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

 

ASX 200 falls 11 to 7114 as tech stocks fall. Dow futures down points. Results continue to tumble with BHP and Apple warning today of the effects of the Coronavirus to their global businesses. Banks were a firm market with CBA up 0.9% and WBC up 0.5% though BEN fell 5.6% after its right issue and dividend cut. Healthcare stocks were a little weaker after disappointing results from COH down 3.4% and CSL down 0.4%. Bond proxies fell too despite RBA minutes suggesting the RBA could cut if the virus had more effect on the local economy. TCL dropped 0.1% and SYD down 0.1% whilst REITs suffered as SCG dropped 1.59% after its results. In the tech sector ALU set the scene after underwhelming with its results and fell 7.9% dragging APX down 4.2% with it and PME down 4.4%% as the selling continues. Mining was a breath of sunshine as BHP rewarded shareholders with its biggest dividend ever although some were disappointed, the stock rose 0.8% and FMG up 1.3% on better iron ore pricing. Gold miners slipped slightly with NCM under pressure again down 1.4%. Consumer stocks also slipped with COL down 0.95%, WES down 0.4% but WOW rose 0.6%. The RBA minutes showed the central bank remains alert but not alarmed at the coronavirus threat but stands ready to cut if needed. Not that it would do much good instead just pushing up housing further. The AUD weakened to 66.90c on the minutes and the 10-year yield dropped to 1.03%. In Asia, markets drifted lower with Japan down 1.6% and China down 0.8%

  • ASX 200 falls 11 to 7114.
  • High 7121 Low 7097. Tight range low volume.
  • Banks and miners firm as tech falls.
  • Bond proxies under a little pressure.
  • REITs slip. Healthcare follows COH lower.
  • 10-year bond yields steady at 1.06%
  • AUD stable at 66.90c.
  • Dow futures down points
  • Aussie gold pops to $2371
  • Bitcoin drops to US$9739
  • Asian markets mixed as Japan drops 1.6% and China down 0.8%

STOCKS                                               

  • AMP +5.29% brokers warm.
  • FMG +1.28% iron ore cheers.
  • MAQ +6.07% terrible volume.
  • IEL +2.11% buyers return.
  • MNY +2.41% broker upgrades
  • ALU -7.91% disappointment.
  • BEN -5.58% rights issue takes it toll.
  • NEC -5.45% catches SWM disease.
  • PME -4.36% selling continues.
  • SWM -21.15% challenging times.
  • BXB -1.45% brokers downgrade.
  • IAG -1.77% continues to fall.
  • QBE +1.96% brokers upgrade.
  • BUB +13.57% doubles WOW exposure.
  • LVT -4.41% trading update for Wizdom.
  • ZNO -2.33% roller coaster ride. German tests could be an issue.
  • AEI +12.75% lists as effective against Coronavirus.
  • Speculative stock of the day: Hollista ColTech (HCT) +51.61% large volume. Another company exposed to coronavirus. Th recent announcement it will ship a further 90,000 NatShield sanitisers follows a sell-out of the initial 60,000 units.
  • Biggest Risers: IMD, EHL, MAQ, MND, AMP, NWH and PNI
  • Biggest Falls: ALU, SGF, LIC, AAC, OML, BEN and EQT

TODAY

  • ARB Corp. (ARB) -4.74% reports H1 NPAT $25.3m vs consensus $25.2m. Revenue $233.4m vs consensus $234.0m. Interim Dividend 18.5c, fully franked. Management comments, “economic and currency headwinds experienced by the company in H1 of the financial year have continued into H2…likely to result in full-year earnings being down by a similar amount to H1.”
  • BHP Billiton (BHP) +0.81% reports H1 Underlying EPS 103c vs expectations of 106c. H1 revenue from continued operations came in at $22.29bn, topping estimates of $22.27bn. Underlying EBITDA beat at $12.08bn vs consensus $12.07bn. Underlying attributable profit missed however, coming in at $5.19bn which was shy of the $5.28bn consensus. Interim dividend of 65cps declared – a record but short of the 71c analysts expected, which may see some share price weakness this morning. The petroleum division underperformed ($813m vs $860m consensus), whilst copper ($1.55bn vs $1.40bn) and iron ore ($6.34bn vs $6.24bn) outperformed. BHP’s outlook is OK; the company talks about short-term demand and policy uncertainties and a ‘cautious’ approach due to the coronavirus, but attractive medium-term fundamentals.
  • Altium (ALU) –7.91% reported after the bell yesterday. 1H NPAT $23.1m vs $27.3m expected. 1H revenue $92.8m vs $95.3m expected. Interim dividend of 20cps (unfranked); record 2-Mar; payable 25-Mar. Guidance was also weak; revenue $205-215M but likely to land at the lower end of guidance due to the coronavirus.
  • Sims (SGM) -1.65% reports H1 underlying loss of $34.7m vs $76.7m NPAT a year ago. Revenue came in at $2.71bn vs $2.77bn expected. Underlying EBIT ($23.2m) vs guidance of ($20-$50m). Interim dividend A$0.06/share, fully franked. The company reaffirmed guidance, saying 2H FY20 underlying EBIT is still expected to be within the previously guided range of $40-60m, although risks to that guidance include the impact of the coronavirus on both ferrous and non-ferrous demand and prices and continued aggressive competitor buy-side pricing (that has recently indicated some softening.
  • Rio Tinto (RIO) +0.48% has cut iron ore guidance after the latest cyclone is taking its toll on its infrastructure. RIO now expects to ship 324m-334m tonnes down from 330m-343m tonnes. The loss of 7.5m tonnes could cost RIO more than US$600m in lost earnings on top of the cost of repairs and the clean-up. RIO it seems was hit harder than the operations of FMG or BHP.
  • Ansell (ANN)-2.87% Some strong numbers from ANN with revenue, EBIT and EPS all ahead of estimates. Full-year guidance maintained, the impact from coronavirus anticipated to be minimal. Reports H1 profit attributable $65.8m vs consensus $63.3m. Revenue $753.3m vs consensus $677.1m. EBIT $91.8m vs consensus $88.5m. EPS 50c vs consensus 48c. Half-year dividend of 21.75c vs year-ago 20.75c. Maintains FY20 EPS guidance range 112c-122c.
  • Monadelphous Group (MND) –5.49% Revenue and EBITDA came in ahead of estimates, interim dividend cut from 25c to 22c. MND also pointed out that FY20 performance is dependent on the operational impact of coronavirus. Reports H1 NPAT $28.5m vs consensus $30.3m. Revenue $852.0m vs consensus $811.0m. EBITDA $59.1m vs consensus of $54.2m. Interim dividend of 22c, fully franked, down from 25c. Forecast of around 10% revenue growth for FY20. Construction activity levels on secured projects to ramp up in H2.
  • Cochlear (COH) –3.39% First half numbers appear soft so likely to see some more pressure on the share price following its 3.5% fall last week. Reports H1 underlying NPAT $132.7m vs consensus $143.2m. Revenue $777.6m vs consensus $781.0m. EBIT $183.7m vs consensus $194.7m. DPS 160c. Repeats underlying NPAT guidance $270-290m as per 11-Feb release.
  • Coles (COL) -0.95% First half sales revenue (excluding Fuel sales1 and Hotels) increased by 3.3% with growth in all segments. Earnings before interest and tax (EBIT) increased by 0.4%, Interim fully-franked dividend of 30c, in line with demerger guidance. EBIT by division: Supermarkets $789m vs year-ago $602m. Liquor $76m vs year-ago $74m. Express $28M vs year-ago $51m. Outlook, “in the early part of the third quarter, comparable Supermarkets sales have remained broadly consistent with the levels achieved in the second quarter.” “In Liquor, it is expected that earnings will remain under pressure in the second half as a result of the tailored range reviews and clearance activity which commenced in the first half.”
  • Citadel Group (CGL) – expects FY20 revenue to be in line with Company’s prior outlook statement. H1 FY20 dividend declared is 4.8c in line with HY19. Gross profits from software are expected to contribute in excess of 60% of Citadel’s total gross profit. Revenue $61.1m Gross margin of 41.2%. Acquisition of Wellbeing Software for $198m. An Underwritten two tranche placement of approximately 27.4m shares) to new and existing institutional investors to raise approximately A$127m. SPP at 465c with record date of 17th February.
  • Kogan (KGN) –3.49% Highest ever gross sales. Of $322.9m up 16.4%. Revenue of $219.5m down 5.3% on launch of Kogan Marketplace as fees only recognised. Gross profit up 10.6% to $49.9m. Dividend of 7.5c up 22.9%. No guidance as is policy and too early to tell if the coronavirus will have any impact.
  • Superloop (SLC) -11.76% H1 FY20 EBITDA of $4.1m in line with expectations on $51.3m of total group revenues. The board has deemed it prudent to revise its guidance to $12m – $15m due to travel restrictions and the impact from coronavirus given SLCs exposure to the student markets in HK and Singapore. Another one in the coronavirus club.

ECONOMIC NEWS

Consumer confidence gained 1.2% last week to 109.1 points, more than reversing last week’s loss and marking the highest level for 2020. Sentiment possibly buoyed by the continued gains in asset prices,” ANZ Head of Australian Economics David Plank said.

RBA MINUTES – Looks like RBA is ready to cut if the Coronavirus effects worsen.

Coronavirus does represent a material risk to the economy. AUD dropping below 67c. Click here for the full statement.

  • The outlook for the Australian economy was for growth to improve, supported by a turnaround in mining investment and, further out, dwelling investment and consumption. In the short term, the effects of the bushfires were temporarily weighing on domestic growth, but the recovery was likely to reverse the negative effects on GDP by the end of the year.
  • Members agreed that it was reasonable to expect that an extended period of low interest rates would be required in Australia to reach full employment and achieve the inflation target. The Board would continue to monitor developments carefully, including in the labour market, and remained prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.

BOND MARKETS

ASIAN NEWS

  • Apple supplier shares hit in Asia on warning on virus impacts.
  • China’s aviation market is now smaller than Portugal’s having fallen from 3rd to 25Th due to the Coronavirus. Many airlines have suspended flights to China in an effort to contain the outbreak.

  • China Southern now operate only 800 more seats than Air Astana of Kazakhstan.

EUROPEAN AND US NEWS

  • Apple warned iPhone supply will be hurt on the coronavirus outbreak. Production is ramping up more slowly as factories in China only come back online slowly. Apple also said demand for its devices in China had been hurt by the outbreak; it closed all 42 of its stores in the country last month and most have yet to reopen.
  • The Trump administration is considering new restrictions on exports of cutting-edge technology to China in a push aimed at limiting Chinese progress in developing its own passenger jets and hitting Huawei again. The discussions over banning the sale of the GE/Safran Leap 1C engine for instance, to China is based on fears that it could help Chinese companies reverse engineer the technology used and speed up the development of their own jet engine programs. The engine has been available in China though since 2014.
  • One of Boris Johnson’s controversial advisers has quit after just a few days in the job after some extraordinary claims. Andrew Sabisky claimed he was the subject of a ‘giant character assassination’.
  • Bill Gates have bought a Porsche Taycan instead of a Tesla. Gates has been praising the car industry and Elon Musk, in particular for the car industry heading towards an electric vehicle world. Elon had this to say about the Microsoft founder, “my conversations with Gates have been underwhelming tbh.”
  • Intesa Sanpaolo, Italy’s biggest domestic lender, has launched a EUR4.86bn takeover bid for its rival UBI Banca. It is a bold move to consolidate the troubled Italian banking sector.
  • French high-speed rail maker Alstom has agreed to buy Canadian Bombardier’s train unit in a deal worth close to EUR7.5bn.
  • Bezos pledges US$10bn to fight climate crisis.

And finally a great car ad…

subaru

Does driving at the speed limit scare you? This may well be the car for you!

Subaru Impreza SPORT NON TURBO manual!

Imagine all the excitement, joy, cool noises and sheer brutal acceleration the 2.0 turbo impreza brings you… well this has none of that

Fortunately Subaru spent millions of pounds designing the impreza and it’s rally winning suspension design only for someone to ruin it and fit coilovers that Zheng sells on eBay

Different colour panels obviously add to the speed and the turbo scoop to fool people into thinking you’re wasting lots of money to make all that noise when really this car has never came on boost in its life!

The rear parcel shelf must have been made out of lead as it’s been thrown away as with the radio as why would you not want to listen to the deafening sound of disappointment out of the exhaust?

Fortunately the exhaust is big enough to get my size 11 timberlands in so it’ll warm most shoes.

Now if you want to entice 16-year olds into your car at McDonald’s this is the prime vehicle. And even has back doors for more girls.

This being the sport model I’d hate to think how slow the non sport model was.

It’s got extra reflectors on the back as the dodgy looking rear lights obviously don’t conform to CE regulations

It’s in no way sporty

It won’t do skids

It’s not fast at all

It’s embarrassingly loud

It’s about as comfortable to drive as throwing yourself face first down a flight of stairs

Now for the bad bits….

It runs and drives
It’s mot’d till 27th March 2020
The wheels and tyres are fairly “alright”

It’s £400

The lowest I would go is probably sleeping with my wife’s granny.

May part x something funny

YOU HAVE TO COLLECT IT FROM BRIDPORT DORSET.
I can deliver.

I don’t know anything else about it so please don’t ask me questions or I’ll just make up the answers

Clarence

XXXX

mt_tryforfree

Financial Markets and Political Commentary