Finally – the banks find some love! (BHP, NAB, QBE, MQG)
A better day for the Aussie Banks today with an obvious rotation out of the recently HOT commodity stocks into the beaten down financials – the BIG 4 contributing +22pts of the gains on the index while Macquarie also chimed in after they reconfirmed guidance. Elsewhere, the rotation out the commodity plays was aggressive early on however buying into weakness soon followed with the likes of BHP and RIO finishing well up off session lows, although still in the red. The gold stocks copped it on the chin as money flowed elsewhere, while the Insurers were higher despite the US Hurricane, however unconvincingly so.
In terms of the broader market today, the IT sector led the way courtesy of decent buying in Seek (SEK) and CarSales (CRZ) while the selling was concentrated in the Material stocks which lost -1.10% - an overall range of +/- 53 points, a high of 5723, a low of 5669 and a close of 5713, off -40pts or -0.71%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Macquarie (MQG); were out this morning pre-market and reconfirmed guidance of flat earnings saying they expect 1H18 earnings to be up on this time last year, and broadly in line with 2H17. The main reason is performance fees so it looks like the millionaires factory (haven’t heard that in a while!) has started the year off pretty well. Normally we see a second half skew so although the company saying earnings will be flat, expect the market to second guess this, double their first half numbers and assume 5% growth! All up, we’re not keen on MQG at current levels as discussed in the AM report today. The stock closed up +2.96% to $85.15.
Macquarie Daily Chart
QBE; obviously a stock in the cross hairs at the moment with Hurricanes, weakness in their earnings and the macro backdrop moving against them, however looking forward we expect things to be brighter. Firstly, global premium rates are still declining, but are improving and heading in the right direction as shown recently in this chart…
Secondly, US interest rate expectations as priced by the market are a long way off where the FED is guiding to. Although we expect the Fed to be proven ‘optimistic’ in their assumptions, we think the market remains too pessimistic and some middle ground will be found. Higher US interest rates and a higher US currency at some point will both prove supportive of QBE. The stocks closed up +0.59% today to $10.24
QBE Daily Chart
…and finally, the big rotation from resources to banks played out today as MM has been suggesting now for the past week or so. We think now is the time to be overweight the banking sector using resource exposures as a funding vehicle. Using NAB and BHP as examples here to illustrate.
NAB Daily Chart
BHP Daily Chart – weakness early however decent buying off the lows
Have a great night
The Market Matters Team
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