Market Matters Afternoon Report Thursday 9th June 2016

Afternoon Report 09/06/2016

Market Matters Afternoon Report Thursday 9th June 2016

Good Afternoon everyone

Market Data

What Mattered Today

The market closed pretty flat today however that belies the real story with some big intra session moves playing out. A decent open, weak middle section and a strong close – sort of like a Midnight Oil song. A range of +/-50pts. 5336 low, 5386 high and a close at 5361; off -8pts or -0.15%.

On the economic front, Chinese inflation was a tad lower than expected printing +2% v +2.3% while producer prices were -2.8% v -3.1% expected.

The AUD traded up above 75c but reversed into a weak close. Now looks like a short term top there, largely driven by what’s happening in the $US. Look for some buying in $US tonight which could put the cap on resources in the near term. BHP has obvious resistance around $20 – RIO hit its 30 day moving average today and sold off.

Amcor (AMC) the big mover today – off -8.05% to $14.85 after announcing a $US350 million hit from foreign exchange losses in its Venezuelan operations, and $US100 million from a restructure of its tobacco packaging arm, only a short time after they purchased South American packaging group Alusa, which has operations in Argentina, Peru, Chile and Colombia.

The hit has been ‘sold’ to the market as a restructuring charge however it also seems weak economic conditions in Venezuela has impacted earnings + we’ve seen a big move lower in the Venezuelan currency which has a negative impact on earnings post repatriation.

All up, it’s a stock trading on 26 times current earnings (pre todays downgrade) with a reputation for having a reasonably defensive earnings stream that has been growing at a strong clip. If this is a one off, the mkt may look through it, however we doubt that will be the case and now think we’ll see a period of underperformance for the stock, as a bigger risk premium in priced into valuations.

Telstra (TLS) has come of its recent highs – now trading at $5.47 down a further -0.73% today. It’s a good business but it’s changing and we continue to think it’s a stock to be more active in rather than passive.

….and finally, Fortescue (FMG) kicked up today by +3.48% to close at $3.27 and now looks likely to go and retest recent highs – after two months of consolidation. A trading stock we like that remains on our radar.

Sectors Today

Source; Bloomberg

ASX 200 Movers

What Matters Overseas

Interesting to see where the money has flowed over the last 3 months in the U.S with the energy sector clearly the most bullish. In recent notes, we’ve made mention of the markets newly found eagerness towards the sector. Clients are now receptive towards Energy stocks which is somewhat of a concern. It’s now a well owned trade and clearly, after such a strong move we should be looking for selling opportunities, rather than buying ones.

Global FUTURES Markets as @ 4.46pm

Source; CNBC

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 9/06/2016. 5:00PM.

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