The ASX up 20 to 5962 after some early slippage especially in the banking sector. Budget to come. Dow futures up points. The big four banks were the turnaround from early losses as the RBA held rates unchanged as expected. The basket rose to $119.69. Elsewhere miners firmed with BHP up 0.4% and FMG up 1.7% together with energy stocks STO up 3.5% and WPL up 2.2%. In gold miners, the space was dominated by the Super Pit owners merging, plenty of other takeover targets abound in a sector rife for M&A. NST up 10.6% and SAR up 9.6% with WGX up 7.1% and ALK pushing ahead by 7.6%. Healthcare slipped led by CSL down 0.8% though tech stocks firmed with APT up 5.0% and XRO up 1.5% with the All Tech Index up 1.9%. In corporate news, MTO up 24.5% on a guidance update. SGR up 2.5%, debt providers agreeing to a lenient assessment of SGR’s gearing and interest cover ratio covenants. BBN up 6.1%, reports comparable store sales growth of 17.0% for Q1. IAG up 0.2% settles a class action, anticipates a net after-tax impact from the settlement of less than $50m. MYX down 17.1%, FDA asks for more info on contraceptive treatment. SHV up 15.8%, completes $123m raising. DCN up 16.7% tracking well against FY guidance of 110-120Koz. REH up 1.8% bucking its ex-dividend. RWC up 0.23% despite being downgraded to underweight at Morgan Stanley. ANZ-Roy Morgan Consumer Sentiment index last week lifted 0.7% to 95.7. Australia’s trade balance for August recorded a surplus $2.643bn vs consensus $5.05bn. Exports -4% Imports +2%. 10-year bond yields rallied to 0.90% after no change to rates. AUD back up towards 72 again. Asian markets China closed, Japan up 0.5%. Hong Kong up 0.7%.

Today’s Highlights

  • ASX 200 rallies 20.5 points to 5962 after early losses.
  • High 5964 Low 5913. RBA keeps rates on hold. Modest volume.
  • Big Bank Basket rallies hard to $119.27
  • All Tech Index up 1.9%
  • 18 trading days until the US election. Jobs number tonight.
  • Dow Futures up 60.
  • Gold rises to AUD$2664
  • 10-year bond yield rallies to 0.90%
  • AUD firms to 71.82c
  • Bitcoin firms to $10743
  • Asian markets China closed, Japan up 0.5%. Hong Kong up 0.7%.

MARCUS TODAY TEAM INSIGHT

MARCUS STRATEGY -A new addition to the growth portfolio and we have topped up on two stocks – all three are domestic recovery rather than growth plays. Trump out of hospital removes some of the uncertainty and pops the market back up. Not a significant market factor. The market is still “holding the line” at the bottom of the trading range but with COVID restrictions tightening in the Northern Hemisphere the market is inching along not charging up. The Budget and the RBA Meeting today hold the focus. Prepare to be stimulated. READ MORE

HENRY’S TAKE – Positive update from TNT this morning. A look at comparative valuations to a US Goliath in the Cyber Security space. And as NST and SAR merge, something we mentioned a few days ago, a look at three gold miners that could also be attractive to a predator. Budget tonight and Josh will be hoping that Iron ore prices stay strong as Brazilian production now rising. Could be a worry. READ MORE

TRADING IDEAS – We’re adding a trade in Kogan (KGN) today. No doubt many of you rode it on the way up, well done. It’s a technical opportunity we’re chasing, with the price action recently forming a wedge pattern. Wedges are continuation patterns, with the stock typically breaking in the direction that it came from. READ MORE

STOCKS

  • PLL +29.73% company presentation
  • MTO +24.50% business update.
  • TNT +20.45% update on acquisitions
  • AMS +12.40% Morgans Conference presentation
  • SWF -6.47% quarterly.
  • BUD -11.48% technical selling.
  • AVA -7.87% profit taking.
  • SHV +15.77% insto offer completed.
  • NST +10.64% SAR +9.58% merger of equals.
  • ALK +7.64% takeover target?
  • WGX +7.08% gold miner takeover target?
  • MYX -17.11% update on Women’s health pipeline.
  • AFG -4.66% profit taking.
  • MSB -4.21% sellers move back in.
  • MGR -2.59% director resignation.
  • AKP +12.38% business update thin as usual.
  • Speculative Stock of the Day:  Douugh Limited (DOU) +120.00% new IPO today for Neobank in RTO. $6m raised at 3c.
  • Biggest Winners: SHV, AKP, PLS, NST, ADH, SAR, LOV and CHN
  • Biggest Losers: MYX, NAN, AFG, MSB, ALQ, CUV and ERA.

TODAY

  • Freedom Foods (FNP) – Equity raise likely to occur in the next couple of weeks. Newswires report the raising is expected to be at least $100m and notes that majority holder, the Perich family, is expected to take part and increase its 54% stake in the company.
  • Woolworths (WOW) -0.27% There is speculation Woolworths spin-off Endeavor could look to acquire ALE Property Group (LEP), the landlord of its ALH pubs division. The article adds Endeavor has also remained a potential target for PE groups with Apollo and The Carlyle Group previously showing interest.
  • Northern Star Resources (NST) +10.64% and Saracen Mineral Holdings (SAR) +9.58% To merge and form a new $16bn gold miner, with ownership of the Kalgoorlie super pit consolidated under a single owner. SAR shareholders will receive 0.3763 NST shares for each SAR share they hold and will also receive a special, fully franked dividend of 3.8c/share. NST shareholders will own 64% of the combined entity and SAR shareholders will own the remaining 36%.
  • Baby Bunting (BBN) +6.10% Reports comparable store sales growth of 17.0% for Q1. Excluding Melbourne metropolitan stores, comparable store sales growth was +28.5%. Online sales (inc. click & collect) up 126% during Q1 FY21; excluding Victoria, online sales growth was up 92%. Gross margin improved 90 basis points to 37.5% to the end of Q1 FY21. Expects to open 4 to 6 new stores in FY21. Notes FY21 earnings guidance cannot be given at this time.
  • Newcrest Mining (NCM) -0.22% Receives conditional approval to list on the Toronto Stock Exchange on October 13. NCM will retain its primary listing on the Australian Securities Exchange (ASX), and its secondary listing on PNGX Markets.
  • Insurance Australia Group (IAG) +0.22% Has settled a class action brought against its subsidiaries, Swann Insurance and Insurance Australia Limited, by Johnson Winter & Slattery, which relates to add-on insurance products sold through motor vehicle and motorcycle dealers. The settlement involves a gross payment of $138m and is subject to approval by the Federal Court of Australia. IAG anticipates a net after-tax impact from this settlement of less than $50m, which will be reflected in IAG’s half-year results.
  • Dacian Gold (DCN) +16.67% Q1 production 32,799oz. Tracking well against FY guidance of 110-120Koz. Repaid $25m in debt during the quarter with total debt of $39.1m Cash and gold-on-hand at the end of September $38.5m for a net debt position of $0.6m. Reduced hedge commitments by a further 23,101oz as planned with total remaining of 61,488oz at an average price of $2,114/oz.
  • Mayne Pharma (MYX) -17.11% Receives FDA letter in relation to its abbreviated new drug application for a generic version of NUVARING (contraceptive treatment). CEO comments, “We are confident we can address the issues raised in the letter in a timely manner. Pleasingly, the FDA has indicated that Mayne Pharma and its development partner Mithra have an acceptable manufacturing process for generic NUVARING.
  • Select Harvests (SHV) +15.77% Completes institutional component of its capital raise at a take-up rate over 99%, raising $81.7m at an offer price of 520c/share.
  • The Star Entertainment Group (SGR) +2.53% Debt providers have agreed to a lenient assessment of SGR’s gearing and interest cover ratio covenants. Adds The Star Sydney is eligible for JobKeeper phase 2. There are 3,000 staff eligible for JobKeeper employed by The Star Sydney entity. The Star Queensland and the group employer entities will not be eligible for JobKeeper phase 2.
  • Motorcycle Holdings (MTO) +24.50% Expects H1 underlying EBITDA to be in excess of $20m. Observes strong sales levels have been experienced throughout the last five months after the initial COVID-19 restrictions were eased. Liquidity remains sound, with the cash position continuing to improve as a result of strong sales and as stock levels are reduced, especially in used motorcycles and accessories. As well as cost-cutting measures undertaken during the pandemic, results have been supported by various Government stimulus measures, including the JobKeeper program. The Company has not qualified for the JobKeeper program past the initial period which ended in September.

ECONOMIC DATA

  • Weekly ANZ-Roy Morgan Consumer Sentiment index last week lifted 0.7% to 95.7
  • Australia’s trade balance for August recorded a surplus $2.643bn vs consensus $5.05bn. Exports -4% Imports +2%
  • ANZ job advertisements for September up 7.8%

RBA Leaves rates on hold:

For a full transcript click here.

  • The global economy is gradually recovering after a severe contraction due to the pandemic.
  • Financial conditions remain accommodative around the world and supportive of the economic recovery.
  • The Australian economy experienced a sharp contraction in the June quarter, with output falling by 7%. As difficult as this was, the decline in output was smaller than in most other countries and smaller than was earlier expected. A recovery is now under way in most of Australia, although the second-wave outbreak in Victoria has resulted in a further contraction in output there.
  • The Bank’s policy package is working as expected and is underpinning very low borrowing costs and the supply of credit to households and businesses.
  • $81bn of low-cost funding for authorised deposit-taking institutions (ADIs) has been advanced under the initial allowance of the Term Funding Facility. ADIs currently have access to a further $120bnunder this facility.
  • The Board views addressing the high rate of unemployment as an important national priority.
  • It will maintain highly accommodative policy settings as long as is required and will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3% target band.

COVID – 19 NEWS

  • Hong Kong Chief Executive Carrie Lam said there would be “no further relaxation” of coronavirus measures, as authorities continue to find infections of unknown origin.
  • Top Trump officials are blocking new federal guidelines that would make it more difficult to authorize a Covid-19 vaccine before the election.
  • In 34 US states, the seven-day average of new cases is higher now than it was a month ago. Although the virus has waned in populous states including California and Florida.
  • Ireland will move to level 3 on a five-point scale of restrictions. Among other restrictions, the move means restaurants will only be allowed serve take out, while bars that don’t serve food must close.
  • About 4 out of 5 patients hospitalized with Covid-19 suffer neurologic symptoms such as muscle pain, headaches, confusion, dizziness and the loss of smell or taste.
  • Diners in Paris and Marseille must keep masks on between courses starting Tuesday.
  • UK remains a mess as a spreadsheet error has left 50k off the list to track and trace.

BONDS

ASIAN NEWS

  • The only country to show a true V-Shaped recovery, China has seen travel bounce back hard. Through the first four days of the week-long holiday that started Oct. 1, some 425m people travelled domestically, according to the Ministry of Culture and Tourism, nearly 80% of last year’s travellers.
  • China hasn’t reported any local virus infections since Aug. 15, though it found two asymptomatic cases in late September.
  • Flight bookings for the holiday were up 11% compared with 2019, according to a report from travel data and analytics agency Cirium. Tickets at the Badaling section of the Great Wall sold out by mid-morning on Oct. 3, the first-time daily tickets have sold out since late March.

EUROPEAN AND US HEADLINES

  • Slightly positive open for European markets.
  • A UK Appeals court has overturned a judgement on who controls Venezuela’s $1bn in gold bullion in the Bank of England vaults. The case will now go back to the High Court, which will have to determine more clearly who is in charge in Venezuela.

And finally…

A man walks into a butchers shop. “I’d like a Barn Owl please”
“A Barn Owl?” questions the butcher, “You can’t buy Barn Owls, especially not to eat! It’s Illegal to buy birds of prey to eat!”
“Oh dear” answers the man, “I didn’t realise that, I ate one last week that I shot by mistake and it was rather tasty”
“Well, you’re probably better off just buying some pheasant or grouse, as I can sell you that” says the butcher, “by the way, what did the Barn Owl taste like?”
“Well” said the man, “sort of a cross between Golden Eagle and Swan”

The rain was pouring down outside O’Connor’s Pub in Dublin.

There standing in front of a big puddle outside the pub was an old Irishman, drenched, holding a stick, with a piece of string dangling in the water.

A passer-by stopped and asked him, “What are you doing?”

“Fishing”, replied the old man.

Feeling sorry for the old man, the gent says, “Come in out of the rain and have a drink with me.”

In the warm ambiance of the pub, as they sip their whiskies, the gentleman, being a bit of a superior smart ass, cannot resist asking, “So how many have you caught today?”

“You’re the 8th”, replied the old man.

Clarence

XXXX