The ASX 200 rallied up 34 points to 7006 (+0.5%) post RBA announcement as it seems the central bank is in no hurry to raise rates. QE is dead. The meeting saw inflation revised higher but still too early to conclude whether it is nothing more than short term supply chain issues. The board is prepared to be patient. Enough to bring the buyers back. Although enthusiasm faded at close. Banks found support with the Big Bank Basket rising to $168.50 (0.47%). MQG also doing well and insurers enjoying a good day out at the beach. QBE up 2.3% and SUN up 1.6%. Money managers were also in demand, GQG rose 4.4% and MFG up 4.6%. Industrials firm but unspectacular, CSL up 0.5% RMD rising 2.3% and ALL up 1.4%. Consumer stocks were modestly higher with tech the standout as SQ2 went hard up 6.1 as Block rallied in the US. Z1P tried hard to hold double-digit gains but succumbed eventually rising %. XRO up % and the All–Tech Index up 2.2%. Miners were in the doldrums as index rebalancing continued and BHP sagged 3.1% after holding up so well in the rout, money is now moving out of havens into growth tech. RIO down 2.4% and FMG off 0.7%. Lithium stocks stirring but need a push, PLS up 1.9% and MIN up 3.6%. Energy stocks were better but still a little unloved all things considered. Gold miners mixed. In corporate news, Kerry Stokes will be happy at BLD will be paying a large $3bn distribution from its ill-fated US adventure. The market seems happy with its failure and sale of assets. ABB warned on rising costs but appears to have convinced the market that all is still well only off 1.4%. Plenty happening on the economic front. RBA is playing a long game and doesn’t want to spook the horses, PM is talking LNP achievements in a short speech and house prices continue to rise but peak looks in for the moment. 10-year yields steady at 1.89%
- Winners: 88E, BRN, NMT, DUB, SYA, APX, PDL, JDO, REG
- Losers: 29M, TUA, ABR, BHP, OMH, PSI, BXB
- Positive sectors: Banks. Tech. Industrials. Health. REITS
- Negative sectors: Iron ore miners
- High 7044 Low 6946
- RBA leaves rates unchanged. QE to end Feb 10th
- Big Bank Basket: Rallies to $168.50 (+0.47%)
- All-Tech index: Up 2.2%
- Gold: Eases to $2547
- Bitcoin: Rises to US$38580
- Aussie Dollar: Better around 70.61c
- 10-Year Yield: Eases back to 1.89%
- Asian markets closed for holidays
- US Futures: Dow down 67 points Nasdaq down 37
Stocks on the Move
- SQ2 +6.07% Blocks move in the US.
- BRN +16.14% AI stocks on a run.
- NMT +10.65% bargain hunters.
- DUB +8.76% broker research piece.
- AXE +12.04% positive announcement on Quantum chips.
- VR1 +13.04% investor presentation.
- GQG +4.44% shorts covering.
- PDL +7.28% fund managers find buyers.
- ADO +15.38% quarterly update.
- PLY +11.27% US game shop buyers.
- NEU +14.53% new VP.
- RHC +2.47% completion of Elysium acquisition.
- BHP -3.06% index reweighting.
- TUA -4.18% block trade looms for TPG stake.
- MYR -1.14% Solly ups stake to 19.9%
- LYC -0.45% ministerial approval for Kalgoorlie.
- Speculative stock of the Day: Nothing on volume or announcements.
In the News
- Credit Corp. Group (CCP) – first-half profit $45.7m vs year-ago $42.3m.Revenue $203.9m vs year-ago $188m. Purchased debt ledger (PDL) investment $147.2m vs year-ago $135.5m. Interim dividend 38c, fully franked. Upgrades FY22 PDL acquisitions guidance to $300-320m vs prior guidance $280-300m.
- Bendigo & Adelaide Bank (BEN) appoints Bruce Speirs as COO. He is expected to focus on reducing complexity and improving productivity. The bank is combining its rural and business banking divisions.
- Boral (BLD) announces $3bn return of surplus capital. The cash distribution of 272c will be made up of a 265c equal capital reduction, totalling $2.923bn and an unfranked dividend of 7cps, totalling $77m. No shares will be cancelled in connection with the return of capital. The capital return of 265c effectively reduces your cost base by that amount in a tax-efficient way. An immediate capital gain would arise for shareholders with a cost base is less than 265c.
- Nufarm (NUF) – 10-year sales contract with BP for a sustainable bio-fuels ingredient. The deal with Nuseed will see BP buy its Carinta oil to process.
- GPT Group – has completed the $397m sale of its Casuarina Square shopping centre property in Darwin.
- Aussie Broadband (ABB) – warned that rising costs and lockdowns have hit EBITDA. total broadband connections increased 11%, with business broadband up 13% on the prior quarter. It now expects FY EBITDA to finish between $27m and $30m excluding the contribution from the recent Over the Wire acquisition.
- ELMO (ELO) – plenty of Mr Blue Sky here with ARR growing 28-35% to $107-113m.FY 2022 adjusted EBITDA between $1.5m and $6.5m on revenue between $91m and $96m.
Economic News/Bond Markets
RBA Statement– No rush is the upshot. It seems happy to wait until it sees more data.
- The Board decided to maintain the cash rate target at 10bps and the interest rate on Exchange Settlement balances at zero per cent. It also decided to cease further purchases under the bond purchase program, with the final purchases to take place on 10 February.
- The Omicron outbreak has affected the economy, but it has not derailed the economic recovery.
- Wages growth has picked up but, at the aggregate level, has only returned to the relatively low rates prevailing before the pandemic.
- Inflation has picked up more quickly than the RBA had expected but remains lower than in many other countries. The headline CPI inflation rate is 3.5% and is being affected by higher petrol prices, higher prices for newly constructed homes and disruptions to global supply chains. In underlying terms, inflation is 2.6%. The central forecast is for underlying inflation to increase further in coming quarters to around 3.25%, before declining to around 2.,75% over 2023 as the supply-side problems are resolved and consumption patterns normalise.
- As the Board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range. While inflation has picked up, it is too early to conclude that it is sustainably within the target band.
- The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.
Weekly consumer confidence rose 1.7% with the improvement attributed to falling Omicron cases. Weekly inflation expectations dropped 0.3% to 4.7%, its lowest since mid-December which interestingly coincided with the hotter than expected December quarter inflation report.
- Retail sales for December down 4.4% vs consensus -2%. Follows consecutive rises of 7.3% in November 2021 and 4.9% in October 2021. Retail sales still remain elevated compared to pre-pandemic levels, with December’s monthly turnover the second-highest level in the series following last month’s record according to the ABS.
- New loan commitments for housing rose 4.4% to a record high value of $32.8bn, well ahead of consensus of a 0.4% decline. December’s rise was driven by a 5.3% lift in the value of new owner-occupier loans. It marked the second consecutive monthly improvement in owner-occupier lending and follows the falls seen from June through to October according to the ABS.
- CoreLogic home values for January show momentum is still continuing. Prices in Sydney and Melbourne were up 0.6% and 0.2% respectively. Adelaide recorded the most improvement, up 2.2% in the month. National prices up 1.1% in January.
- IHS Markit Manufacturing Purchasing Managers’ Index (PMI) was down from 57.7 in December to 55.1 in January. A reading above 50 indicates expansion.
- Closed for Lunar New Year. Happy New Year.
US and European News
- ‘Partygate’ report handed down. Boris refuses to resign. He wasn’t to blame apparently. He was having Pizza in Woking. Maybe he thought he was working in Woking.
- NY Times buys Wordle.
- Podcaster Joe Rogan apologises.
- Russia has sent a letter back to the US in a written follow up. Back to old skool diplomacy, it seems. No more twitter tirades.
A young man went into confession crying, and told the priest:
“Forgive me father for I have sinned”.
“What have you done?” asked the priest.
“A few weeks ago I went to the library. I remained there until closing time and when I was about to go home, rain started pouring down. It was so intense I had to wait in the library.
I had waited for a while with the librarian, a young attractive single girl, then one thing led to another, and I ended up sleeping with her”. The man stopped talking but kept weeping.
“Well don’t cry, it’s a sin but it is not that bad. You should say 5 Hail Marys and it will be forgiven”. Said the priest.
“But it doesn’t end there” the man kept sobbing. “a few days later my elderly neighbour asked me to help her with her computer. Her husband was hospitalised and she couldn’t send an email to her son. I went there and fixed the problem, but when I was about to leave, rain started pouring down. It was really stormy and I had to wait. One thing led to another and I ended up sleeping with the old lady” the man cried.
“Oh dear well that makes it harder indeed, but still – you should say 15 Hail Marys and you will be forgiven” Said the priest.
“Oh I’m afraid the worst part is still ahead” cried the man. “Yesterday I went to the barber. I was his last client that day. As soon as he finished and was about to close the shop rain started pouring down so intensely, I had to wait with him. One thing led to another and I ended up sleeping with him as well” the man cried.
“Oh dear, it is indeed worse than I thought” said the priest.
“So what should I do father?” the man asked.
“Well” answered the priest,
“you should get the hell out of here before it starts raining!”