ASX 200 finished up 42 to 6340.5 (0.66%) after a roller coaster session. The market opened with a huge US vaccine inspired rally, with a leap out of the blocks as the computer traders got busy but it was one way traffic from there, and much like the US markets, finished sloppy and looking softer. Dow futures flip flopped from a big gain to a modest loss after AG Barr and Mitch McConnell both came out in support of an inquiry into voter fraud and Trump continues to claim victory. Travel stocks were in high demand, CTD up 15.8% FLT up 9.3% and WEB up 13.5% with education stocks IEL up 10.3% and old fashioned bricks and mortar shops in demand., LOV up 24.7% with online platforms getting whacked seriously hard, KGN down 17.1%, RBL down 20.0%, TPW down 20.6% and ADH down 15.2%. Banks were a bright spot, the Big Bank Basket has roared again to $132.53 with CBA up 3.0% although all off their highs. Big miners were mixed but energy stocks improved substantially on short covering OSH up 16.5% and STO up 12.2%. Gold miners got smacked, NCM down 4.8% and NST down 11.5% on a fall in bullion and in tech we saw a big reversal of fortunes, APT down 10.9% and WTC off 1.1%, with ALU off 4.6%. The All Tech Index followed the Nasdaq with a 5.4% fall. In corporate news, IPH up 3.1%, has recorded a 19% slide in profit, weighed down by significant items. FBU up 16.5%, saw a modest 1% lift in revenue for the first quarter of FY21. SM1 in a trading halt, to launch a $200m raising at NZ510c. Expects FY21 to be at or just below the FY20 result. SUN up 6.8% has seen a $336m contraction in lending over the September quarter. BHP up 0.4%, Liverpool High Court dismisses class action against BHP Group over Samarco. The judge noted the existing class action in Brazil and the complications and overlap of running a concurrent class action in the UK. DHG down 6.9%, year to date total revenue down 7%, digital revenue up ~4%. Observing atypical seasonal patterns. BSL up 1.9%, the sale of an industrial warehouse expected to contribute $40m to underlying EBIT guidance. JobKeeper to be extended until the end of March. ANZ-Roy Morgan Weekly Consumer Confidence Index up 3.2% to 103.1, the highest level since the beginning of March. NAB business conditions edged 1 point higher in October to +1 index points, with the improvement driven by a large gain in Victoria. Asian markets modestly higher with Japan up 0.35% and China up a mere 0.02%

Today’s Highlights

  • ASX 200 up 42 to 6340.5. Big volume day.
  • High 6438 Low 6322. Big range. Big drop from euphoric open.
  • Big Bank Basket see huge rise to $132.53
  • All Tech down 5.43%
  • Dow Futures down 180 points.
  • Gold drops hard to AUD$2585
  • Huge day for 10-year bond yields up 16bps to 0.91%
  • AUD rises to 72.84c
  • Bitcoin consolidates at $15,335
  • Asian markets modestly higher with Japan up 0.35% and China up a mere 0.02%

STOCKS

  • URW +43.55% capital raising vote fails.
  • LOV +24.70% vaccine boom.
  • EVT +21.43% cinemas to return to normal.
  • FBU +16.51% positive results.
  • CTD +15.83% WEB +13.55% FLT +9.26% travel is back.
  • SCG +14.52% shopping centres are back.
  • MMM -22.97% profit taking as now not needed.
  • TPW -20.56% KGN -17.11% RBL -20.04% no more virus it seems.
  • NXT -13.88% withdrawal of AMG resolution.
  • MYD -16.67% follows sector down.
  • DUB -9.62% SPP closes.
  • ALC -13.89% profit taking after NHS deal yesterday.
  • VTH +21.66% takeover approach.
  • PBP +15.94% positive acquisition.
  • RCE +14.21% encouraging results.
  • Speculative Stock of the Day: Debutante Dctwo (DC2) +192.50% raised $20m at 20c. DC Two provides managed cloud services, hosting over 300 businesses on our platforms, utilising a channel of over 40 channel partners, across WA and NT, with services delivered from data centres in Perth and Darwin.
  • Biggest Winners: URW, LOV, EVT, OSH, FBU, VUK, CTD and BPT.
  • Biggest Losers: MMM, TPW, RBL, KGN, ADH, CSX and NXT.

TODAY

  • James Hardie Industries (JHX) -5.58% Q2 adjusted profit US$120.5m vs consensus US$114.8m.Revenue US$736.8m vs guidance of US$735-740m and consensus US$721.7m. Adjusted EBIT US$163.1m vs guidance of US$160-165m. Adjusted EBIT margin 22.1% vs guidance of ~22%. To reinstate dividend for FY21, plans to reduce gross debt by US$400m by end of FY21. Reaffirms FY21 adjusted profit guidance of US$380-420m.
  • Incitec Pivot (IPL) -2.78% Full-year profit $188.2m ex-items vs consensus $198m.Revenue $3.94bn vs consensus $4bn. EBIT $374.5m ex-items vs consensus $402.1m. The board has determined, as an exception to its dividend policy, not to pay a final dividend for FY20 in light of the ongoing uncertainty due to COVID-19. IPL’s dividend policy, which is to pay between 30%-60% of NPAT, remains unchanged. The group continues to actively manage the risks arising from COVID-19 on its people and operations, which includes a financial response plan that is expected to deliver cost savings of $60m* per annum by FY22 of which $30m will be delivered in FY21, heavily weighted to Australian Fertiliser manufacturing.
  • AUB Group (AUB) -4.18 With stronger than expected performance in Q1, and ongoing positive momentum in the business, now expects to deliver FY21 underlying profit of $60-62m vs previous guidance $58.5-61m.
  • Sims (SGM) +2.61% Free cash flow for the September quarter was positive and all metal divisions and Group achieved solid positive EBIT. Intake volumes for the September quarter remained at 85% of average FY19 intake volumes. Balance sheet remains strong, costs are lower. Adds its remains in a strong position to benefit from global government infrastructure stimulus.
  • Fletcher Building (FBU) +16.51% Inthe four months to October 30 revenues were up 1% to NZ$2.70bn vs year ago. EBIT before significant items of $227m, up 55%, EBIT margin up 2.9ppts to 8.4% due to improved operating efficiency. Cash flow and balance sheet: net debt US$388m, liquidity US$1.4bn.
  • Synlait Milk (SM1) – Launches NZ$200m equity raising at NZ510c. NZ$180m placement and $20m share purchase plan. Now expects consumer-packaged infant formula volumes to be lower than FY20, with softer demand in HY21 than previously expected as its key customer resets inventory levels. Anticipates volumes to increase in H2 of FY21 once stocks have cleared. Now expecting HY21 NPAT result to be significantly lower than HY20 and FY21 to be at or just below FY20.
  • Suncorp Bank (SUN) +6.77% September quarter lending contracted $336m vs quarter ago. Driven by a 1.0% decline in retail lending partially partly offset by a 1.0% increase in business lending. Total impairment losses for the quarter $3m. At 30 September, the bank had $3bn of loans under temporary loan deferral arrangements, representing 5.2% of the total lending portfolio. Six-month assessments have been completed for approximately 1,100 or 14% of home lending accounts in deferral. Of these accounts, 79% have resumed regular repayments, 10% were approved for an additional deferral period, 9% have restructured repayments and 2% have entered hardship. Gross impaired assets were flat over the quarter. Risk-weighted Common Equity Tier 1 ratio of 9.62% vs 9.32% at the end of June.
  • BHP Group (BHP) +0.42% Liverpool High Court dismisses class action against BHP Group over Samarco. The judge noted the existing class action in Brazil and the complications and overlap of running a concurrent class action in the UK.
  • Domain Holdings (DHG) –6.93% Year to date total revenue down 7%, digital revenue up ~4%. The YTD decline in total revenues reflects the pause on print during the Victorian lockdown. For H1, total costs (adjusted for divestments) are expected to decline ~12% from pcp of $96.5m. This includes the benefits from the Federal Government’s Jobkeeper scheme and Domain’s Project Zipline employee program. Excluding these two items, H1 costs are expected to reduce 1%. Overall trading to the end of October has improved from Q4 FY20 despite the impact of the Victorian lockdown. While lockdowns have eased, seasonal patterns remain atypical, with a stronger performance in July, and a less pronounced peak in October.
  • Bluescope Steel (BSL) +1.95% One-off ~$40m addition to its H1 underlying EBIT guidance provided on October 23. The one-time impact is due to the completion of a sale of an industrial warehouse property developed by BlueScope Properties Group in the United States. It is not expected to be repeated in H2 2021.
  • Charter Hall Retail REIT (CQR)+5.21%Guides H1 distribution of 10.7c/unit. Assuming no further lockdown or government-imposed trading restrictions, it is expected that the H2 distribution will be greater than the H1 distribution. Portfolio occupancy stable at 97.3%; positive trajectory in returning to normal rent collection levels. 92% of gross rents were collected, 5% were subject to Covid-19 tenant support, and 3% remain uncollected. With only 1% of Q4 FY20 gross rents uncollected, no adjustments were required to the expected credit loss provision.

ECONOMIC NEWS

  • ANZ-Roy Morgan Weekly Consumer Confidence Index lifted 3.2% to 103.1, the highest level since the beginning of March.
  • NAB business conditions edged 1 point higher in October to +1 index points, with the improvement driven by a large gain in Victoria.

COVID – 19 NEWS

  • Shanghai reported its first domestic case in months. Ukraine’s president tested positive.
  • Chinese vaccine trial halted in Brazil after a serious adverse event. A report said that one volunteer had died although CV19 not the cause.
  • Russia’s Covid-19 vaccine, Sputnik V, is more than 90% effective, according to preliminary observations, the Health Ministry said in text message.

BONDS

ASIAN NEWS

  • Chinese CPI rose 0.5% in October on year, lower than 0.8% estimate. The consumer price index rose 0.5% last month from a year earlier, the slowest pace since late 2009.
  • Core inflation, which removes the more volatile food and energy prices, rose 0.5%, unchanged from September.
  • Factory deflation persisted, with the producer price index declining 2.1% on year, the same pace as in September. The median forecast was for a 1.9% contraction.
  • Pigs may fly but they also crash as well. Pork prices, a key element in the country’s CPI basket, fell 2.8%, the first time they’ve fallen since February 2019.
  • Asia’s sizzling-hot internet economy cooled during the pandemic but spending online should bounce back rapidly and triple to more than $300 billion by 2025, research from Google and others suggests.

EUROPEAN AND US HEADLINES

  • Beyond Meat shares smashed as sales disappoint.
  • Trump has sacked his defence chief.
  • Interesting chart from Bloomberg on the massive rotation into value from growth
  • Retail investors still doing well.
  • Mitch McConnell has joined with AG Barr in calling for an inquiry as Trump remains convinced he has won.
  • Biden is now considering legal avenues to get Federal agency the General Service Administration to rule on the election and release funds for the transition. The GSA’s role is dictated by the 1963 Presidential Transition Act promotes peaceful, orderly handoffs and limit any national security vulnerabilities during the transfer of presidential power.
  • US Junk Bonds yields drop to record low.
  • Trump questions vaccine timing on announcement from Pfizer.

And finally….

Clarence

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