BIG 82pt range today as the ASX comes under pressure
What Mattered Today
Whether it be the realisation that Trump is now the US President, Berejiklian is now NSW Premier or that Brambles, McGrath + Village Roadshow all downgraded earnings, early optimism in the market was short lived and we saw a decent turnaround & sell off from the early highs. Futures were pricing a rise of around +20pts on the open and we saw that play out early with the market up +32pts at the best before selling kicked in and stocks were sold. It seemed to be FUTURES led early on but a lack of any bounce for much of the day highlighted the obvious void of any real appetite to BUY the weakness in stocks. We talk a lot about seasonality in these notes and we’re in a short term period of seasonal weakness now which typically plays out from around mid-January till early February - ahead of reporting season.
We had a BIG range today of +/- 82 points, a high of 5686, a low of 5604 and a close of 5611, off -43pts or -0.77%. Volume was OK at $4.26bn for stocks… Continue to look for 5590 as key technical support for the ASX 200 in the near term.
ASX 200 Intra-Day Chart
ASX 200 daily chart
Brambles; downgraded earnings expectations today and the stock got whacked by 15.8% to close at $10.34. They now see revenue growth of ~5% and underlying earnings growth ~3% which is down from revenue growth between 7% - 9% and Underlying earnings between 9% - 11%. Another growth stock priced on a high multiple that simply hasn’t delivered on growth – the issue seems to be from their North American pallets business which is interesting, as they sight ‘US retailer destocking which impacted volumes and resulted in increased transport and plant costs associated with higher-than-expected pallet returns’. So, retailers are holding less inventory to reduce costs in an environment where the top line is hard to grow. Brambles has always been a good indicator of broader economic undertones in the US and clearly this is a negative update and we saw other US exposed stocks come off on the back of it. BXB will provide updated full-year guidance as part of their half year result announcement on 20 February 2017.
Brambles (BXB) Daily Chart
McGrath; a few sharks circling the tank at McGrath with the company downgrading earnings (again) it would seem and dropping to a low today of 71c before closing at 81c, which is a long way from the $2.10 listing price. They hadn’t given guidance before so calling it a downgrade is a bit of a stretch, but they did sight Analyst Research saying that they’re more or less on the money for the 1H but a too high for the 2H. Listing volumes are extremely low and they haven’t turned as yet + they also confirmed the departure of 36 agents from company owned offices…All seems pretty tough for MEA at the moment. Deep value? Maybe. MEA relies more on volumes than price so all this talk of a strong housing mkt means little to them. Panic selling, lots of stock coming on line and turnover the key. Very similar to IBs and Brokers that do well in a volatile market given increased transactions.
McGrath (MEA) Daily Chart
Suncorp; another to disappointment today saying that it expects to exceed its 1H17 natural hazard allowance of $310m by $40m, which equates to about a ~2% downgrades for FY17 but has no impact on later years.
Suncorp (SUN) Daily Chart
Sectors
ASX 200 Movers
What Matters Overseas
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