Defensive stocks lead the ASX higher
What Mattered Today
A reasonable session to start the week with the market trading higher into the close, largely on the back of some decent buying amongst the more defensive yield type stocks like Transurban (TCL), Sydney Airports (SYD) and APA Group (APA) - all being up around ~2%. The yield names were higher in the States on Friday but we also saw the Mid Year Economic and Fiscal Outlook which was fairly downbeat, but probably a shade better than some thought it would be which prompted buying of Aussie bonds thus pushing down yields – which makes higher yield stocks more appealing….Here’s a chart of Transurban which we have in the portfolio…
Transurban (TCL) Daily Chart
Staying on MYEFO for second, Treasury retained their target of FY21 as the estimated threshold for the return to budget surplus. However, over the four-year forward estimates to FY20, a cumulative $AU10.3bn has been added to the deficit compared to the Budget.
The underlying cash balance improved slightly for FY 17 to -$AU36.5bn (-2.1% of GDP) from -$AU37.1bn in the Budget, on the back of lower operating cash payments. That said, the FY17 deficit is wider than previously expected at -$AU28.7bn (-1.6% of GDP) compared to -$AU26.1bn in the Budget. This was because forecasts for wage and salary receipts as well as GST receipts have all been lowered, as a result of weak inflation and wage price growth. (source Citi). This prompted the ratings agencies to confirm Australia’s AAA rating for now however it’s likely we may lose it in time. Do we really care – or should we??
The other interesting trend that caught our attention came from run up in the $US and subsequent buying of US exposed stocks. Clearly, the $US has been very strong in recent months and now trades above 102 for the dollar index, which is understandable when we consider that it’s now a ‘high yielding currency’!!!. Yes, believe it not, the overnight rate for USD rose to 0.66%, which puts it as the third highest central bank yield in the G10 behind Australia and NZ and therefore it is considered ‘high yield’!. This obviously put some life into those $US earners on the ASX with QBE the main beneficiary rebounding +1.37% to $12.59…We own QBE from lower levels and see this as a good play for now.
QBE Insurance (QBE) Daily Chart
Elsewhere, Fortescue (FMG) was down another 4.76% after dropping 5.7% last week after saying it JV with Vale may not happen while shares in Seven West Media (SWM) fell around 8% on news the now CEO had a fling with a staffer and some fairly dubious payment arrangements seemed to have prevailed as a result.
For the ASX, we had a range today of +/- 47 points, a high of 5578 a low of 5531 and a close of 5562, up +29pts or +0.53%. Volume has started to dry up with 22% below average going through the bourse.
ASX 200 Intra-Day Chart
ASX 200 Daily chart
Sectors
ASX 200 Movers
What Matters Overseas
FUTURES mixed….
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All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 19/12/2016. 4.35PM.
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