ASX 200 falls 27 points (-0.4%) to 7359 saved by the banks as red flows across the screens. Dow futures down 154. The Big Bank Basket continues to push higher as 10-year yields rocket on Fed commentary and local jobs data beats expectations by a country mile. The basket closed at $189.09 with CBA at new records up 1.0%. Other financials caught the updraught with QBE up 0.9% and NWL going hard up 5.2%, MQG bucked the trend, slipping 0.6%. Healthcare came off slightly as one broker turned ‘whatever’ on CSL and the stock fell 0.2%. Others in the sector steady. Industrials were mixed, TCL better despite bond yield rises, WES putting on the Ritz despite its lithium exposure, up 0.6%, CPU doing well up 4.8% with COL falling on its investor day down 4.5%, WOW off 0.8% ahead of the crucial meeting. Tech stocks firmed slightly with APT up 1.7% and XRO up 0.6%. The All–Tech Index rose 0.1%. Miners though smacked again as iron ore falls took their toll, BHP down 1.4%, FMG off 1.5% and gold miners continuing to fall led by SLR down 2.9% and EVN off 4.7%. Oil and gas stocks also under pressure with STO down 1.9% and WPL down 2.3%. In corporate news, NST down 7.6%, completes acquisition of the Kurnalpi project. COL down 4.5%, says it expects to see more than $200m in benefits from its ‘smarter selling’ program in FY22. The $1.4bn capex spend drowning out the positives. CGF off 1.8%, reaffirms FY21 profit guidance at its investor day. WHC lost 11.5%, cuts production guidance. SWM up 23.7% on a guidance update, says conditions in the final quarter of FY21 have been positive, points to strong ad revenue. In economic news, Employment rose by 115,200 vs 30,000 consensus. The headline rate dropped from 5.5% in April to 5.1%, beating estimates of 5.4% and we heard today from Dr Lowe and he seems to be heading the same way as Powell. 10-year yields rose to 1.63% with the AUD up to 76.19c on news. Asian markets mixed with Japan down 0.62% and China up 0.13%.

Today’s Highlights

  • ASX 200 down 27 points to 7359. Saved by the banks
  • High 7384 Low 7342. Narrow range again
  • June SPI Expiry passes without incident. Increased volumes.
  • Jobs data far better than expected. Headline rate 5.1%
  • Dow futures down 154
  • Big Bank Basket spurts to $189.09
  • All Tech Index flat
  • Australian Gold slides to $2382
  • 10-year yield rallies to 1.63%
  • AUD rallies to 76.19c on jobs data
  • Bitcoin slips to US$38923
  • Asian markets mixed with Japan down 0.62% and China up 0.13%

END OF DAY PODCAST – ASX 200 falls 27 points to 7359.  Jobs data far better than expected and bond yields rise as the headline number hits 5.1%. Banks the stars as the Big Bank Basket up to $189.09. Miners in the dog house with BHP down 1.4%. Gold miners hit again as industrials hold the line. All -Tech Index flat up 0.13%. Dow futures down 160 points and European Futures down around 0.5%.

STOCKS

  • SWM +23.75% trading update.
  • NXL +6.15% dogs are barking with change of management.
  • WHC -11.52% production downgrade.
  • ADT -5.13% commodity falls.
  • OZL -4.7% GXY -4.99% resource sell off.
  • CPH -16.67% Merging with Red Light Holland.
  • BTH +10.29% positive trading update.
  • TNK +4.92% agreement with Busy Bees.
  • PRN +2.94% Macquarie upgrade.
  • WES +0.63% bucking the trend on lithium stocks.
  • NTO +3.68% finding friends.
  • PNV +3.33% follows AVH lead.
  • AVH -4.97% not as good as thought.
  • CHN -9.99% becoming a substantial shareholder.
  • SZL -3.63% director’s interest.
  • Speculative Stock of the Day: Nothing on any volume.
  • Biggest Winners: SWM, NXL, NWL, PPM, CPU, ASB, NTO and BOQ.
  • Biggest Losers: WHC, CHN, RBL, NST, REG, ADT, GXY and OZL.

TODAY

  • Challenger (CGF) -1.77% Reaffirms FY21 profit guidance at investor day, sees normalized profit at the bottom end of the $390-$440m range. Sees that lifting to $430-480 in FY22. Revises its target capital range to 1.3-1.7 times the APRA Prescribed Capital Amount, extending the upper end of the range and outlining an intention to operate at around 1.6 times. Revises its pre-tax return on equity target to the RBA cash rate plus 12%.
  • Seven West Media (SWM) +23.75% Expects FY21 underlying EBITDA between $250-$255m. Trading conditions in the final quarter of FY21 have been positive, with a strong rebound in advertising revenue when compared to last year. Seven’s advertising revenue including Broadcaster Video-On-Demand (BVOD) is estimated to grow more than 45% in the quarter. Early indications suggest ongoing positive momentum into the September quarter. Net debt at the end of FY21 is expected to be between $240-250m.
  • Sonic Healthcare (SHL) +0.93% To acquire Canberra Imaging Group (CIG), details not disclosed. Expects the transaction to be immediately EPS accretive. CIG has annual revenues ~$60m. The return on capital invested is expected to exceed Sonic’s cost of capital in the first year.
  • GDI Property Group (GDI) -0.43% Declares second-half distribution of 3.875, in line with full-year guidance.
  • Northern Star Resources (NST) –7.57% Completes $18m acquisition of Kurnalpi project from KalNorth Gold Mines.
  • Whitehaven Coal (WHC) –11.52% Downgrades FY21 coal production guidance to 20.4Mt vs prior 20.6-21.4Mt. Sees coal sales of 17.9mt vs prior 17.8-18.3mt in FY21 and unit cost of $74/t vs prior $73-75/t. Overhaul works on the long wall at Narrabri and machinery repairs are expected to be completed in the coming days.

ECONOMIC NEWS

  • A large improvement in May jobs data with employment up +115,200 vs +30K consensus (97,500 were FT jobs). The unemployment rate has dropped from 5.5% in April to 5.1%.

RBA governor Philip Lowe gives a speech titled – From Recovery to Expansion

  • It is time, to be thinking about how we transition from recovery mode to expansion mode.
  • The level of employment in Australia is above its pre-pandemic level. We are expecting the unemployment rate to trend lower over the months ahead.
  • Wages growth and inflation remain subdued and there have not been upside surprises.
  • The GDP data paints a positive picture of the recovery, which has been V-shaped
  • Household balance sheets are in better shape than they were previously.
  • If households were to run down their additional savings quickly or if higher housing prices spurred more spending than usual, a stronger economic path than the one we have envisaged could eventuate.
  • The RBA is paying close attention to is the increase in household borrowing. It is important that lending standards remain sound in an environment of low interest rates and rising housing prices.
  • At the Reserve Bank board’s next meeting we have two important decisions to make. The first is whether or not to extend the yield target from the April 2024 bond to the next bond, which matures in November 2024. And the second is whether, and in what form, to extend the bond purchase program once the current program is completed in September.

BOND MARKETS

CV19 NEWS

  • Vaccine Tracker: 2.47bn doses in 180 countries. 35.7m a day. In US, 313m doses and 1.17m a day.
  • In Australia, the latest vaccination rate is 105,494 doses per day, on average. It will take another 10 months to cover 75% of the population.
  • Local medical experts not recommending AstraZeneca for only over 60’s. Blood clots the issue.
  • More than 80% of the adult population in Beijing, or 15.6 million people, have been fully vaccinated.
  • The U.K. is considering allowing fully vaccinated people to travel to amber-list countries without having to quarantine on their return.
  • Germany will this week pass the threshold of vaccinating 50% of its population with at least one dose.

ASIAN NEWS

  • President Xi is hoping one of his trusted deputies can spear head the charge into technology self -sufficiency. Liu He is now in charge of the Bureau of third-generation chip development and capabilities.
  • The PBoC is facing a sliding yuan in the face of USD rises on rate outlook.
  • Ant is heading slowly towards an IPO despite its valuation falling 60%.
  • China’s home prices grew at the fastest pace in nine months in May. New home prices in 70 cities, excluding state-subsidized housing, rose 0.52% last month from April.
  • Housing inventory shrank in more than 70% of cities, worsening an undersupply

US AND EUROPEAN HEADLINES

  • Ripples from Fed hawkish tone continues. Jerome Powell says Dot Plot does not reflect true position and should be taken with a ‘grain of salt’.
  • Fed ‘talking about talking about’. And everyone is talking about the talking about. 
  • European markets set to open weaker.

And finally….

May be an image of text that says 'Sadl ythe ne man who invented Tupperware recently died, his funeral was held up as they couldn't find the right lid for his coffin.'

Sadly the man who invented the taser gun has died….I was stunned when I read this.

May be an image of text that says 'Very proud to have just finished my 7th marathon in 7 days! Or 'Snickers', as they are now called.'

Clarence

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