Market Matters Afternoon Report Tuesday 2nd August 2016

Afternoon Report 02/08/2016

Market Matters Afternoon Report Tuesday 2nd August 2016

Good Afternoon everyone

Market Data

What Mattered Today

The RBA cut rates by 25bp today taking the benchmark to just 1.50% - a new all-time low yet the equity market sold off afterwards – an obvious case of buy the rumour / sell the fact.

ASX 200 Daily Chart

This morning we wrote…. ‘at 230pm today, the local market is looking for an interest rate cut to a record low 1.5%, with current pricing now suggesting a 66% chance of a cut. If we rewind back to the end of June, the market was trading just south of 5100, and there was a 15% chance of a rate cut priced in for August. The market is now +10% higher, and the expectation for a cut has firmed to 66% according to market pricing however nearly every economist is calling a cut. It seems to us; there is clear room for disappointment this afternoon given the markets run up into this decision.

Our short term view is that the ASX200 is close to or has already topped in the short term and is due for a pullback under 5500. Importantly, this is no reason to panic; we would look to buy this retracement’.

After a firmer open this morning, the market tapered off into the decision at 2.30pm, spiked just before it then sold off into the close. A range of +/-53pts. 5539 low, 5592 high and a close at 5540; down -47pts or -0.84%...

ASX 200 Intraday Chart

The Aussie Dollar was interesting….the decision dropped, the currency fell as you’d expect however its clear from the statement they’re now in no rush to cut again soon. It’s the one and done scenario which supports the AUD and put pressure on stocks in afternoon trade.

Banks have started to announce their pass through – Commonwealth Bank (CBA) cut by 13bp – National Australia Bank (NAB) by 10bp with the banks seemingly taking this rate cut as an opportunity to reprice their loan books and relieve some margin pressure. There will be a political beat up about this, however, the fact remains, banks struggle in a low-interest rate environment and they’ve taken the opportunity that Glenn Stevens has dished up. Subscribers can refer to our Monday Morning note which covered net interest margins

Banks were still lower though despite the move as profit taking starting to kick in throughout the market…CBA lower after a strong run-up over the past month.

Commonwealth Bank (CBA) Daily Chart

Credit Corp (CCP) reported today – releasing a very strong print. The stocks rallied +13.06% to close at $15.15 after hitting an early high of $16.14. Earnings were better than expected, purchased debt ledgers which is basically inventory was higher than market predictions and the dividend came in at 27cps for the half v 22cps expected. A stock cheaper than the market, growing earnings at a greater rate than the market, delivering a strong, clean result and importantly, guiding well for FY 17 and you can why the stock was bid up so strongly.

Credit Corp (CCP) Daily Chart

Navitas (NVT) also released results and we spoke with the CEO Rod Jones afterwards. A good number although it was pre-released so not a surprise to the market, guidance was for flat earnings, flat dividend but importantly, reduced risks for FY 17. That said, the stock on 23 times with a lack of growth is hardly compelling…

Navitas (NVT) Daily Chart

Sectors Today

Source; Bloomberg

ASX 200 Movers

Reporting this week

NPAT = net profit after tax (consensus numbers)
EPS = earnings per share (consensus numbers)
DPS = dividend per share (consensus numbers)

RIO Tinto (RIO) Reports after market close tomorrow…

RIO Tinto (RIO) Daily Chart

Select Economic Data – Today & Tomorrow; Stuff that really Matters in Green

RBA cut rates but the statement suggest little urgency to cut again.

What Matters Overseas

FUTURES are mixed. Short term top seems the likely scenario in the US which will present another buying opportunity.

Regards,
The Market Matters Team
Level 12 28-34 O'Connell St
Sydney NSW 2000

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 2/08/2016. 5:00PM.

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