A big volume day to finish the week, with an initial rally giving away to profit taking in resources and some bargain hunting emerging in the banks. ASX 200 down 2 to 5863. Interest rate sensitive stocks in demand but no  confessions to add volatility today. A muted reaction to Trump’s positive tariff talks as some may be baked in. Chinese PMI numbers remain weak and the case builds for more stimulus as the Lunar New Year holiday kicks off next week. The lunchtime release curbed local enthusiasm. Locally the Hayne Royal Commission is the focus with the report sent to government and will be released to the market on Monday after trading. Plenty of big bets in the sector with hedge funds doubling shorts ahead of the findings.The big winners this week have been the three big iron ore miners with FMG the stand out after Vale’s issues in Brazil. The AUD slipped slightly and US futures are mildly positive.

Todays Highlights

• ASX 200 down 2 points to 5863 as RC weighs.
• High 5882 Low 5857.
• ASX 200 is down 43 points for the week.
• Song remains the same. Resources up banks down. But not out.
• Bank shorts double ahead of the Hayne train.
• Energy stocks give up some gains. Industrials mixed. Bond proxies rise.
• AUD slips to 72.64c
• Bitcoin falls to US$3391
• Aussie Gold rises to $1820 as AUD weakens
• US futures give up 40.
• Asian markets slightly higher with Japan up 0.12% and China up 0.90%

STOCKS IN FOCUS

• GEM +2.52% positive comments from MFD helping.
• HSO +3.81% agreed on takeover from Brookfield.
• APT +1.89% buyers still happy to pay.
• SYR -7.99% shorts winning.
• STO -0.93% large shareholder ENN bullish on outlook.
• SIQ -6.79% release of escrow shares.
• VOC -2.67% euphoria on 5G eases.
• ORE -3.60% drilling update.
• RWC -2.29% guidance reaffirmed. Hoping for a freeze.
• SHV -2.66% Royal Commission from SA may hinder.
• SEA -10.42% quarterly report.
• TTT -6.64% revenue a long time coming.
• AQZ +8.70% QAN -2.21% takes 19.9% holding. The company has no comment.
• WOR +% acquisition update.
• The speculative stock of the day: Entek Energy (ETE) +40.00% the company announced an option agreement over acreage on the North Slope. Not huge volume though. No real standouts even SPT.
• Biggest Risers – PLS, PME, CRN, PPH, HSO and ARB
• Biggest Fallers – SYR, SIQ, LOV, SDF, APE and AIZ.

TODAY

• Reliance Worldwide (RWC) -2.29% reaffirms FY19 EBITDA guidance of between $280m and $290m, RWC adds that a higher percentage is expected to be earned in 2H19. The result could be negatively impacted by 1.5% – 3% by the absence of a freeze event in the US. The current polar vortex has not yet hit southern parts of the country, which is a significant factor to the impact of freeze events on plumbing installations.
• Healthscope (HSO) +3.81% Brookfield has announced a 250c inclusive of 3.5c dividend scheme of arrangement bid. The board has unanimously recommended the bid in the absence of a better offer. The bid is NOT subject to due diligence (already done) and has limited conditions attached. There is also a simultaneous off-market takeover priced at 240c.
• Ansell (ANN) -0.34% to acquire oil & gas specialty glove supplier Ringers Gloves for US$70m. ANN expects the acquisition to be 1 cent dilutive to EPS in FY19 and 1 cent accretive in FY20.
• WiseTech (WTC) +1.62% acquires Norwegian customs and logistics solutions provider, Systema for $3m. WTC notes the transaction is of strategic value and is not material to the group.
• Qantas (QAN) -2.21% has taken up a 19.9% stake in charter operator Alliance Airlines valued at $60m. QAN will look to take a majority stake in the future. The airline is a significant service provider for the resource sector.

ECONOMIC NEWS

• The CoreLogic Home Value Index of national home prices fell by 1.0% in January, now down 5.6% on year. Prices fell in all capital cities except Canberra. Regional prices fell by 0.2% National property prices are now 6.1% lower than they were when the market peaked in October 2017.

• The Australian Industry Group’s (Ai Group’s) Performance of Manufacturing Index (PMI) rose to 52.5 last month in seasonally adjusted terms, up 2.5 points on the upwardly-revised 50.0 reading of December. The Ai Group said the improvement was helped by firm demand from infrastructure, government and mining firms.
• A NAB survey has found that the number of Australians who believe Australia “is a great place to live” rose to 91% in 2019, from 88% in the past two years. 1-in-25 people (or 4%) disagree.

BOND MARKETS

• 2-Year bond yields down 2bps to 1.77%
• 5-Year yields down 4bps to 1.84%
• 10-Year yields down 3bps to 2.20%

ASIAN NEWS

• China has vowed to buy more beans from the US.
• The Caixin/Markit PMI fell to three-year low of 48.3, down from 49.7 in December. New export orders rose notably above the 50 level.

• China has scaled back it’s buying of fluff pulp from International Paper used in nappies, both infant and adult. Good trivia stuff. China accounts for 30% of International Paper’s fluff-pulp sales. Are consumers using less or are stockpiles being drawn down? Maybe it’s a luxury item.
• An industry gauge of Taiwan’s manufacturing sector has fallen to its worst point since August 2015.
• Indonesia’s manufacturing sector shrank for the first time in 12 months in January. South Korea’s exports declined for a second straight month in January.

EUROPEAN AND US HEADLINES

• The S&P 500 has followed up one of its worst Decembers with one of its best Januarys in forty years.

• Brexit still the only game in town. Now news that Unilever is stockpiling Magnum Ice Creams together with Lynx antiperspirant. Tough days ahead for the UK.
• Germans are now starting to criticise the EU negotiators over its intransigent line on Brexit. Another bit of trivia. There are 751 members of the European Parliament. No wonder nothing gets done. The UK has 73 members. Elections this year. Ironic really.

And finally……..

 

 

Clarence

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