ASX 200. Henry Jennings, Australian Market Wrap. Headlines, Stocks, Bonds, Economic & Asian Market News – END of DAY REPORT.

 

ASX 200 kicks 54.5 points to 6741 after RBA cuts rates 25bps as expected. US futures up . China struts its tanks and bombs. After a meandering day up until the RBA decision, the market took off led by a recovery in the banking sector. CBA up 0.6%, WBC up 0.2%. Bond yields fell and pushed proxies higher led by SYD up 2.7% and TCL up 2%.  Consumer stocks too in focus as lower rates and better consumer sentiment helped. House prices too bringing a warm and fuzzy feeling to consumers with WES up 1%, TWE up 1% and WOW up 0.8%. Even TLS rose 0.8% today and healthcare stocks continue to bubble away. In Corporate news, KMD is buying Rip Curl for $350m, MSB is raising $75m and OSH fell 1.8% after announcing Peter Botten’s successor. 10-year bond yields fell heavily to 0.93% after rate cut with some economists now suggesting a move to 0.25% by mid next year. In Asian markets, China flexed its military muscles with ist biggest Parade ever and Japan rose 0.66%.

Today’s Highlights

  • ASX 200 up 54.5 points to 6741
  • High 6741 Low 6688. Same range as yesterday. Coincidence. Think not.
  • RBA cuts by 25 bps as expected.
  • Consumer confidence and house prices rise. Market kicks.
  • Banks head higher after rate cut. Consumer stocks in focus.
  • Even materials work higher. Gold under pressure.
  • Bond proxies rise on rate cut.
  • AUD lower at 67.18c
  • 10-year yields 0.93%
  • Aussie gold lower at $2182
  • Bitcoin rallies hard to US$8441
  • US futures up 78.
  • China closed and Japan up 0.69%. Parade dominates as HK protests.

STOCKS

  • ISX +14.44% business update.
  • FMG -0.57% broker downgrade.
  • NUF +15.25% broker upgrades
  • OPT +6.87% tax refund.
  • JIN +6.24% Hits jackpot again.
  • PET +3.08% new China contract
  • FLC +11.70% gets a China contract too.
  • SPL +6.09% change in director’s interest.
  • WGX -7.20% gold loses lustre.
  • CVN -1.28% drilling update.
  • WEB -3.57% MS cuts price target.
  • OSH -1.78% Peter Botten to step down. Next year.
  • ALL +1.14% change in substantial holding.
  • WES +0.98% DRP allocation price.
  • BYE -9.72% MEL issues shares as bonus.
  • CBA -0.56% completion of Count Financial sale
  • OSX +9.90% kicks higher.
  • MSB – trading halt but looking to raise $75m in capital raising.
  • Speculative stock of the day: Actinogen Medical (ACW) +466.67% after a report that its Xanamem treatment for Alzheimers disease.
  • Biggest Risers: NUF, ISX, PGH, OPT, TNE, JIN and OML
  • Biggest Falls: WGX, HT1< MGX, HUB, WEB, IMD and VGI.

TODAY

  • Oil Search (OSH)1.78% Managing Director Peter Botten to retire, effective 25 August next year. Botten will be succeeded as Managing Director by Dr Keiran Wulff.
  • Westpac (WBC) +0.20% Ceases talks with American International Group over the sale of its life insurance business, following the departure of AIG’s global head of M&A.
  • Suncorp Group (SUN) +0.95% To sell its smash repair business, Capital S.M.A.R.T Group to AMA for $420m. Suncorp will also retain a 10% stake in Capital S.M.A.R.T and a subsidiary Board seat. The after-tax profit on sale is expected to be in the range of $275-$295m.
  • iSignthis (ISX) +14.44% Has seen a 360% lift in actual transactions processed on its Paydentity service. GPTV (gross processed turnover volume) exceeded $1.9B to 30 Sep 19.
  • Kathmandu (KMD) – To buy surf brand Rip Curl for $350m. KMD will raise NZ$145M via an entitlement offer & use debt facilities to fund the acquisition.
  • Phoslock Environmental Technologies (PET) +3.08% Has signed a contract to commence work applying its water treatment product, to the East Lake in Wuhan City, central China.
  • GUD Holdings (GUD) +2.78% Outlook update at investor presentation; FY20 is expected to focus on medium-term value rather than short term EBIT growth. Modest EBIT growth is expected in FY20. Cash conversion still expected to remain near 80%. Regarding the automotive outlook, challenging trading conditions are expected to persist in the near term, although planned mitigation actions are in progress.
  • Downer EDI Limited (DOW) +0.38% Has won a $200m, 2-year contract to provide mining and related services at the Goonyella Riverside coal mine, in central Queensland. The contract has provisions for a further three-year extension.

ECONOMIC NEWS

  • RBA has cut the cash rate by 25bps to 0.75% as expected. The decision marks the third cut in 2019. The Aussie dollar initially jumped on the news but has since moved lower, currently sitting around US67.35c.

From the statement: The board revealed,

Reasonable to expect extended period of low rates.

The outlook for global economy reasonable, risks tilted to downside.

  • Will ease further if needed to support growth and meet inflation target.
  • Gentle turning point for the economy appears to have been reached.
  • Outlook supported by low interest rates, recent tax cuts, infra spending, signs of stabilisation in housing.
  • Outlook for consumption remains main domestic uncertainty.
  • The board took the decision to lower interest rates further today to support employment and income growth.
  • Forward-looking indicators of labour demand indicate that employment growth is likely to slow from its recent fast rate.
  • Economy still has spare capacity and lower interest rates will help make inroads into that.
  • Recent outcomes suggest Australian economy can sustain lower rates of unemployment and underemployment.
  • Board also took account of the forces leading to the trend to lower interest rates globally.
  • A$ at its lowest levels of recent times.
  • In both headline and underlying terms, inflation is expected to be a little under 2 percent over 2020 and a little above 2 percent over 2021.
  • Signs of turnaround in established housing markets, but new dwelling activity has weakened.
  • Credit conditions, especially for small and medium-sized businesses, remain tight.

AMP Capital’s Shane Oliver predicts RBA will cut to 0.25% headline rate by March next year. Now that is scary.


  • CoreLogic Home Value Index for September; National prices +0.9% (biggest rise since March 2017) Capital city prices +1.1%.

ANZ – Roy Morgan Consumer Sentiment looking positive.

  • Confidence jumped by a solid 4.2% last week, closing above its long term average. The gain was broad-based with all the subindices rising.

BOND MARKET

  • 2 – year bond yields tumble 9bps to 0.67%
  • 3 – year bond yields fall 7 bps to 0.67%
  • 10 – year bond yields down 5 bps to 0.96%

ASIAN NEWS

  • China celebrates 70 years since it became the PRC. More a military warning though than a celebration. Very impressive. Markets now closed for a week.
  • President Xi says the rise of China is unstoppable. Talks of a united China. Means Taiwan and HK watch out.
  • Japan’s Government Pension Investment Fund, which manages nearly US$1.5tn in assets has re-appointed Hiromichi Mizuno as its chief investment officer.
  • Exports from South Korea slumped for the tenth month in a row. Sentiment among Japan’s large manufacturers fell to its lowest level in more than six years.

EUROPEAN AND US NEWS

  • Futures indicate a positive opening for Euro markets despite WTO tariff ruling to come.
  • Credit Suisse scandal continues as COO resigns on corporate espionage scandal continues.

Here is September:

Investors around the world are obsessed with yield. In September companies issued US$434bn of new debt. A new record.

More Brexit discussions at Tory Conference in Manchester.

And finally….

I asked my wife“ , what would you do if I won lotto?”

She said“ I’d take my half and then leave you!”

Ouch!

I told her “ Actually I won $12 today..

….so here’s $6, ..and I hope we can keep in touch….”

This was after this dinner part exchange….

Woman at cocktail party says to a man, who has annoyed her,

“ If you were my husband I’d poison your coffee!!”

He replies, “Ma’am, if you were my wife, I’d drink it!”

Clarence

XXX

mt_tryforfree
Financial Markets and Political Commentary
 

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About the author

Henry Jennings Contact: henryjennings@mac.com // @henryj007 Has been involved in Investment Banking and Stockbroking since the early 1980's. Stockbroker - Camerons Stockbroking Macquarie Bank - Equity Capital markets Macquarie Group - Divisional Director