage the stock was up around 5%. Wealth Managers threw in the towel with Macquarie Group (MQG) -1.49% and Platinum (PTM) -0.60%. Health insurers also fell as Medibank (MPL) -1.10% and NIB Holdings (NHF) -1.08%.
REITs had a miserable start to the week. Westfield (WFD) -1.56%, Vicinity Centres (VCX) -1.37% and GPT -1.06%.
Industrials fell after Servcorp (SRV) -19.23% issued a profit warning with gaming and consumer stocks Breville (BRG) -2.79% and Myer (MYR) -2.79% underwhelming. Tatts Group (TTS) -0.92%, Tabcorp (TAH) -1.46% and Star Entertainment (SGR) -0.82%. Citi put out a ‘sell ‘recommendation on Telstra (TLS) -0.98% today expecting revenue declines across its product range and regulatory risk ahead as factors.
Miners fell back slightly without Asian trade to pitch the sector higher. BHP -0.58%, Rio Tinto (RIO) -0.03% and Fortescue Metals (FMG) -2.26%. Base metals fared worse with South32 (S32) -1.75% and Orocobre (ORE) -6.92% after a disappointing quarterly production report.
Gold stocks back in demand as punters embraced bullion again. Newcrest Mining (NCM) +1.27%, Resolute Mining (RSG) +2.81%, Evolution Mining (EVN) +1.42% and Northern Star (NST) +2.67%
Energy sagged with Origin Energy (ORG) -1.23%, Caltex (CTX) -1.69% and Santos (STO) -1.47% nearing the end of its SPP pricing period tomorrow. Coal and Uranium stocks also flagged with Whitehaven (WHC) -1.38% and Paladin (PDN) unchanged though ERA -3.40%.
Healthcare once again in A&E led by CSL -1.31%, Mayne Pharma (MYX) -2.72% and Sirtex (SRX) -3.68%. Pro Medicus (PME) -2.34% and sleep stocks Resmed (RMD) -1.32% and Fisher and Paykel (FPH) -2.34%
IT sector was savaged today after the shock downgrade from Aconex (ACX)-45.13% spilled over into sentiment. Wisetech Global (WTC) -4.62%, Nextdc (NXT) -5.07% and MYOB (MYO) -2.27%.
Speculative stock of the day: Pura Vida Energy (PVD) +25.00% has reached a settlement agreement with Freeport McMoran on its drilling equipment and a US$7m cash payment to finalise the dispute.

CORPORATE NEWS

Newcrest Mining’s (NCM) +1.27% production guidance for the full year remains unchanged despite flat production in the December quarter. Newcrest still expects to produce 2.35m to 2.6m ounces of gold and 80,000 to 90,000 tonnes of copper for the 12 months to June 30, 2017 – in line with guidance provided in September 2016. Copper production rose 6.1% to 25,176 tonnes in the December quarter, from 23,723 tonnes in the prior quarter.
QBE Insurance (QBE) +0.16% has denied it is in discussions with Allianz, after a German newspaper suggested that the global insurance giant was considering a $20bn takeover offer.
Aconex (ACX) -45.13% after announcing profit would come in 35% below forecasts. EBITDA is now expected to be between $15m and $18m, down from a previous range of $22m-$25m. Analysts were on average predicting $23.11m. Morgan Stanley put out a report this morning with ACX as one of their six best picks for 2017. Doh!
Servcorp (SRV) -19.23% after profit guidance today of around $47m against previous guidance of not less than $56m. Trading conditions in the second quarter have not been a s favourable as those in the first quarter the US and SE Asia has been sub optimal.
Warrnambool Cheese (WCB) +24.82% after a full takeover at 885c from Saputo which already owns 88% of the company. WCB is thinly traded and the board has recommended the acceptance of the offer and FIRB approval has already been granted. The only condition is the bidder reaching 90% of shares on issue during the offer period.
Spotless Group (SPO) -5.10% is facing a class action funded by IMF Bentham (IMF) +% alleging that the company’s 2015 results were misleading and in breach of the group’s continuous disclosure obligations.

ECONOMIC NEWS

The local debt ceiling is back in focus as ScoMo looks to up the governments credit card limit and blame labor. $500bn and counting.
NAB is sticking to its prediction of two RBA rate cuts this year. The bank believes that without further stimulus the slowing growth will see unemployment rise. Financial market pricing suggests a just 8 per cent chance of a rate cut by October, but this is a turnaround from the 16 per cent chance of a hike priced in before the CPI data was released last Wednesday.

BOND CORNER

ASIAN NEWS

Major Asian markets closed for lunar New Year.

Toshiba faces legal action over its 2015 accounting scandal.
Foreign workers in Japan surpass 1m for the first time.

Chinese workers remain the most numerous but the number of Vietnamese leaped by more than 50% in 2016.10,000 refugees over the next five years a

EUROPE AND US

Tesco’s £3.9bn takeover of the cash-and-carry giant Booker is expected to reignite the feud between the supermarket chain and Unilever known as Marmite Wars. Booker is a supplier to hundreds of convenience stores which compete with Tesco’s own small shops. It sells branded and private-label goods to more than 500,000 customers and a stable of 18,000 products. Expect the competition agencies to have more to say.
Jürgen Stark, who served on the ECB’s executive board during the financial crisis, said it was time to “think the unthinkable” and work towards a “reset” of Europe that pulled power away from Brussels. The former vice-president of Germany’s Bundesbank said the creation of a two-speed Eurozone, with France and Germany at its core, would help to ensure the smaller bloc’s survival.
Starbucks plans to hire 10,000 refugees in the next five years around the world. Coffee tasters maybe? Nasty job at Starbucks.