Market Matters Afternoon Report Monday 1st August 2016

Afternoon Report 01/08/2016

Market Matters Afternoon Report Monday 1st August 2016

Market Data

What Mattered Today

A Bank Holiday today so volume was light, and we had some big ticket economic data to boot with manufacturing stats from China. A higher open, sustained buying throughout the morning before selling kicked in around 1 pm.

The ASX 200 traded above 5600 for the first time in almost a year today and it seems – as we wrote in the Weekend Report –thattomorrows interest rate decision will be key for the near-term direction of the market. If they cut – which is currently priced as a 64% chance, it seems much of the upside has already been priced into stocks with the index up more than 8% over the past month.

If they sit tight, which we think is a strong possibility given a better outlook for US wage growth on Friday – then expect a pullback for stocks. Buy the rumour sell the fact! We mention US wages growth as a reason for the RBA to sit tight for two reasons. Wage growth feeds inflation and higher inflation will make the Fed bump up rates. Higher USratesreduces the interest rate differential between them and us, and therefore reduces the pressure for the RBA to cut.

Suffice to say it’s a live decision and volatility will kick up tomorrow.

On the ASX we had a range of +/-48pts. 5563 low, 5611 high and a close at 5587; up +25pts or +0.45%. Energy stocks led the gains – the likes of Origin Energy (ORG) +3.64%, Santos (STO) +2.28%, Woodside (WPL) +1.92% and Oil Search (OSH) (+2.82%) despite comments from Shell on Friday that they’re not a natural holder of their stake in Woodside. We would have thought some selling might have come out of the woodwork on that news, however, nothing but upside today...

China Manufacturing data was out today – Official PMI out at 11 am which was a slight miss (49.9 v 50.1 expected) however the better – private sector survey which focusses on smaller factories on more regional areas beat the Street at 11.45am with 50.6 v 48.8 expected. Looking at RIO which is probably your purest play on China we saw selling post the release. Seems the market put more weight behind the headline miss on the official numbers….

Rio Tinto (RIO) Intraday Chart

Independence Group (IGO) had another decent session today – up +5.47% to $4.24. We bought this at the back end of last week around $3.80, and we’re looking for mid to high 4’s for the holding. Amongst a good cross section of other assets, IGO has a 30% stake in an open cut Gold project in WA that is primarily owned AngloGold Ashanti Australia – and they produced 95k ounces in the June qtr. For CY15 the Tropicana Gold Mine has produced 491k oz at total cash cost of $492/oz.

Gold and Nickel were moving higher it seems and IGO well placed in both commodities.

Independence Group (IGO) Daily Chart

Sectors

Source; Bloomberg

ASX 200 Movers

Reporting this week

Reporting season kicks up a notch this week with Suncorp (SUN) on the 4th of most interest

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

We’ll be interested in Credit Corp (CCP) tomorrow – a stock we bought in the 10’s and sold in the 12’s. Look for an uptick in corporate debt, the price they’ve been paying for ledgers and of course, their outlook statement.

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

RBA tomorrow at 2.30pm the main game in town before US non-farm payrolls released at the back end of the week…The consensus is for a cut of 25bp to 1.50%. Mkt prices give a 64% probability of a cut

What Matters Overseas

Reporting tonight in the US… Alliant Energy, Diamond Offshore Drilling, Emerson Electric, Frontier Communications, General Growth Properties, Loews, Macerich, Microchip Technology, Vornado Realty, Vulcan Materials, Williams Cos

FUTURES are pointing to a good start…

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 1/08/2016. 5:00PM.

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