NAB takes hit ahead of reporting (NAB, S32)
WHAT MATTERED TODAY
A soft start the week as the market opened down and tracked lower throughout the day. A few attempts to rally were overcome with sellers and the index finally finished on the lows. The weakness is not that surprising given the move we’ve seen from the 4400 level to peak recently at 5563 – we’re expecting some weakness to creep in short term and today could have been the start of it. That said, we remain of the view that the low has been seen and any weakness will not be an escalation of the panic like selling we saw in March i.e. markets pullback, however volatility index makes lower high, bond yields fail to makes news lows etc.
Energy the weakest link today as Crude came under pressure during our time zone. The May contract which expires on Thursday was down around 19% today, June was down around 6% as many speculators roll out a month i.e. sell May and buy June. Only those that want to take physical delivery will hold to expiry. IT was at the other end of the spectrum down only 0.67% in a weak market.
Today the ASX 200 fell -134pts /-2.45% to close at 5353 - Dow Futures are trading down -134pts/-0.55%
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE:
NAB -2.38%: it was NAB’s turn today to confess ahead of reporting season. The bank increased remediation provisions for the half to $288m pre-tax while changes to software capitalization will have a $742m impact on earnings and the carry value of the investment in MLC Life will be reduced by 20% for a $214m hit to after tax earnings. The confession was largely expected by the market as the new CEO looks to rebase earnings. Key to note that software capitalization balances and the value of the Life investments are both deducted from Group CET1 capital so there is little change in the bank’s capital position. NAB traded in line with the rest of the Big 4 despite the news.
NAB Chart
South 32 (S32) -3.4%: the Aussie diversified miner was out with their 3rd quarter production report today and the numbers seemed reasonable despite the weakness seen in the shares. Record aluminium production out of South Africa & alumina production in Brazil were the highlights, while Coal in the Illawarra is expected to return to normal levels in the coming months. There were some hits to guidance for production on the full year however these, along with the suspension of the buy-back, were all flagged in an update to the market in late March. The weakness today was mostly seen as a result of falls in the base metals. We have S32 on our radar if it re-tests the recent lows.
South 32 (S32) Chart
BROKER MOVES:
- Beach Energy Raised to Hold at Canaccord; PT A$1.59
- Integral Diagnostics Rated New Buy at Blue Ocean; PT A$3.95
- Orica Raised to Buy at UBS; PT A$21.38
- Mineral Resources Cut to Hold at Morningstar
- Sandfire Resources Cut to Hold at Jefferies; PT A$4.36
- Whitehaven Cut to Hold at Shaw and Partners; PT A$2.50
- Sandfire Resources Raised to Accumulate at Hartleys Ltd
- Flight Centre Cut to Lighten at Ord Minnett; PT A$8.96
OUR CALLS
Growth Portfolio: We sold Magellan Financial Group (MFG) today for a nice profit
Major Movers Today
Have a great night
James, Harry & the Market Matters Team
Disclosure
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