The ASX drops 188 points (3%) to 5961 as reality bites. Dow futures down 435 points. Selling from the outset as Jay Powell seemed to call out the Emperor and his lack of clothing with the Q&A session. Hope and momentum collided with the reality of both OECD and Fed economic forecasts and created a reason to take money off the table. Second wave rears also starting to emerge as US cases continue to rise in some states. Banks were hit hard as zero interest rates stretching out into the distance do nothing for bank profits, CBA fell 4.4% and NAB down 5.4% with the Big Basket down from its recent highs around $133 to $125.48. Other financials also came in for a smacking with MQG down 4.5% and Insurers QBE falling 7.2% and SUN down 7.3%. Big miners as well came in for profit taking with BHP falling 2.0% and even FMG fell modestly down 0.7%. Elsewhere gold miners were back in demand with a good bounce, GOR up 3.0% and NST up 6.8%. Energy stocks under pressure as US inventories build, WPL down % and STO down %. Industrials too felt the wrath with travel stocks seriously in the wars, FLT down 10.4% and WEB dropping 10.1%. Other tech stocks also fell led by giant APT down 4.4% and CPU down 8.1%. The All Tech Index collapsed 2.6%. REITs and bond proxy stocks also under attack with SYD down 5.0% and TCL down 2.4% with SCG down 8.0%. Healthcare under pressure but some outperformance with CSL down only 0.3%. In corporate news, JBH fell 4.2% after a solid trading update, KGN rallied hard on excess demand for the recent opportunistic placement, up 6.9%. AIZ crash landed after hosing down media speculation down 9,5%. In economic news, not much out there with the 10-year yield falling like a rock to 0.91% and the AUD under pressure at 69.22c. Asian market weaker but could have been worse, Japan down 2.4% the worst while China down 0.8%.

Today’s Highlights

• ASX 200 collapsed 188 points to 5961 (3%)
• High 6123 Low 5950. Solid volumes.
• Big Bank Basket $125.48 sees profit-taking on zero interest rates.
• 100 trading days until the US election. Trump is behind in some polls.
• Dow Futures down 450. European futures point to flat opening.
• 10-year bond yields crater to 0.91%
• AUD steady falls to 69.22c.
• Aussie gold rallies to $2497 as AUD falls.
• Bitcoin steady at US$9880
• Asian markets fell heavily with Japan down 2.4%, China down 0.8% and Hong Kong down 1.4%

STOCKS

• BGL +13.14% investor presentation.
• PRU +8.30% RMS +7.55% NST +6.76% gold stocks rally.
• KGN +6.87% placement demand spills over.
• OPT -14.43% still suffering after trial results.
• FLT -10.39% WEB -10.11% CTD -7.73% travel under pressure.
• KMD -10.29% profit taking.
• CCP -% profit taking.
• GEM -8.06% write off and profit taking.
• URW -9.76% rally ends for the time being.
• AIZ -9.51% responds to media speculation.
• ALG -16.92% profit taking sets in as reality bites.
• OPY -17.30% stock coming out from recent issue.
• AFP -16.85% placement completed.
• SWM -11.43% profit taking.
• Speculative Stock of the Day: Beston Global (BFC) +81.82% on decent volume after securing a deal to sell its Dairy Farms business for $40m in cash. The market cap pre the deal was only $47m.
• Biggest Rises: BGL, PRU, RMS, KGN, NST, WGX, NCM and SAR. All golds bar one.
• Biggest Falls: OPT, FLT, CCP, KMD, WEB, URW and AIZ.

TODAY

• JB Hi-Fi (JBH) –4.24% Given the strong performance through April and May, the group now expects FY20 total sales to be ~$7.86bn. Total NPAT after accounting for a $25m impairment in its New Zealand business, to be in the range of $300m-$305m, an increase of 20% to 22% on the pcp.

• Senex Energy (SXY) – Expects FY20 production between 2.0-2.1 mmboe. FY20 EBITDA guidance of $45-55m vs consensus $51.7m.
• Alliance Aviation (AQZ) – Launch $122m raising at 295c/share. Made up of a $91.9m placement and up to an additional $30m SPP. The raising positions Alliance to invest in growth initiatives, and to further strengthen its already robust balance sheet.
• Kogan.com (KGN) +6.87% Completes $100m oversubscribed placement at 1145c/share.
• Medlab Clinical (MDC) – Launches $5.4m placement at 15c/share, to be followed by SPP.
• Beston Global Food (BFC) +81.82% To sell dairy farms to Aurora Dairies for $40.4m in cash. Beston will receive all milk from the farms, currently around 17m litres per annum, over a ten-year period with an option to extend. Sale proceeds will reduce debt (to around 10% gearing) and fund Mozzarella and Lactoferrin production expansion. Continues the transition to a higher margin cash generating dairy business.
• G8 Education (GEM) -8.06% To recognise a H1 after-tax impairment charge of $230m-250m. The impairment charge relates to the carrying value of intangible assets, primarily goodwill and the ‘right of use asset’ and tangible assets relating to a number of underperforming centres, including some recently acquired Greenfield centres.
• Virgin Australia (VAH) – To increase domestic capacity to 13% or 320 flights or per week by July 6. Currently operating at 6%.

ECONOMIC NEWS

Total dwelling units for April

• The trend estimate for total dwellings approved rose 1.0% in April.
• The seasonally adjusted estimate for total dwellings approved fell 1.8% in April.

Private sector houses

• The trend estimate for private sector houses approved rose 0.8% in April.
• The seasonally adjusted estimate for private sector houses rose 2.7% in April.

Private sector dwellings excluding houses

• The trend estimate for private sector dwellings excluding houses rose 1.0% in April.
• The seasonally adjusted estimate for private sector dwellings excluding houses fell 8.9% in April.

COVD-19 NEWS

• Second wave fears begin: Coronavirus cases reached 2m in the U.S. The number of U.S. cases is more than double those reported for Brazil, the country with the second highest number of infections.
• The Coachella and Stagecoach music festivals have been canceled for 2020.
• The government is considering capping the number of people allowed into Japan when it reopens its borders for business travel this summer, Yomiuri reported without attribution. Arrivals could be limited to 200 to 250 a day. Not even a plane load!
• Walt Disney Co. said it proposed plans for a phased reopening of its Disneyland Resort in southern California in July.
• Texas recorded 2,504 new cases, the highest one-day total since the pandemic emerged.
• In the UK BoJo has now allowed two households to mix. And research has found that if the lock down rules were in place a week earlier it could have saved 25,000 lives.

BONDS

ASIAN NEWS

• Netease up 7.4% in initial trading in HK.
• The Hong Kong US Dollar peg has once again had to be defended. The Hong Kong Monetary Authority sold HK$3.72bn ($480m) worth of local dollars on Wednesday, taking the total since it began intervening in April to HK$48.1bn.
• Chinese Premier admits 40% of the population struggles.

EUROPEAN NEWS

• European opening futures calls for a dismal start.
• Lufthansa forecasts more job cuts to come. 26,000 at risk.
• Deutsche will merge its retail and wealth management operations with around 18,000 jobs potentially lost in a restructure.
• Just Eat is merging with Grubhub in a US$7.3bn share deal. Beats Ubereats out of the deal.
• UK companies have issued GBP10bn since CV19 hit.
• Nascar has banned the Confederate flag. at races
• Delta Airlines may be in danger of defaulting on its debt. Forecasts a 90% drop in 2^nd quarter revenue.

And finally………..

 

A doctor, a lawyer and a manager were discussing the relative merits of having a wife or a mistress. The lawyer says: “For sure a mistress is better. If you have a wife and want a divorce, it causes all sorts of legal problems.”

 

The doctor says: “It’s better to have a wife because the sense of security lowers your stress and is good for your health.”

 

The manager says: “You’re both wrong. It’s best to have both so that when the wife thinks you’re with the mistress and the mistress thinks you’re with your wife – you can go to the office and do some work

 

“My wife is really mad at the fact that I have no sense of direction. So I packed up my stuff and right!”

“What concert costs just 45 cents? 50 Cent featuring Nickelback!”

“I’m reading a book about anti-gravity. It’s impossible to put down!”

“I had a neck brace fitted years ago and I’ve never looked back since.”

“I ordered a chicken and an egg online. I’ll let you know.”

Clarence

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