ASX 200 falls 34 to 7252 (0.5%) after a early rout sees buyers back in after CV19 numbers improve slightly. Dow futures up 72 points. Early weakness gave way to bargain hunting as banks saw buyers return with the Big Bank Basket down slightly to $174.92. The ANZ buy back helped sentiment and highlighted the potential in the sector. Insurers slid with QBE down 1.5% and SUN off 1.1%. Travel stocks remained under pressure with WEB down 1.3% and FLT falling 1.3%.   Industrials did well , GMG rose 1.0%, WES rose 0.5% and TCL up 0.1% on defensive buying. Healthcare stocks rose led by CSL up 1.3% and FPH rising 1.9%. RHC rose 0.7% after being knocked back on its UK bid of Spire. Miners were the problem child despite iron ore prices holding up, BHP fell 2.5% after production reports, FMG fell 1.0% and RIO down 2.7% after its production report. Energy stocks were mixed with the sector rocked by news that STO had approach OSH with a merger proposal to create a #22bn behemoth. STO fell 5.0% on the news, OSH up 6.3% as it looks to be in play. Other players in the energy space fell with WHC down 1.9% and VEA off 1.0%. Tech stocks were firm with APT up 1.6% on news of a banking product, Z1P rose 5.4% on M&A rumours and XRO rose 1.7%. The AllTech Index rose 0.3%. In corporate news, GRR rose 6.2% after its quarterly production report, ICQ sank 9.4% after allowing Autodesk DD although not exclusively yet. JBH reported a solid set of numbers and rose 3.7%. On the economic front, RBA minutes were released as expected with supportive policy measures to remain until full-employment and inflation targets are reached. The board reduced the pace of bond purchases to $4bn per week, interpreted by some as peak support. Weekly ANZ Roy Morgan Consumer Confidence fell 5.2% to 104.3 points on the back of renewed lockdowns. 10 -year yields continue to drop, 1.18%. AUD 73.20c. Asian markets weaker with Japan down 0.7% and China down 0.5%.

Today’s Highlights

  • ASX 200 down 34 points to 7252. Modest volumes.
  • High 7283 Low 7205. Off lows but skittish.
  • Dow futures up 72.
  • Big Bank Basket slips to $174.92
  • All Tech Index up 0.25%
  • Gold rallies to $2480.
  • 10-year yield down to 1.18%
  • AUD weaker at 73.20c
  • Bitcoin slips to US$29680
  •  Asian markets weaker with Japan down 0.7% and China down 0.5%

STOCKS

  • STO -4.98% merger with OSH.
  • BET -5.56% sinking fast.
  • URW -6.10% CV19 Delta blues in Europe.
  • LTR -4.40% profit taking.
  • OSH +6.27% STO courts PPNG supplier.
  • Z1P +5.41% takeover rumours.
  • GRR +6.21% costs down and volumes up.
  • TLX +5.52% Phase 3 Renal Cancer study progress report.
  • RCE +11.46% Chinese patents.
  • WWI +5.00% mining rights granted at Witwatersrand Basin project.
  • ICQ -9.38% grants DD to Autodesk.
  • TOY -unchanged- lease agreement.
  • APT +1.64% moves into banking.
  • RXM -unchanged- doubles resource at Hillside.
  • NST -0.87% MAH business update.
  • PRN -6.74% profit taking.
  • ECX +3.20% substantial shareholder notice.
  • JBH +3.73% positive results.
  • Speculative Stock of the Day: Nothing in any volume.
  • Biggest Winners: OSH, GRR, Z1P, TLX, AEF, OCL and JBH.
  • Biggest Losers: PRN, ABR, NIC, URW, BET, STO and SKC.

TODAY

  • Zip Co (Z1P) +5.41% There is fresh speculation around interest in Z1P, newswires report multiple global parties are taking a look given recent consolidation in the space. There is conjecture Klarna may have acquired a strategic stake. The report also names Tencent which is a stakeholder in rival Afterpay (APT).
  • Insurance Australia Group (IAG) – Is exploring the sale of a 49% interest it holds in Malaysian business, AmGeneral Holdings Berhad for $340m. IAG expects to incur a loss of ~$90m which will be recognised in its FY21 results.
  • ANZ (ANZ) +0.63% Intends to repurchase up to $1.5bn of shares via an on-market buy-back beginning August. Management believes an on-market buy-back to be the most prudent, fairest and flexible method to return capital in the current environment. Expected to reduce ANZ’s CET1 ratio by ~35 basis points.
  • Yancoal Australia (YAL) -1.90% Reports Q2 saleable coal production of 8.8Mt, down 5% vs year ago. Lifts full-year cash operating costs guidance range by $2/tonne. Production and capex guidance for FY21 unchanged. Management comments: “During the period, uncontrollable cost factors included elevated diesel prices, demurrage costs, and wet weather recovery works. YAL is also actively targeting higher quality, lower ash, thermal coal, which incurs an additional processing cost.”
  • Oil Search (OSH) +6.27% Has recently received and rejected a confidential non-binding and indicative change of control proposal. The proposal was rejected as it was determined to not be in OSH shareholders’ best interests on the terms and value proposed.
  • BHP Group (BHP) -2.50% Q4 petroleum production 27mmboe, up 2% vs year ago. Copper 403.0t, down 3%, iron ore 65.2mt, down 2%, met coal 11.8mt, up 2% and energy coal 6.3mt down 17% over the same period. Petroleum production for the 2021 financial year was slightly above guidance. Full-year production guidance for copper, iron ore, metallurgical coal and nickel were delivered, as was revised guidance for energy coal. Full-year unit cost guidance is expected to be achieved for WAIO, Escondida and Queensland Coal. Petroleum unit costs are expected to be slightly better than guidance. New South Wales Energy Coal (NSWEC) unit costs are expected to be marginally above guidance.
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  • Sydney Airport (SYD) -1.26% Reports June traffic -70.9% vs June 2019. Domestic down 56.8% to 906,000 passengers. International down 93.6% to 83,000 passengers.
  • Afterpay (APT) +1.64% Introduces ‘Money by Afterpay’ with Australian launch slated for October. The app’s phased rollout will begin with a staff pilot at the end of July, with the aim to launch to the market in October. Key product features will include a competitive 1% p.a. interest rate and no fees. The overall experience will focus on helping customers trust themselves with money management. In addition to Westpac as the regulated deposit account and card issuer, Afterpay has obtained an AFSL from ASIC to enable it to provide general financial product advice and distribute basic deposit products and debit cards.
  • Reliance Worldwide Corp. (RWC) +0.19% Enter into an agreement to acquire business assets of LCL for $37m. LCL’s primary production facility in Moorabbin is immediately adjacent to RWC’s brass forging operations. Completion is expected to occur by 31-Aug-21 and the final purchase price will be subject to working capital adjustments at completion. The acquisition will be funded through existing committed borrowing facilities.
  • JB Hi-Fi (JBH) 3.73% Preliminary full-year profit of $506.1m vs consensus $452.8m. Preliminary sales $8.92bn vs consensus $8.79bn, preliminary EBIT $743.2m vs consensus $687.4m. Management comments: “In July, the Group is expecting some disruption and variability to sales as a result of the various state-based COVID restrictions, particularly following the recent store closures in Greater Sydney and Victoria.”
  • Senex Energy (SXY) -2.45% Q4 revenue $32.5m vs quarter-ago $33.2m. Q4 production (PJ) 4.7 vs quarter-ago 4.6. Q4 sales volumes (PJ) 4.7 vs quarter-ago 4.8. Average realized gas price ($/GJ) 6.9 vs quarter-ago 6.8. Roma North expansion to 9PJ/year expected online next quarter (Q1-FY22).
  • Ampol (ALD) -3.01% The Lytton Refinery is expected to return to a modest RCOP EBIT profit for Q2 2021 (ALD’s preferred profit measure), before the benefit of the government short-term support payment. Ampol now expects to receive a once-off grant from the Federal Government’s Temporary Refining Production Payment of ~$40m relating to production in H1 2021.
  • Lovisa Holdings (LOV) -1.29% Continues to experience disruptions to trading and temporary store closures as result of government COVID-19 measures.
  • HUB24 (HUB) -2.38% Q4 funds under administration $58.6bn quarter-ago $51.4bn. Q4 net inflows of $3.9bn, +258.9% on pcp. The separation of PARS from Ord Minnett systems to HUB24 is continuing and is on track for completion by the end of Q2-FY22.

ECONOMIC NEWS

RBA meeting minutes

The board as expected reaffirmed previous comments citing a commitment to supportive monetary conditions to help reach employment and inflation targets.

It will not increase the cash rate until actual inflation is sustainably within the 2-3% target range. The bank’s central scenario is that this condition will not be met before 2024. It will require the labour market to be tight enough to generate wages growth that is materially higher than it was at the time of the meeting.

The board decided upon the following policy settings:

  • Retain the April 2024 bond as the bond for the yield target and retain the target of 10 basis points.
  • Continue purchasing government bonds after the completion of the current bond purchase program in early September 2021 – these purchases will be at the rate of $4 billion per week until at least mid-November 2021.
  • Maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances of 0%.

Weekly ANZ Roy Morgan Consumer Confidence Index fell 5.2% to 104.3 points. Lockdowns weighing again on the measure.

  • Victoria lockdown extended for one week until July 27. Sydney construction to be open definitely July 31st.
  • New South Wales state recorded 78 new locally-transmitted coronavirus cases in the 24 hours through 8 p.m. Monday.
  • Apple delays return to office by at least a month.
  • Toyota is no longer advertising in Japan as part of its Olympic sponsorship.
  • Indonesia expected to extend emergency restrictions.
  • US has warned its citizens NOT to travel to the UK.
  • Virus hospitalizations in Texas topped 3,000 for the first time in more than three months.
  • Australian health minster hails lack of deaths from flu.

BOND MARKETS

ASIAN NEWS

  • Chinese cities are warning of power outages as the heat wave takes hold.

US AND EUROPEAN HEADLINES

  • European markets opening relatively unchanged.
  • Robinhood expected to be valued around US$35bn.
  • Jeff Bezos to be launched into space. New Shepard blasts off today. Good luck Wally Funk.
  • UBS results. US$600m buyback. Q2 Net profit US$2bn.

And finally…

An Irish painter by the name of Murphy, while not a brilliant scholar, was a gifted portrait artist. Over a short number of years, his fame grew, and soon people from all over Ireland were coming to Milltown in County Clare to get him to paint their likenesses.

One day, a beautiful young English woman arrived at his house in a stretch limo, and asked if he would paint her in the nude. This being the first time anyone had made such a request, he was a bit perturbed, particularly when the woman told him that money was no object; moreover, she was willing to pay up to 10,000 pounds.

Not wanting to get into any marital strife, he asked her to wait while he went into the house to confer with Mary, his wife. They talked much about the Rightness and Wrongness of it. It was hard to make the decision but finally his wife agreed, on one condition.

In a few minutes he returned. “The wife says it’s okay. T’would be me pleasure to paint yer portrait, missus,” he said. ” I’ll paint you in the nude alright, but I have to leave me socks on, so I have a place to wipe me brushes.”

“Welcome back to Plastic Surgery Anonymous. Nice to see so many new faces here today!”