The ASX 200 crashed higher yet again heading towards an all time high with a gain of 33 points to 6751. Volatility is at its lowest level since August. Dow Futures up 17 pre non-farm payrolls tonight. The big news of the day was APRA finally conceded it had got it all wrong to force banks to gauge borrowers capacity at 7% plus, in a low interest rate world. Now set for 2.5% above the prevailing rate. The banks took off (a little) on the back of this positive news. It was as if the whole 2018 RC was just a bad dream. CBA up 0.85% and NAB up 0.3%. MQG was a winner up 0.7% and other financials kicked higher. So let me count the ways. Tax cuts, rate cuts, and APRA moves. No wonder the ASX is roaring ahead. Miners were a blank spot today as sector rotation and profit taking continues. BHP fell 1.3% and FMG down 4.3% as it turned its first sod at Eliwana in the Pilbara. REITs continued the charge, boring they may be but highly geared to lower rates. Other bond proxies in demand with TCL up 1.3%. TLS out in a good day as it grinds up towards 400c. Up 0.5% today. Energy stocks were back in demand with WPL up 1.2% and ORG up 2.4%. In corporate news, ECX rid itself of Graysonline for $60m and rose 20.6%. Nothing on the economic front today apart from meat numbers. In Asia, markets were up again with Japan up 0.18% and China up 0.27%. Australian bonds steady and the AUD down a little at 70.15c.

Today’s Highlights

• ASX 200 up 33 to 6751 as energy stocks gain.
• High 6770 Low 6715
• ASX 200 up 2% this week.
• Global bond yields at record lows. Equities at record highs.
• NFP number tonight. 164k is the estimate.
• Banks cheer APRA move.
• Miners fall foul of falling prices.
• Dalian iron ore futures down 6% as one regulator said authorities were investigating the iron ore rally.
• Bond proxies in demand. TLS ahead again.
• Energy charges up.
• AUD slips a little to 70.15c.
• Aussie gold steady at $2014.
• Bitcoin weaker at $11,119.
• Dow futures up 17
• Asian markets better with Japan up 0.18% and China up 0.27%.

 

STOCKS

• PET +13.78% just gets better.
• LYC +4.91% sentiment improves.
• GOR +4.00% now a producer.
• HVN +3.98% tax cuts lift sentiment.
• ALL -1.92% heads to court with AGI.
• APE +2.94% sells Klosters to appease ACCC.
• FMG -4.35% turns first sod at Eliwana.
• AHG -1.79% ACCC appeasement.
• ECX +20.62% sells Graysonline.
• MFG +1.73% FUM and performance.
• WSA +4.64% Odysseus early works completed.
• BYE -22.81% plugged and abandoned.
• RED +7.69% rally continues.
• ISX +2.86% Australian licence on track.
• HUB -1.02% change in substantial holding.
• SDA -4.76% clarifies US Homeland contract.
• Speculative stock of the Day: Invex Therapeutics (IXC) +%168.75% Welcome to the ASX for this new biotech. Raised $12m at 40c. Here’s what they do; Invex is a biopharmaceutical company, focused on the research and development of Exenatide as an efficacious treatment for neurological conditions derived from or involving raised intracranial pressure, such as Idiopathic Intracranial Hypertension (IIH), acute stroke, hydrocephalus, venous sinus thrombosis, brain tumours, meningitis, secondary pseudo tumour cerebri and traumatic brain injury. Sounds great.
• Biggest Risers: PET, OML, AX1, PRU, LYC and WSA.
• Biggest Falls: SPO, MGX, FMG, VGL, MFF, PPH and IMF.

TODAY

• Magellan (MFG) +1.73% Funds under management update. Total FUM at June 30 of $86.72bn, $82.76bn. For the month the company saw net retail inflows of $132m and net institutional inflows of $356m.
• Vicinity Centres (VCX) +2.67% Incoming chairman Peter Kahan has taken a leave of absence to deal with a health condition. Current chairman Peter Hay will stay in the position for the duration of Kahan’s absence.
• Suncorp Group (SUN) +0.97% In the news again amid rumours that it will pursue a demerger of its banking operations, rather than a sale. The Australian newspaper reports that SUN would likely retain a stake in the demerged bank, which could be a target for a regional competitor or private equity. The article goes onto suggest that the remaining SUN insurance business could then itself become a target of international players, such as Allianz.
• Eclipx (ECX) +20.62% the company has sold its Graysonline business to Quadrant Private Equity for $60m and has appointed Jason Muhs as acting CFO.

ECONOMIC NEWS

Released yesterday

BOND MARKETS

• 2-Year bond yields unchanged at 0.93%
• 5-Year yields unchanged at 0.98%
• 10-Year yields down 1bps to 1.28%

ASIAN NEWS

• Here’s a game changer : Qu Xiuli, vice president of the China Iron and Steel Association, said relevant state ministries and commissions are highly concerned about the sharp rise in the price of iron ore. Qu added that the bodies are investigating the reasons for the rise and would “severely” crack down on irregular behavior. Dalian futures down 6%.
• China says that the US must lift all tariffs. More push back on a trade deal seem to be happening.
• Samsung Electronics estimated its operating profit more than halved in the second quarter, down 56% on trade war escalations.
• Chinese movie studios have now imposed an informal ban on US actors.

EUROPEAN AND US HEADLINES

• Royal Marines have boarded an Iranian oil tanker near Gibraltar. Could kick oil higher again.
• Spanish Foreign Minister says the tanker was seized in waters under Spanish sovereignty.
• Gold is heading for its longest stretch of gains in 8 years. Trading near a six-year high with bond yields so low no wonder it is this high.

• All about the Non-Farm Payrolls tonight. It did rain on Trumps parade after all.

And finally…no joke today just a rant…

Mainly because I suspect that this is the biggest joke of all…will be in the newsletter Monday but you get a sneak peek

 

“Are you serious? There was a bond fund manager on CNBC on Friday afternoon, telling the good viewers that buying Spanish ten -year bonds was a good investment. They yield 0.2%. Are you kidding me? The CNBC host Steve (who I worked with in the 80s) was getting stuck into him. Hardly surprising. The fund manager said that the EU was showing signs of growth and that fund managers just wanted to be able to get their money back. The ECB is set to go even lower with rates. Yet growth is ok. Cannot have it both ways.

We are now entering the twilight zone on bonds and this is all going to end in tears. Big time. Lets just say that out loud, investors are lending money to Spain for 10 -years and are being paid 0.2% for their troubles Are these guys completely crazy? And you thought the equity markets were silly as at the moment. Greek 10-year bonds yield 2.08%. Yes, that is right 2% for that risk. Did hit 30% in the Greek crisis in 2012. Remember that? Well, it hasn’t gone away at all. Still there, just kicked down the road. Kidding right? I kid you not. The world has officially entered the twilight zone. The German bund curve is negative out to 2040!

And what I find amazing is these bond fund managers say this stuff with a straight face. And this is not some idiot with a small fund but the Head of Fixed Income at Franklin Templeton. You couldn’t make this stuff up. It manages US$720bn.

Welcome to 2019, the year my model broke!”

Clarence 

XXX