ASX 200 flip flops to close up 9 points at 5769 as banks continue to weigh and resources hurt by the Chinese credit downgrade. Industrials shone with healthcare also in the frame. Asian markets mixed with Japan up 0.56% and China sliding 0.59%. AUD falls on China woes to 74.50c with US Futures down 13.

STOCKS AND SECTORS

  • Banks and financials saw no reprieve today as the bears continue to sell. The Big Bank Basket fell to $169.83 with regional banks mixed as Bank of Queensland (BOQ) +0.79% and Bendigo and Adelaide (BEN) -0.17%. Insurers were better with modest gains for IAG +0.48% and QBE Insurance (QBE) +0.54%. REITs firmer with Westfield (WFD) +0.24%. Wealth managers had a positive day today with Macquarie Group (MQG) +0.76% enjoying a solid day as did Challenger (CGF) +2.57% and AMP +1.37%.
  • Miners devoid of friends today led by the bulk commodity players BHP -0.58%, Fortescue Metals (FMG) 4.75-% and RIO -1.33%. 2.57Base metal stocks fell too with South32 (S32) -1.86%, Syrah Resources (SYR) -2.57%, Alumina (AWC) -3.70%, and Galaxy (GXY) +2.18%.
  • Industrials were a bright spot with mining services talking their cue from ALS (ALQ) +12.82%. WorleyParsons (WOR) +4.20% held an investor day today gaining friends and CIMIC (CIM) +2.65% continue to push higher. Consumer stocks still on the nose with Harvey Norman (HVN) -1.06%, P. Eagers (APE) -6.02%, Automotive Holdings (AHG) -3.15% and Bapcor (BAP) -3.06%. Gaming stocks though offered defensive exposure on reports of special divs for Crown Resorts (CWN) +1.17%.
  • Telcos continue to bounce as rumours of a private equity tilt at Vocus (VOC) +7.80% buoyed the sector. TPG Telecom (TPM) +1.00% and Telstra (TLS) +0.45%.
  • Healthcare were led higher by CSL +1.53%, Cochlear (COH) +1.83% and Fisher and Paykel (FPH) +1.58%. Pathology though not in favour with Sonic Healthcare (SHL) -0.58%.
  • Speculative stock of the day: Cokal (CKA) +28.57% after a presentation on its BBM PCU coal mine project. The presentation highlighted a financially robust and technically sound project in Kalimantan.

 CORPORATE NEWS

  • G8 Education (GEM) -1.45% returned from suspension having completed an institutional placement to raise $100m after the Chinese partner pulled put. The deal was done at 320c a 7.7% discount to the closing price.
  • ALS (ALQ) +12.82% has reported this morning within guidance. Underlying net profit of $112.7m with second half earnings of $53.1m within the range of $50-$60m. The company is divesting most of its oil and gas assets as previously advised. The company has also reaffirmed guidance going forward for a number consistent with forecasts. Final dividend 8c.
  • Iluka Resources (ILU) +6.88% announced an increase in the reference price for Zircon by US$130 a tonne to US$1100.
  • Sigma Pharma (SIG) -31.22% following news the company has issued legal proceedings against My Chemist Warehouse after ongoing discussions over the supply chain with My Chemist Warehousing saying it would buy products from another wholesaler. The effect will be a 5% hit to EBITDA.
  • Ardent Leisure (AAD) +1.46% has played the property card with news today that it was considering unlocking the value in its Queensland parks with prime real estate developments. The company will look to develop the site adjacent to its Dreamworld Gold Coast theme park and is undertaking a strategic review of its US-based Main Event business.
  • Programmed Maintenance Services (PRG) +3.70% has posted a full-year profit of $12.3m compared to a $98m loss last year. The labour hire and maintenance group reported a 21.4% increase in revenue for the year to March 31, to $2.69bn
  • Zip Money (ZML) +10.48% National Australia Bank will provide the company with a $200m funding line, as part of a $260m facility that represents the largest debt market deal to date for an Australian fintech.

BOND CORNER

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ECONOMIC NEWS

  • ABS numbers today showed a 4.7% decline in residential building cut the quarterly total to a seasonally-adjusted $17.2bn from $18.1bn in December and was the greatest quarter-on-quarter decline since December 2000
  • Consultancy Macromonitorsuggests housing construction in Sydney and Melbourne is headed for a major slump due to apartment oversupply and credit tightening, and that total dwelling starts will fall 23%from last year’s peak to the cyclical trough in 2019.
  • The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, fell in April.

ASIAN NEWS

  • Moody’s has cut the credit rating of China citing slowing reform, productivity falling and debt fuelled growth leading to risks in the financial sector. The downgrade to A1 followed Moody’s placement of China on negative watch in March last year.
  • S&P Global Ratings has China’s AA minus rating on negative outlook and said it could be downgraded in the coming months.
  • Total outstanding Chinese credit climbed to about 260% of GDP by the end of 2016, up from 160%in 2008, according to Bloomberg
  • Chinese iron ore futures have dropped more than 5%, the steepest single-day drop in more than two weeks, on supply concerns as stocks Steel product inventories held by Chinese traders in the week to May 19 dropped 5.6% from the previous week,

EUROPE AND US

  • Swiss commodity trader Glencore has made a takeover approach to Bunge for around US15bn including debt. Bunge is one of the oldest and largest grain traders and processors in the US, employing around 32,000 staff across 40 countries.
  • Greece is the word again as Athens has failed to agree with its international creditors to unlock the latest tranche of the EUR86bn rescue package. The proposals, which have not been finalised, mean the IMF would not provide Greece with any cash until the eurozone has agreed a clear plan on debt relief.
  • The incredible shrinking Greek economy is back in recession again. A fourth bail out cannot be ruled out in 2018 and beyond. Still the world has moved on.

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And finally…..

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.”=

 

Clarence

XXX

mt_tryforfree

NT Markets

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