Markets trickle higher again ahead of US Fed speech

James Gerrish

Market Matters

Not a lot happening across markets today, although the ASX did grind higher again on the session defying the negative lead in from the US. Last week the market was sold off fairly aggressively down to a low of 6475 before grinding back to a 6593 close today. While the buying hasn’t been convincing overall, there have been decent pockets of strength in individual stocks - Dominoes (DMP) +2.90%, a position we hold in the Platinum Portfolio an example today with sustained buying throughout the session to close at $49.97, approaching our original target. Their US namesake reports Q3 earnings in the tonight – before open with the market looking for EPS of $US2.07). Transurban (TCL) was also strong today adding +1.84% on the session as money comes back into the more traditional yield names on lower interest rates expectations. The theme of lower rates will remain in focus this week with Fed Chair Jerome Powell speaking in the US tonight.

On the economic front today, Chinese data was soft with their services sector expanding, but at a lesser rate than expected + it was down on last month. The Caixin Services PMI adding 51.3 v 52.0 expected v 52.1 the prior month.

US Futures were stronger during our time zone while Asian markets were mostly higher. All sectors on the ASX closed in the black today

Overall, the ASX 200 closed higher today, up 29pts or +0.45% to 6593, Dow Futures are trading up +78pts/+0.30%.

ASX 200 Chart

ASX 200 Chart


Fortescue (FMG) -1.91%: Was down today v the market and relative to other Iron Ore stocks on news out yesterday they have submitted a bid to develop two blocks in the giant Simandou iron ore deposit in Guinea. Details are light however here’s the rhetoric from the company. “Consistent with our active business development program, Fortescue is interested in global opportunities in iron ore and other commodities which align with our strategy and expertise,” FMG CEO said. Details are confidential however our resource guy Peter O’Connor thinks they’ve thrown their hat in the ring as a blocking move more than anything…more to play out on this.

Fortescue Metals (FMG) Chart

ANZ +0.44; finished higher despite flagging an increase to provisions for customer remediation ahead of their full year result. The bank added $559m to the after-tax charge a week or so after NAB increased theirs by more than $800m. The bulk of the remediation will go towards continuing operations with fees and interest on a number of products heading back to the clients. A smaller portion will go towards the wealth arm which is now considered discontinued given the sale to IOOF which is now less than 10 days from completion.

Remediation reviews continue – not just in NAB or ANZ but in all the banks – however the market knows this and investors will give some wiggle room to the big four if they manage to keep remediation to a level where capital and dividends don’t become an issue.

The harder hit will be the wealth managers like IOOF & AMP

ANZ Chart

Santos (STO) +2.04%; oil names were higher, however Santos led the charge today with some solid results out of their Dorado field development in the waters off Port Headland. Initial results showed the highest potential flow rates in the Caley reservoir and support up to 30k boe/day flow for each well in the shallow reservoir which could add to Santos’ production in early 2020.

Santos (STO) Chart


· Woolworths Group Rated New Buy at Jefferies; PT A$42.50

· Coles Group Rated New Buy at Jefferies; PT A$17

· Metcash Rated New Hold at Jefferies; PT A$3

· Netwealth Rated New Negative at Evans & Partners; PT A$8.02

· Hub24 Rated New Positive at Evans & Partners; PT A$14.32

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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