Australia | Oct 22 2014
By Henry Jennings, Private Client Advisor, BBY Ltd
Another solid day following very bullish leads from overseas as we climbed to close near our highs at nearly 5400,up another massive 61 points at 5385. It is relentless. How quickly we forget the dark and dim days of 5150! Central Banks have once again exercised the put and put the floor under the equity market with dreams of free money forever. It works. The markets love their sugar hit. Anyway benign inflation numbers too helped the sentiment coming in around expectations and opening the doors for a rate cut. There was a sea of green across my screen, with naturally the banks forging ahead as the head into reporting season starting next week. The big four were up around 1% with AMP Limited (A$5.38, +3.1%) a superstar plus the miners joined the fun led by BHP Billiton Limited (A$34.27, +1.5%) following positive production numbers. RIO Tinto Limited (A$61.21, +2.1%), Fortescue Metals Group Ltd (A$3.66, +3.1%) and Newcrest Mining Limited (A$10.13, +3.6%) didn’t want to miss out so hung on for the ride. Elsewhere oils improved led by Oil Search Limited (A$8.72, +1.4%) and Santos Limited (A$13.01, +1.6%) plus other metals in the green like Oz Minerals Limited (A$4.10, +1.0%), Cudeco Limited (A$1.405, +0.4%), Sandfire Resources NL (A$5.70, +2.2%) and Independence Group NL (A$4.46, +2.1%). Unfortunately our old friend Lynas Corporation Limited (A$0.079, -9.2%) had a shocker falling under the issue price again. In the industrials Woolworths Limited (A$34.80, +0.2%) disappointed after denying media speculation on selling Small W but Wesfarmers Limited (A$41.85, +1.0%) forged ahead as did Metcash Limited (A$2.73, +2.2%).Telstra Corporation Limited (A$5.46, +0.7%) as usual did ok in fact it was hard to find much red around at all. We even saw green in the mining services with Leighton Holdings Limited (A$19.95, +3.4%), Monadelphous Group Limited (A$12.54, +2.5%), Seven Group Holdings Limited (A$6.67, +3.9%) and Ausdrill Limited (A$0.75, +2.0%).
In the winners enclosure today were Clearview Wealth Limited (A$1.045, +7.7%), Henderson Group PLC. (A$3.63, +5.5%), Northern Star Resources Ltd (A$1.375, +7.4%), Drillsearch Energy Limited (A$1.17, +5.4%), NIB Holdings Limited (A$3.00, +4.5%), Mount Gibson Iron Limited (A$0.525, +6.1%) and Sirtex Medical Limited (A$23.81, +5.6%) in the bigs and Sundance Resources Limited (A$0.068, +23.6%) and Tiger Resources Limited (A$0.255, +13.3%) at the smaller end. Losers included Syrah Resources Limited (A$3.23, -13.2%), Bradken Limited (A$3.48, -4.9%),Vocation, APN News & Media Limited (A$0.76, -1.3%) and AP Eagers Limited (A$5.50, +0.5%) whilst small caps #TON#, Bougainville Copper Limited (A$0.27, -10.0%) and much hated Lynas Corporation Limited (A$0.079, -9.2%) all fell in a leach heap. Volume was again hardly spectacular but at $3.7bn at least it was better than some days recently.
The Aussie dollar firmed after the CPI to 87.90 (will upset the RBA) whilst Gold trading in AUD at $1418. Asian markets bolted again with Tokyo rising another 2%, HK up 1.3% and China up 0.41%. Good news for Japan with exports climbing the most in seven months in September, supporting a rebound in the economy as Prime Minister Abe weighs another sales-tax increase. Overseas shipments rose 6.9 percent from a year earlier, the finance ministry said in Tokyo today, compared with the median estimate for a 6.5 percent. Meanwhile in HK the protesters are copping it from the Chinese media as “foreign puppets”. Can’t see them winning this one.
Stocks and Stories
CPI announcement today, with Consumer prices up 0.5 per cent over the September quarter, above consensus expectations of a 0.4 per cent rise and matching the June quarter’s figure.
The headline ABS consumer price index increased 2.3 per cent over the year to September 30, in line with expectations. Small falls in utility costs as carbon tax removed but fruit and household expenditure like rent increased.
Good to see banking analysts questioning the bounce in the banks. Having got bearish at the bottom, they are now trying to explain away the huge bounce. Results will be the crux! coming soon.
Origin Energy Limited (A$14.36, +0.2%) chief executive Grant King has flagged expectations for “significant growth in earnings” in the 2015-16 year and beyond, but has pointed to a lower contribution this year from oil and gas production.
G8 Education Limited (A$5.14, unch) are in a trading halt as the company announces plans to acquire 20 childcare and education centres for upwards of $38 million, along with a capital raising of $100 million to fund those and future purchases.
BHP Billiton Limited (A$34.27, +1.5%) production numbers for the September quarter showed the iron ore and coking coal divisions performed as well, if not better, than analysts had hoped.
The 62 million tonnes produced by BHP’s Pilbara iron ore division means the business is ahead of schedule on its promise to produce 245 million tonnes in the 2015 financial year. The petroleum division also beat expectations, with good results in onshore liquids production lifting the division to a better than expected tally of 67.4 million barrels of oil equivalent.
Super Retail Group Limited (A$7.92, +3.4%): Comments from the AGM today were mildly positive, in line with expectations.
Telstra Corporation Limited (A$5.46, +0.7%): Looks like the ACCC has sided with TLS over co arrangements with the NBN (whatever that is) for fixed lines. Looks like a win for TLS .
Woolworths Limited (A$34.80, +0.2%) announced no plans to sell Big W despite media speculation. Yeah right!
Buru Energy Limited (A$0.75, +2.7%): The SPP has been completed raising a poultry $3m only against a wish for up to $15m. At least it is now out of the way though so maybe some pressure has been removed. They have raised around $31m from Instos and retail now so are fully funded through 2015.
Good to see the Real Estate Institute of Australia slamming the RBA for doing too little too late to stem the tsunami of money into Sydney and Melbourne Inner city housing.
And things continue to deteriorate with the Westpac Melbourne Institute Leading Index, which indicates the likely pace of economic growth three to nine months into the future, fell from –1.07% in August to –1.16% in September. Rate cut anyone?
Tomorrows News Today
Hindu festival Divali is prompting a big push into gold and retail sales.
Good news, a hover board has been invented. “Back to the Future” fans jump on board! It’s called the Hendo. Want one!
Yahoo fights back with a five point plan to defuse the activists. Lucky they have Alibaba or where would they be. Remember Looksmart!
Toys R Us has withdrawn its Breaking Bad dolls from shelves. Wouldn’t your kid want an action figure of a meth dealer and a junkie? Can’t think why not!
Love Jackie Lambie as she has warned that Ebola infected terrorists would target Australia. And I thought Pauline Hanson was a loony!
Tesco (where Buffet recently declared he had stuffed up, for once!) announced sales are falling at the fastest rate in the grocery industry as the rise of Aldi and Lidl and the supermarket price war take their toll. Sales for Britain’s biggest retailer dropped by 3.6pc in the 12 weeks to October 12, reducing its market share from 30.1pc a year ago to 28.8pc
That is all.
Henry Jennings
Private Client Advisor
BBY Limited
Participant of the Australian Securities Exchange
Authorised and Regulated by the Financial Services Authority
Level 17, 60 Margaret St
Sydney NSW 2000
D +61 2 9226 0067
M +61 414 345 137
E hcj@bby.com.au
W www.bby.com.au
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