Another positive day with the ASX 200 building on the bank rally post Commission. Off its highs but still  up 20 points to 6026 as sellers emerged at the close. Miners took up the running today as sellers returned to the big four, following a slightly disappointing CBA result.The dividend was held at 200c which will please retail investors though. Industrials joined the party with TLS and bond proxy stocks rallying too. RBA governor Philip Lowe gave a lunch time speech and warned of risks ahead, the RBA is now seeing a more balanced interest rate environment and did not rule out rate cuts. Big change in rhetoric for Lowe. AUD fell on the speech as did bond yields. Market now pricing in one rate cut this year.

Todays Highlights

• ASX 200 up 20 points to 6026. Fades into close.
• High 6042 Low 5990.
• Banks see sense as industrials and miners take off.
• Iron ore miners to the fore as Vale declares ‘force majeure’ following dam failure.
• Healthcare stocks in focus though CSL slips.
• Bond proxy stocks head higher after rates outlook changes.
• Governor Lowe opens the door for a rate cut, if necessary.
• AUD falls on RBA speech to 71.65c
• Bitcoin falls to US$3377
• Aussie Gold rises to $1835
• US futures up 23 following the SOTU address.
• Asian markets closed in China, Hong Kong, Korea, Malaysia, Singapore, Taiwan and also in New Zealand. Japan up 0.41%

STOCKS IN FOCUS

• SHV +4.30% Precision Partner and business update
• VEA +13.77% new Coles deal
• COL -2.51% new deal hurts margins and growth.
• RWC +3.38% broker upgrades.
• BAL +5.34% bargain hunters continue.
• SYD +4.26% Productivity Commission draft report favourable.
• JHG -2.09% results disappoint.
• WSA -% profit-taking.
• MTO -19.47% EBITDA downgrade.
• CSL -2.18% safe haven buying unwinds.
• VAH +2.70% new CEO.
• GRR +6.67% iron ore price helps.
• SPT +9.74% buying continues.
• FID +8.70% response to RC report.
• EVN -2.53% NST -3.76% and OGC -3.04% under pressure on bullion price.
• The speculative stock of the day: Triangle Energy (TEG) +40.00% good volume on replying to an ASX query on a share price spike. Follows quarterly report last week showing production at the Cliff Head oil field of 70,491 bbls. Operating margin of US$36.08/bbl.
• Biggest Risers – VEA, LOV, SM1, CIA, BAL and BVS.
• Biggest Fallers – OML, NWL, NST, CGC, DHG and PNI.

TODAY

• Commonwealth Bank (CBA) -1.36% cash earnings from continuing operations rose 1.7% to $4.68n in the first half of fiscal 2019, slightly below analysts’ consensus estimates. Revenue slid 1.9% to $12.4bn, with volume growth offset by a net interest margin decline, lower fees and weaker trading conditions. The NIM came in at 2.1% down 4bps. Due to higher funding costs.
• Coles (COL) -2.51%Trading update. COL has extended its fuel and convenience deal with Viva Energy (VEA) to 2029. COL expects its convenience division to report HY EBIT between $47m and $51m. The fall in comparable fuel volumes in Q2 was the main driver of lower earnings. Convenience store comparable growth +1.5% for HY19 with food-to-go sales growth at 11.8%.
• Genworth Mortgage Insurance (GMA) +3.98% Full year result announcement. Underlying NPAT and gross written premiums both came in above expectations at $93.9m and $460.2m respectively. CEO and MD, Ms. Georgette Nicholas noted that financial performance was consistent with guidance. Also announced a new share buyback of up to $100m.
• Select Harvests (SHV) +4.30% Business update speaks to a ‘very favourable’ growing season. Horticultural programs have led to excellent tree health across the portfolio. Last year’s frost effected orchards have rebounded strongly. Harvest commences this week with full harvest mode in effect within two weeks. The demand for Australian almonds in China coupled with a softening exchange rate has resulted in improved almond prices.
• Dexus (DXS) +0.85% First half profit down 27% to $726.4m, recording a smaller valuation gain on its property portfolio. Funds from operations lifted 9.8% to $353.3m while gearing came in below its target range at 23.7%. DXS reaffirmed full-year DPS growth of around 5%.

ECONOMIC DATA

• Governor Philip Lowe has changed the narrative surrounding the economic outlook with risks now building for the economy and he has not ruled out interest rate cuts. Now a live issue it seems. RBA has moved into line with the markets. Sees political risk and global growth slowing as risk factors. He now says the “probabilities appear to be more evenly balanced”.
• One of the biggest private land developers, Nigel Satterley, has said that 1 in 4 buyers of housing lots in Melbourne are defaulting.

BOND MARKETS

• 2-Year bond yields down 9bps to 1.71%
• 5-Year yields down 10bps to 1.78%
• 10-Year yields down 6bps to 2.18%

EUROPEAN AND US HEADLINES

• Mon Dieu. Merde! Apple agrees to pay US$800m in French back taxes.
• One US analyst has suggested that any trade deal will be a signal to sell the recent rally. The 13% rally in the US markets is a classic ‘Buy the rumour, sell the fact’. Shawn Matthews who once headed Cantor Fitzgerald runs his own hedge fund now and believes the bond market is not convinced and this is significant. Either equities are wrong or bonds are. We will find out..
• President Trump will meet Kim Jong Un on February 27^th-28^th. Trade representatives head to China next week to discuss the March 1^st tariff deadline. Big ratchet up to 25% if no solution.
• The joys of cryptocurrency, with one exchange boss dying without revealing his passwords to a US$150m fortune. Must be on a Post-It somewhere.
• 51 days until Brexit. Times flies doesn’t it. Still as clear as the Liffey. UK economy on the brink.

And finally……………..

One night a guy takes his girlfriend home. As they are about to kiss each other goodnight at the front door, the guy starts feeling a little amorous.

With an air of confidence, he leans with his hand against the wall and smiling, he says to her, “Honey, would you have sex with me?”

 Horrified, she replies…“Are you mad? My parents will see us!”

“Oh come on! Who’s gonna see us at this hour?”he asks, grinning at her.

“No, please. Can you imagine if we get caught?”

“Oh come on! There’s nobody around, they’re all sleeping!”

“No way, it’s just too risky!”

“Oh please, please….I love you so much!”

“No, no, and no. I love you too, but I just can’t!”

“Oh yes you can. Please?”

“No, no I just can’t!”

“I’m begging you . . .

Out of the blue, the light on the stairs goes on, and the girl’s older sister shows up in her pyjamas, hair dishevelled, and in a sleepy voice, she says:

“Dad says to go ahead and have sex with him, or I can do it, or if need be,

mum says she can come down herself and do it . . .

but for God’s sake, tell him to take his hand off the intercom!”

 

Clarence

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