Tag Archives: Banks

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

-          The ASX200 made small gains up 6 points or 0.13% to 4557

-          The AUD drifted lower over day after climbing on Friday’s trade.. Currently reading 1.0475 vs the USD

-          Total volume for the day was light at $3.1B. This was well below the $4B+ we were seeing for most of last week though largely in-line for a Monday session.

Shares on the ASX took a slight pause to close marginally higher after strong gains on Friday thanks to offshore portfolio buying. The market hit a seven-week high intraday as positive US jobs data on Friday kept sentiment elevated. The XJO has risen 5.4% since mid-November but will run into stiff headwinds at the key 4550 resistance level.

The Monday Report detailed the US employment news on Friday night, which appeared to largely be priced into offshore markets in overnight trade. The biggest driver of stocks appears to be the strength in China following their mid-year slowdown which has helped spark rebounds in the big miners. Weekend data showed China’s industrial output rose 10.1% y/y in November, above October’s 9.6% rise and the strongest move since March. An anomaly in the positive Chinese data of late slowed our market intraday where Chinese exports only rose 2.9% vs expectation of a 9% rise.

RIO Tinto ((RIO)) is up 25% since it’s one year low in September. RIO had another strong day, closing up 1.9% to $61.30.

Positive data flowing from China has pushed Spot Iron Ore prices back through $120/t as optimism over demand grows. This comes as more good news for Fortescue Metals ((FMG)) who announced they will sell 25% of a joint venture back to BC Iron ((BCI)) for $190m. The transaction means BCI will increase its interest in the project from 50% to 75% and fund the deal using debt and existing cash. FMG closed up 6.8% to $4.05.

The high-yield plays also performed well, Westpac ((WBC)) and National Bank ((NAB)) the standout performers closing up 0.6% and 0.3% respectively.

Japan’s GDP growth figures showed the economy contracted 0.9% in the July-September quarter or 3.5% on an annualised basis. Not a good news piece for the start of the Japanese election week where opposition leader Shinzo Abe is widely expected to defeat current Prime Minister Yoshihiko Noda. This could prove to be the kickstart Japan desperately needs as Abe has vowed to ramp up public expenditure and pressure the BoJ into aggressive monetary policy easing measures.

DOW futures are pointing to a flat opening, currently up 2 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)
 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

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article 3 months old

Weekly Broker Wrap: RBA Cuts Cash Rate And Banks Respond

-Banks respond to RBA's cash rate cut
-Credit demand weak
-Bank margins compress
-More official rate cuts possible
-Australian dollar takes it in its stride


By Eva Brocklehurst

In the wake of the latest cut to official interest rates Australian banks are under scrutiny again. Not only are they copping compression in margins they are also being punished by weak credit demand, which seems impervious to the easier policy that has abounded this year. The Australian dollar also seems impervious to the lower cash rate.

Moreover, while the banks were working on responses to the RBA's cash rate decision, which delivered a 25 basis point reduction to 3%, some economic data descended and it didn't provide for any euphoria. Macquarie noted the latest capital expenditure figures from the Australian Bureau of Statistics show that non-mining investment intentions are not stepping up to meet sagging mining capex. Macquarie is concerned with the impact that reduced capital expenditure will have on bank exposure to small-medium enterprises. The broker has identified a strong positive correlation between business credit growth and capex, ex-mining, growth. It all looks pretty soft. Also, from the RBA's November data, month-on-month credit growth deteriorated across the board, with housing, business and personal lending losing momentum. Macquarie noted deposit growth declined on an RBA and APRA basis, with the decline in business deposit balances the main driver.

How did that translate to the banks? It appeared to Macquarie that Westpac ((WBC)) and ANZ Bank ((ANZ)) had a better month, outperforming the other majors in business credit and housing credit. National Australia ((NAB)) and WBC were strongest in deposit growth. While the major banks outperformed the market over the week, as interest rates came down, for the month-ending 30 November 2012 the majors have underperformed the S&P ASX200. Nevertheless, for the year to November, the major Australian banks still outperformed the S&P ASX 200, by 10.9%.

Credit Suisse has observed that housing lending growth in October was marginally lower than its most recent peak of 3.0% in June 2012, and the fourth consecutive month of deceleration. Growth was also significantly lower than the series peak of 5.4% in September 2010 and series average of 3.4%. The broker also notes credit card lending declined in October, after recently turning negative in the six months to September 2012. Wait, there's more. Corporate lending sustained a rapid deceleration in growth from November 2011 to May 2012, the broker maintains. The deceleration may have eased up recently but, with only 2.7% growth in the six months to October 2012, it's well off the series peak of 6.0% growth in the six months to November 2011.

Citi  notes the impact of flat credit and soft deposit growth in October has translated to ANZ being  up 0.5% in mortgages and broadly consistent with its performance over the past 12 months. Its household deposits were up 0.8%. Commonwealth Bank ((CBA)) continues to cede a share in mortgages, adding just 0.2% in October while growth was 1.1% in household deposits. NAB is holding its own with 0.6% and 0.7% growth respectively. However, Westpac is losing mortgage share, adding 0.3% while continuing to grow strongly in household deposits, adding 1.6%. For the regionals Bendigo and Adelaide Bank ((BEN)) grew 0.2% in mortgages, having slowed in recent months, while adding 1.1% in household deposits. Bank of Queensland ((BOQ)) saw 0.2% growth in mortgages and a drop of 0.6% in deposits, the former stable and the latter continuing the trend of rapidly slowing growth evident over 2012.

As the major banks respond to the 25bps reduction in the cash rate with their rate cuts of 20bps,  JP Morgan observes that the proportion of bank funding of interest earning assets unable to be re-priced is in the order of 10%. In order for banks to recoup the deposit compression, re-pricing of around 4bps is required for every 25bps of rate reductions. The banks have the option of not passing the rate cut on in full or delaying implementing rate cuts. They've opted to do both. JP Morgan estimates that each day the major banks delay passing on a rate cut they make around $2m. The broker makes the calculation thus: the time between the rate cut and the effective date for lower standard variable mortgage rates and associated first half revenue benefit is 17 days for ANZ and $25m, six days for CBA and $14m, six days for NAB and $11m and 13 days for Westpac and $28m.

In view of the latest easing,  JP Morgan has noted NAB has retained its position offering the lowest standard variable home loan rate of the major banks in 2012 (6.38%) with CBA at 6.40% and WBC at 6.51%. ANZ has stated it will announce its rates on December 14. It is expected to follow the others and cut by 20bps which will give 6.4%. ANZ would need to cut its rate by 22bps to match NAB's new rate. For the second tier banks, BEN cut by 20bps as did BOQ. For BOQ, with 73% of its loan book in housing and a lower relative proportion of deposit funding, a 5bps re-pricing will deliver a slightly more positive balance sheet benefit relative to its peers. JP Morgan forecasts a broadly flat margin outcome in FY13E of 1.63%, in line with published management targets.

CIMB said, if the market was looking for a clearer picture from the RBA on the trajectory for the cash rate in the new year it wasn't forthcoming. In fact, the broker suggests the lack of forward-looking commentary from each RBA meeting in this easing cycle is probably a reason why the economy hasn't responded to the changes made to settings so far. CIMB believes this means policy is eased more than would otherwise be necessary. The broker continues to expect the bank to ease policy by 25bps in both the March and the June quarters next year, taking the cash rate to 2.5%. The crux of the matter, in the broker's view, is the response of households and businesses to the policy easing has been relatively subdued but uncertainty surrounding how quickly mining investment will decline appears to be holding back the bank from more aggressive easing. All we are left with is the fact the non-mining investment parts of the economy are still weak and the Australian dollar remains high.

The stubbornness of the Australian dollar in the wake of cash rate reductions has puzzled many. CIMB noted the correlation of the Australian equity market with the USD/AUD exchange rate has been somewhat lower over the past year (48%) as compared with its peak two years ago at 81%. However, it remains significant. Reasons given for this risk reduction include the notion that the Australian dollar is being seen as a temporary safe haven currency. Despite the overall easing of currency risk to equities, CIMB still sees significant currency correlations in individual stocks and sectors. In analysing the short-term and long-term correlations between the USD/AUD rate, equity sectors and stocks, CIMB has flagged a positive currency view - the Australian dollar strengthening - would mean buying the materials sector and selling healthcare. Alternatively, portfolio risk, in the event of currency volatility, may be mitigated by reducing weighting in these sectors.
 

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article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

 

The scoreboard:

-          The ASX200 closed up 42 points or nearly 1% to 4552

-          The AUD is lingering around the $1.048 level and looking toppy as it struggles to push through $1.05

-          Total volume for the day was just $3.5B below the current short term average and helped explain today’s unusual rise.

Shares on the ASX traded with surprising strength thanks to several large offshore buy orders with solid gains seen across all sectors after a neutral night offshore. Poor domestic economic data did little to slow the run higher with the market hitting a six-week high to climb over 1% intraday. Another raft of woeful growth forecasts for the broader Eurozone failed to push European markets lower overnight and kept the US market moving sideways. The poor growth outlook dragged oil prices lower by over 1%.

Several large offshore portfolio buy orders led the market higher as well as expectations of strong employment data for the month of November from the US due out tonight. Traders seemed convinced that this was a certainty and didn’t want to miss out on any rally that may develop tonight.  Continued strength from the Shanghai index also appeared to inject life into Asian indexes.

On the domestic data front, Australia’s trade deficit widened by over $0.66B to $2.1 billion in October. The deficit was the biggest since 2008 and wider than analyst expectations of $2B. The cumulative trade deficit over the calendar year to October was $11.9B. The deficit underscores our dependence on raw materials exports, the prices of which have declined markedly since the start of the year only increasing the deficit gap.

The strength of the banks was reportedly the result of overseas fund purchases. Commonwealth ((CBA)), ANZ ((ANZ)), National  Bank ((NAB)) and Westpac ((WBC)) were all up around 1%.

CSL ((CSL)) rallied strongly all day following an upgrade from Credit Suisse to outperform from Neutral and increasing the price target by 12%. CSL closed the day up 2.5% to close at $54.77

Other standout movers for the day included Westfield ((WDC)), Goodman Group ((GMG)) which jumped between 1.5-3%                                                                                                                                            

DOW futures are are flat at present, currently up 5 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

 

The scoreboard:

-          The ASX200 closed down 11 points or 0.25% to 4509

-          The AUD drifted lower during the afternoon session after jumping on the employment data.. Currently reading 1.0462 vs the USD

-          Total volume for the day was $4B. This is slightly below the average at the same time last year and well above November’s average.

The Aussie share market was pushed lower by gentle profit taking over the day as investors were happy to watch progress surrounding the unfolding China story and Fiscal cliff from the sidelines. Gains in our market centred around the big miners follow strong gains on the ADRs thanks to encouraging comments from the new Chinese politburo. The defensives and high-yielders led declines after steering our market the past fortnight. A surprise fall in the jobless rate did little to the change Mr Market’s mind and investors were happy lock in profits and await developments overnight.

All eyes were on China overnight after incredibly bullish comments late yesterday from China’s new leadership pledged to promote domestic demand and urbanisation with greater policy support for the economic recovery. US coal heavyweights went ballistic on the news. Alpha Natural Resources jumped 10% on the news and other coal miners moved between 3-7%.

This comes as rumours swirl around the market that BHP Billiton ((BHP)) may be gearing  up for a takeover of another US coking coal goliath, Walter Energy at $55. Walter closed up 6.5% to $31.66 on the news. The US coal market had been in the doldrums for the past 12 months facing increasing pressure from Democrat led environmentalists and competition from falling domestic gas prices. This has seen the likes of coal miners like ANR falling from highs of around $60 2 years ago and $25 just 1 year ago to trade at current levels of $7.35 as of yesterday’s close. The industry is desperate and miners have resorted to scaling back production in order to avoid growing inventories as exports to Europe and Asia rapidly slowed in such a short period of time. The Chinese rhetoric that they will continue to support growth as well as whispers that BHP is interested in metallurgical coal (coking coal as we call it in Australia) is BIG news for cyclicals and the global growth story.

A shock fall in the unemployment rate to 5.2% against expectations that the rate would hold steady at 5.5%. Not that the market was paying attention as it barely awoke on the news. The dollar jumped from US$1.0445 to US$1.048 on the news as traders anticipated a slowdown in monetary policy intervention. The rise in employment numbers was mostly in the part time sector so likely to be seasonal and largely unimportant to the real economic picture.

Ten Network ((TEN)) confirmed a $230m capital raising at a massive discount to market as they try to pay down debt and battle declining ratings. The raising at 20c represents a 60% discount to their last traded price at 32c.

QBE ((QBE)) regained some ground today after being demolished in yesterday’s trade to finish up 1.8% to $10.

RIO Tinto ((RIO)) climbed through $60 intraday for the first time in 7 months to close the day up 0.96% to $59.92

The Shanghai Composite is off around 0.4% currently after gaining over 3% yesterday.

DOW futures are pointing to a weaker opening, currently down 20 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

-          The ASX200 closed up 17 points or 0.37% to 4520

-          The AUD was flat during the session after gaining 0.5% overnight. Currently reading 1.0478 vs the USD

-          Total volume for the day was $3.5B

Shares on the ASX were mostly higher after a quiet night offshore. Widespread gains on Asian markets during the session helped move our market higher after weak domestic data failed to lead stocks.

Australia’s Q3 GDP growth figure released early in the session was the main data point for the day. Australia’s economy grew at just 0.5% for the quarter, well below the consensus of forecast for an increase of 0.7% and the slowest rate since the QLD floods, and outside of that, since the GFC. The softer figure can be mostly attributed to lower household consumption which increased just 0.3% q/q which suggests consumers remain cautious and are not responding to the lower rate environment.

The market took badly to the news, trading lower by 10 points before finding support on the back of strength of other Asian indexes.

We are struggling to work out why, but the Shanghai index surged more than 3% intraday. The Chinese index had been seriously underperforming the rest of the globe but the move today injected a lot of confidence into other Asian indexes. Hong Kong’s Hang Seng was up a solid 1.3%.

The yield plays continued to march higher following yesterday’s interest rate cut as investors try to look for some return on their money. The big 4 banks all looked better with Commonwealth ((CBA)) and ANZ Bank ((ANZ)) the standouts, up 0.96% and 0.73% respectively. Another cause for strength in the banking sector may be a quarterly report by the FDIC (Federal Deposit Insurance Corporation – a US government agency monitoring the financial sector) out last night which showed the US banking industry’s third-quarter earnings were the highest for any quarter since 2006, up 6.6% y/y. Banks in the US are in a stronger position thanks to a recovering housing sector and as regular readers will know, I believe a recovery in housing always leads a broader economic recovery.

QBE ((QBE)) took a pounding today following market speculation that a capital raising may be in the wings. QBE’s gearing is well above their average and lower interest rates domestically will likely mean less return on their ‘float’ (large swag of funds held (premiums) to payout claims as necessary). QBE closed the day down a shocking 4.72% or 50 cents to $10.10

A large ‘crossing’ (change in beneficial owner) of stock in Seven West Media ((SWM)) changed hands today worth approximately $20m. This line of stock represents around 1.2% of the issued capital in SWM and changed hands at $1.66, 4.5c above yesterday’s closing price of $1.61. SWM closed up 1 cent to $162.5

It is worth noting how much of the 25 point cut the banks have passed down to customers:

ING – 25 points

BOQ – 20 points

NAB – 20 points

CBA – 20 points

DOW futures are pointing to a strong opening, currently up 40 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

CBA Will Set New All-Time High

The TechWizard's confidence has increased that CommBank ((CBA)) shares are on their way to set a new all-time high.

Solid dividend yielding stocks are expensively priced, he notes, but from a technical point of view, CBA shares still have the wind blowing strongly in the back.

The shares have now broken through $60 and the Wizard says a run to the all time high of $62.16 from November 2007 seems all but a done deal.

Most stockbrokers have price targets well below the current share price, he observes. As far as the Wizard is concerned, they are being proven too conservative by investors' appetite for yield.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The XJO closed down 28 points or 0.62% to 4503.

The RBA cut the cash rate 25 basis points to 3% from 3.25%.

Australian stocks pushed lower today following negative leads from offshore and a raft of negative domestic data. Overnight data from the US showed the Institute of Supply Management’s (ISM) PMI index fell below 50 in November to 49.5 from October’s reading of 51.7, indicating a contraction in manufacturing activity. Analysts had been expecting a reading of 51.4 and the market was unappreciative of the news. Perhaps most importantly, the tit-for-tat negotiations between Democrats and Republicans began as make headway in resolving the well-known fiscal cliff issues.

The big news of the day was the RBA’s rate cut decision at 2:30pm pulling the cash rate to its GFC low. Whilst this was largely priced into the market given 80% of economists had anticipated a 25 basis point cut, the market drifted lower on the news. A classic case of “sell the fact” as traders locked in profits given the market’s strength from the prior fortnight. The RBA cited: a softening labour market, the persistently high AUD and non-mining investment remaining subdued as reasons for the cut but noted the inflation outlook was consistent with the target. Strangely, the AUD jumped on the announcement, perhaps as the RBA’s attaching explanatory statement had a more neutral tone than was expected and gave no indication that more cuts were likely.

We have seen seriously deteriorating domestic economic data recently with retail sales, nominal wage growth, building approvals and job ads all showing signs of a rapid deceleration in Australia’s growth and enforce the RBA’s decision to cut rates today. Basically, our economy is stagnating faster than anyone had anticipated even 6 months ago.

Contrary to America’s strengthening housing data, building approvals in Australia fell 7.6% in the month of October based on data released today.

Other data showed the current account deficit widened to 4% of GDP in Q3, driven predominantly by a fall in the terms of trade. A fall in export prices by 5.9% q/q outpaced a 2.0% q/q fall in import price dragging the terms of trade lower. Australia’s Q3 GDP will be announced tomorrow with most analysts expecting GDP growth to be +0.8% q/q.

The market’s reaction was more like interest rates had gone up with high yielders and retailers selling off on the news. Whilst the falls were somewhat muted, they were fairly widespread.

DOW futures are down 33 points.
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The Aussie market maintained strength today following on from gains last week and a jump in commodities prices on Friday night. Weaker Australian manufacturing and retail sales data failed to slow the uptrend which saw the market close up 25 points or 0.6% to 4531. Continuing chatter amongst US politicians had the US market wavering between gains and losses throughout the Friday overnight session ending in a small gain as expectations continued to grow that lawmakers would at least find a partial resolution to the cliff issue.

On the domestic data front. The Australian Industry Group’s PMI index fell 1.6 points in November to 43.6, showing another contraction in Manufacturing activity (See the comments on Rosella below). October retail sales showed a flat reading vs a consensus expectation of a rise of 0.4%. David Jones ((DJS)) and Myer ((MYR)) were both weaker on the data, down 2% and 1.8% respectively.

The ANZ job ads index showed job advertisements were down 2.9% in November and was the eighth straight negative reading. This is a reliable ‘at the coal face’ indicator of the demand for new employees by firms and will almost certainly be a gauge the RBA will use to determine whether to cut or hold rates tomorrow.

Focus appears to now be shifting to China where continuing signs of stabilisation and strength are injecting confidence into the Asian region. Economic data out today showed the HSBC China Manufacturing PMI hit a 13 month high of 50.5 in November, up from 49.5 in October and the strongest result in seven months. Remember, a reading above 50 shows expansion and a reading below 50 shows contraction. The result was in-line with the Chinese Government’s official reading released on Saturday,  which showed the index at 50.6. Market enthusiasm on the back of these numbers helped it shrug off the weaker domestic numbers.

Woodside Petroleum ((WPL)) announced its discovery of one of the biggest gas discoveries in modern times. WPL has a 30% equity stake in the 17 Tcf (Trillion cubic feet) Leviathan gas project in Israel. WPL must contribute approximately US$700 upfront to maintain its interest. WPL closed up 0.9% to $34.11.

All eyes are on the RBA board who meet tomorrow which is expected to cut the cash rate from 3.25%.

Defensives and Financial led the market today with CSL Limited ((CSL)) continuing it’s run closing up 2.4%, ANZ Bank ((ANZ)) up 1.35% and the Commonwealth bank ((CBA)) up 1.88%.Fund manager Perpetual ((PPT)) has continued is strong run of late, closing up another 1.73% to $31.77.

On another note, the Australian icon founded in 1895, Rosella, made famous for its Tomato sauce, today went into receivership. Rosella has joined the likes of Darrell Lea, who in July this year also went into administration as Australian manufacturers struggle with higher costs and overseas competition.

DOW futures, despite being strong all day have weakened in the last hour and point to a stronger start up 25 point.
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The market punched through the key psychological 4500 level in a strong day across the board. Volumes were solid, particularly for a Friday with over $7B being traded, though a chunk of this will be due to yesterday’s equity options expiry.

Despite a large sell dumped into the market in the match pushing the market down 5 points and an additional $1B of stock going through in the closing period, the market held good gains closing up 28 points or 0.6% to 4506 and added to gains from last week. The Australian market has risen 4% in the last two weeks despite the volatility and inconsistent volume.  

There is a lot resistance at the 4500 level and this may prove a hurdle we can’t mount if developments surrounding Cliff negotiations do not improve. Most market observers are now of the view that Boehner and Obama will conceptually agree on what form the budgetary changes will take before Christmas and finalise the details in the new year.

Even news of a handshake agreement will be enough to put the issue behind us so we can focus on the strengthening economic data in the US. This is the real news and investors will get a big wakeup call when the nail biting over the cliff saga is behind us. Past experience tells us, markets tend to overreact to the resolution of such drawn out issues. A big Christmas rally is therefore not implausible and investors should consider appropriately exposing themselves to the cyclicals which will be the biggest beneficiary of a relief rally. The US market is looking a little toppy here in the short term though so we may see one more sell off before traders will be happy to move the market higher.

Rio Tinto ((RIO)) closed up 2.75% as the company announced a number capital expenditure cuts.

Metcash ((MTS)) fell 2.3% after reporting a 13% fall in FH profit as a result of heavy discounting of food and groceries.

The banks put in a particularly solid performance with the ANZ Bank ((ANZ)) closing up 1.1%, National Bank ((NAB)) up 1.46%, and Westpac ((WBC)) up 1.1% being the star performers.

Macquarie Bank ((MQG)) jumped 2.7% to an 18 month high on what looks like a bullish technical breakout.

Defensives lagged throughout the day with Telstra ((TLS)), Wesfarmers ((WES)) and CSL ((CSL)) all closed flat between 0.1%-0.5%
 

DOW futures are showing a negative read down 19 points.

Happy Friday!

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)
 

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Australian Stocks: What Happened Today?

By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The XJO put in a solid day of trade following positive leads from the Street overnight as Cliff talks once again stole the show. Both Obama and House of Reps. speaker Boehner said they were optimistic that a deal could be struck over the budgetary issue. The XJO finished the day on its highs up 30 points or 0.7% to points on better than recent volume of $3.5B despite trailing the futures by 10 points for most of the day.

You must now have observed that this is a nightly saga where equity markets around the around the world are totally dictated to by mere words from individual US politicians. This type of weak headline-driven price action makes trading markets incredibly difficult so for those traders out there trying to make sense of things, don’t be too hard on yourself because this is as tough as it gets.

Take some solace from the fact Goldman Sachs chief Lloyd Blankfein described Obama’s fiscal cliff plan as “very credible”, we all know brokers have a vested interest in injecting confidence into markets but this is actually a pretty important development. Both because it means Obama actually has a plan and also because it shows Republican support for the Democrat’s plan. Obama taking the stage to confirm they were actively working on a ‘plan’ may be the next step to putting the issue to bed. Don’t expect the volatility to end before there a signatures on paper though.

On the data front, Aussie Q3 Capital Investment data showed capex had risen by 2.8% q/q (in real terms) in Q3 ahead of expectations of a 2% rise. More importantly total nominal capex in 12/13 was revised 3% lower from the previous estimate. The peak of the mining capex cycle is beginning to bite, BHP Billiton ((BHP)) chief said it was even behind us at the BHP AGM today, so don’t be surprised to see this number decline going forward. Anyone care to bet on an interest rate cut next Tuesday?

Mining services took a beating today following NRW Holdings’ ((NWH)) profit downgrade and sell off yesterday which has now fallen 28.9% in two days. Mining consumables (far more resilient than pure services and capital equipment suppliers) company Bradken ((BKN)) got sold down 7.1% to due to worsening sentiment in the sector. Other players in the space: Cardno ((CDD)), Macmahon Holdings ((MAH)), Ausdrill ((ASL)) all ended the day lower.

Otherwise it was a strong day for across the board with stocks in the defensive and cyclical sectors both ending the day well.

US futures closed the overnight session up 80 odd points then reopened intraday down 5 or so points. They are now tracking up nicely and are currently reading in the green up 18 points
 
(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

IMPORTANT DISCLAIMER - THIS MAY AFFECT YOUR LEGAL RIGHTS:

This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.