Wednesday 16th October – Australian Market Wrap | Beeks Downunder-Because not all financial news is boring!

ASX 200 jumps 84 points to 6736 led by the banks. US futures drop 72 points on concerns that China may retaliate if Congress passes a bill supporting the HK protesters. Banks led the market higher with CBA up 1.4% on its AGM today, NAB rallied 1.5%. Insurers also did well, CGF rose 5% after some promising outlook commentary and MQG and MFG both had good days as markets rallied. Miners though missing out on the rally with BHP down 0.1% and RIO down 0.9% on quarterly numbers. Gold stocks under pressure still as bullion sold off. NCM down 0.2% and NST down 2.1%. Healthcare rode the bull wave with CSL up 1.9% and RHC up 2.8%. TLS continued to push ahead after the AGM yesterday up % and REITs and bond proxies also firmed with GMG up % and TCL up 2%. Consumer staples had a great day with WES up 2.8% and WOW up 2.5%. In corporate news, NEU piled on the gains after FDA approvals up 6.7%, CGF did well after an update though RIO production numbers failed to fire it up. HVN’s capital raising fell slightly short of the target, and TWE rose 3.4% after positive comments from the CEO at the AGM. 10-year bond yields rise to 1.05% as the dollar goes nowhere. Nothing on the economic front except Peter Costello giving his best advice and Asian markets mixed as China falls % and Japan rises %.

Todays Highlights

ASX 200 up 84 to 6736. Better volume. On highs.
High 6738 Low 6660
Banks lead the charge as shorts squeezed.
Insurers take flight. Miners miss the boat.
APT tumbles as UBS cuts PT in half.
AGMs dominate so far, so good.
AUD steady at 67.73c
GBP/AUD now 1.89
10-year yields down to 1.01%
Aussie gold steady at $2204
Bitcoin falls to US$8160
US futures down 72.
Asian markets mixed with Japan up 1.2% and China down 0.2%

STOCKS

CYB +7.23% Brexit hopes.
NEA +7.09% broker upgrade.
NAN +4.44% technical buying.
APT -7.22% UBS cuts target in half.
AGL +0.57% buys regional telco for $27.5m.
OZL +1.25% copper sales rebound.
ORG +1.00% reaffirms guidance.
MOC +4.04% AGM positive.
KGN +8.44% broker upgrades.
SXL -6.38% the hangover.
Z1P 3.87 FXL -3.18% SZL -4.44% follows APT lower. Same issues.
PLS -4.76% AGM commentary.
GSW +9.45% rally continues.
SPT +1.16% runs into resistance at 100c.
NGI -8.60% broker downgrades.
PPS -4.59% profit taking.
VRT +3.19% annual report.
FNP +12.40% volatility to the max.
NEU +6.67% FDA approvals for its NNZ-2591 product designed to treat genetic conditions.
WTC -2.82% rotation begins.
PET -8.79% sold down as FLC raises money.
Speculative stock of the day: Damstra Holdings (DTC) +36.67% new IPO. Seemed to do much better than Latitude. Here’s the blurb: “Damstra is an Australian-based provider of workplace management solutions to multiple industry segments across the globe. We develop, sell and implement integrated hardware and software-as-a-service (”SaaS”) solutions in industries where compliance and safety is of utmost importance”.
Biggest Risers: FNP, KGN, SLR, CYB, NEA and COE
Biggest Falls: PET, APT, SXL, PLS, IFT and EOS.

TODAY

Challenger (CGF) +4.96% reports Q1 total AUM of $84.35bn, a 3% quarter-on-quarter increase. The company confirmed FY normalised NPBT of A$500-550m. Life net book growth of $766m, up 5.2% q/q. Total annuity sales of $842m, up 14% q/q.
Boral (BLD) +2.74% there is speculation private equity group Lone Star Funds is eyeing Boral as a potential acquisition target. The Australian has reported that Lone Star Funds interest could lead to up to a $6bn offer within the next year.
Rio Tinto (RIO) -0.87% reports Q3 Pilbara iron ore shipments of 86.1 mt vs consensus of 84.0mt. Pilbara iron ore production came in at 87.3Mt, an increase of 6% year-on-year. Mined Copper came in at 157.8kt vs consensus 142.5kt. Guidance for 2019 was as follows; Pilbara shipments 320-330mt, unchanged. Pilbara unit cost $14-15/t, unchanged.

Oz Minerals (OZL) +1.25% has upgraded guidance for gold production in FY19, expected to be 123.4-136.8Koz vs prior 122.2-135.6Koz. C1 cash cost and all-in sustaining cost guidance were both reduced for FY19. Q3 gold production improved on Q2 to 30,346 oz, copper production slipped to 24,663t.
Origin Energy (ORG) +1.00% reaffirms guidance at AMG, CEO says the fluid political and regulatory environment is yet to diminish the company’s prospects. Energy markets underlying EBITDA expected to be between $1.35- 1.45bn in FY19, gas production is forecast in the range of 680-700 petajoules with total cash costs up to $3bn, corporate costs are expected to reach $80 million, and capital expenditure is anticipated to come in around $580 million at most.
Phoslock Environmental Technologies (PET) -8.79% FY19 revenue guidance expected in the range of $27-30m. PET reported that it was debt free and holds $14.6m in cash. The company’s project pipeline now totals $330 million until the end of 2022, with expected sales for Phoslock of 4000 to 5000 tons in the final quarter of 2019.
Northern Star (NST) -2.11% has gained control of Echo Resources after increasing its stake in the company to 59.3 per cent. NST is offering 33c per share for 100% of EAR shares has extended its takeover offer to October 28.
Harvey Norman (HVN) +0.76% Update on entitlement issue with the issue to fall short by $7.8m. The company had budgeted on a $4m-$5m shortfall.

ECONOMIC NEWS

Peter Costello blames low interest rates for political extremism. Long bow Pete. He went on to warn that our financial position is worse than before the GFC. After 28 years of economic growth, he asks, why are we running monetary policy at emergency levels. It is a good question. Josh? Phil? Bueller?
New Zealand consumer prices rose modestly in the September quarter this year, lifting 0.7% according to data released by Statistics NZ. RBNZ is preparing to deploy unconventional policy measures if they are required. Instead of bonds though it will buy sheep and dairy.

BOND MARKET

2 – year bond yields up 2bps to 0.71%
3 – year bond yields up 2bps to 0.73%
10 – year bond yields up 4bps to 1.05%

ASIAN NEWS

Bank of Korea cuts key rate by 0.25% to 1.25%. Warns on growth.
China took the markets by surprise and has injected US$28bn of liquidity into the system via loans to banks. It added the money through its medium-term lending facility. The yield on China’s 10-year government bonds fell 1bps to 3.16%

HK Leader to deliver her policy address in a pre-recorded speech after Pro-Democracy protesters interrupted proceedings. Pro-Democracy? I think that ship sailed in 1997.
Japanese Topix Index hits a 10-month high.

EUROPEAN AND US NEWS

Early indications of slightly weaker opening for Euro markets.
US Congress has passed three bills affirming support for HK and the protesters. China not happy Jan.
Looks like Russia has filled the void left by the US in Syria. Mike Pence is inbound to Ankara.
The EU is set to announce anti-trust measures against Broadcom.
MGM sells the Bellagio to Blackstone. Danny Ocean not happy. Terry Benedict smiling. Blackrock has nearly US$7trillion in assets. There’s a target Danny. Crypto heist?
Brexit deal ahead? Maybe, just maybe. Then the real work begins. EU summit Thursday. Crucial vote Saturday.
Mnuchin has admitted that more work needs to be done on the greatest and biggest trade deal of all time.
IMF slashes world growth rates. First woman chief economist, Professor Gita Gopinath, cites trade war as the overriding reason for the slowdown. She also added ‘the outlook could darken considerably if trade tensions remain unresolved’. The IMF announced tariffs would reduce growth by 0.8% in 2020 or around US$700bn or Switzerland’s economy.