The Match Out: ASX rallies, Bond yields fall, NAB’s results solid

A reasonable session for the ASX today up ~0.80%, although that was against a backdrop of US stocks that rallied ~3% overnight following the US Fed’s more dovish tone around rates. We’ve written a lot around the markets aggressive positioning on interest rates, our belief that markets were ahead of themselves and a pullback in yields played out overnight, a theme that was also obvious locally today.

• The S&P/ASX 200 added +60points / +0.82% to close at 7364.
• IT (+2.54%) & Energy (+1.97%) the main pockets of strength.
• Financials (-0.01%) the only sector to fall while Consumer Staples (+0.25%) underperformed.
• Tech stocks loved the backdrop of lower yields and rallied, more of the same (or at least a pause in appreciation of yields) should underpin a strong bounce back in tech.
• Australian 2 & 3 year bond yields fell ~19bps today, the 10 year yield declined by 16bps. While we’ve gotten used to bond market volatility in recent months, these are very big moves.
• The AUD was also strong buoyed by a pullback in the $US, at the start of the week it was poised to test 70c, its now ~72.50c.
• NAB -0.59% slipped after reporting a solid set of 1H22 results, they were clean with growth in all major areas of the bank, the market focussed on costs which will be up instead of down.
• Qantas (QAN) -0.35% said they would buy the rest of the charter business Alliance Aviation that they don’t already own – a play on FIFO mining.
• Ad Bri (ABC) +7.07% said they will see growth in underlying earnings in 2022, driven by increased contributions from cement, concrete, aggregates, masonry, joint ventures and recent business acquisitions.
• Pilbara (PLS) +7.60% & other lithium stocks rallied after the world’s biggest battery metal miner lifted earnings and talked up their expectations for higher Lithium prices.
• Janus Henderson (JHG) -13.04% hit hard on a bigger than expected net outflow number ($11.9b v $9.81b expected).
• Macquarie (MQG) -1.01% reports full year results tomorrow, lots of focus will be on commodities given recent volatility.
• Iron ore futures were back online for the first time since Friday closing at 855. From Friday’s close to where they are currently at the active contract (Septs) are pushing at being up the better part of 3%, supporting Iron Ore stocks locally.
• Gold was strong overnight and was sitting back at US$1900/oz at our close.
• Asian markets were solid, the Nikkei +0.26%, Hong Kong stocks +0.60% while China was flat.
• US Futures are mixed, nothing significant.

National Australia Bank (NAB) $32.25

NAB -0.59%: the second of the banks to report 1st half results, NAB shares were lower despite a small beat to consensus. Like all the banks, NIM fell slightly, down to 1.63% blamed on tougher competition for lending. Not interest income was up 1.8% though with volumes +5% thanks to strong business lending. Costs were flat, though they have guided +2-3% for the year in the second half on the back of regulatory issues with AUSTRAC. Cash earnings were up 4% to $3.48b and the dividend of 73cps were both small beats to expectations.

QANTAS (QAN) $5.65

QAN -0.35%: the national carrier announced the acquisition of Alliance Aviation (AQZ) in a scrip deal for an enterprise value of $919.2m. Alliance runs a fleet of 70 aircraft servicing domestic charter flights largely servicing FIFO mining workers, also operating the Qantas Link services with Qantas their single biggest client. The deal is expected to be EPS accretive from day 1 pre-synergies while Qantas will look to reduce Alliance’s cost base and extract more life out of the aircraft. QAN had bought 20% of Alliance back in 2019.

Broker Moves

• Macquarie Telecom Rated New Market-Weight at Wilsons; PT A$74.71
• Flight Centre Cut to Sell at Ord Minnett; PT A$14.28
• Domain Holdings Cut to Neutral at Jarden Securities; PT A$3.90
• Deterra Raised to Outperform at Credit Suisse; PT A$5.20
• Home Consortium Raised to Neutral at UBS; PT A$6.60
• Reliance Worldwide Raised to Overweight at Morgan Stanley
• ARB Raised to Neutral at JPMorgan; PT A$32
• ANZ Bank Cut to Neutral at Goldman; PT A$29.84
• Harvey Norman Cut to Hold at Jefferies; PT A$5.30
• Fortescue Raised to Neutral at Credit Suisse; PT A$20
• BHP Cut to Sell at Liberum; PT A$34.57 

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