The US market was weak overnight, the S&P 500 off by around -0.40% and that selling ticked into local stocks throughout our session today, more so in the morning before  buyers stepped up into weakness and the market finished ~25 points up from the session lows, but still in the red. While the market is showing signs of topping out, tops take time and often test ones patience  - even shorter term ones like we’re targeting and todays buying of weakness suggests the market may not be ready to roll over – just yet. The US market obviously key here and the S&P 500 is knocking its head up against resistance…

China was in focus today lowering its economic growth target + they also announced tax cuts as they attempt to insulate against the external trade related factors impacting growth. They now target growth of 6-6.5% which was expected, consensus sitting at 6.2% so no real movement on the back of that call. On the data front, both Chinese services and manufacturing data were out around lunchtime, both printing on the softer side, however the Chinese market + the rest Asia remained fairly mute.  

Chinese Economic Data out today

Locally, there was a flow of economic data out which put some pressure on the Aussie Dollar, while the RBA kept interest rates on hold at 1.5% (as expected) this afternoon. The market is now pricing a 52% chance of a 25 basis point cut in August while a few of the better known economists expect more. Bill Evans at Westpac reckons they’ll cut  in August and one in November while UBS has also joined the party calling for 50bp of cuts. We think they’ll hold fire.  

Local  Economic Data out today 

The Aussie Dollar saw some selling today, settling around 70.73 at time of writing

Australian Dollar Chart 

There was some buying in the defensive areas of the market today however the main (positive influence) came from the banks which outperformed in a weak market, CBA, WBC and NAB actually closing higher on the session – it’s hard for the market to sell off when the banks are being supported.

Overall today, the ASX 200 fell by -18 points or -0.29% to 6199. Dow Futures are currently trading down -19pts / -0.08%.

ASX 200 Chart 

ASX 200 Chart

CATCHING OUR EYE

Not a lot from a stock specific perspective today…

Coles (ASX: COL) –0.18%; although more known for the supermarkets, Coles does still have interests in a number of hotels Australia wide which today it moved to sell down part of its ownership. Coles has entered into a joint venture with Australian Venue Co. which is majority owned by private equity firm KKR. The deal sees AVC manage 87 of Coles’ hotels while Coles will continue to operate the retail liquor stores, 10 of which are attached to the hotels, whilst receiving around $200m from AVC. At around $300m revenue/year, the hotels are not a huge portion of the company’s earnings, and with the cash injection from the sale Coles can look to reduce its large debt balance or take a more aggressive approach in the supermarket war. Despite the sale being around 10% below book value, it seems the logical move for Coles.

Coles (COL) Chart

Broker Moves

·         Cimic Downgraded to Neutral at Macquarie; PT A$50.90

·         Collection House Upgraded to Buy at Canaccord; PT A$1.60

·         CSL Downgraded to Hold at Morningstar

·         Perpetual Downgraded to Sell at Morningstar

·         Nine Entertainment Downgraded to Hold at Morningstar

·         McMillan Shakespeare Downgraded to Hold at Morningstar

·         Cochlear Upgraded to Buy at Citi

·         Tabcorp Downgraded to Underweight at JPMorgan; PT A$4.20

·         Senex Downgraded to Underweight at JPMorgan; PT A$0.34

·         Goodman Group Cut to Sell at Shaw and Partners; PT A$11.30

·         Vicinity Centres Cut to Neutral at Credit Suisse; PT A$2.67

·         SCA Property Upgraded to Neutral at Credit Suisse; PT A$2.25

·         CYBG GDRs Downgraded to Hold at Bell Potter; Price Target A$4

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