Australian Investment Blog

Good Afternoon everyone

Market Data

What Mattered Today

A reasonably anaemic session in the U.S overnight, Commodity prices that were OK yet our FUTUTRES market was down -47pts, and that negativity continued for the first 30mins of trade with the market down -80pts at the 10.30am low…. We then bounced strongly to close up +12pts or some +92pts from the intra session low. A BIG turnaround.

The SELL OFF was all FUTURES led with some big lines hitting the SPI in the first 30 mins….We then see a large crossing of 12300 May 5000 Puts reported at 2.10pm – done through Bells but our guess would be on the instruction from a large international bank…..

Here’s the reported trade which would have been hedged on the SPI FUTURES this morning – hence the big sell off early on.

…and here’s the intra-day of FUTURES with volume in red at the bottom…

We also had the RBA release their Statement of Monetary Policy – which highlighted the rationale for cutting rates on Tuesday and sets up a pretty clear path for further cuts to interest rates. While they did concede that the fall in the headline inflation rate was partly due to transient factors, they made it very clear that on closer inspection they did see evidence of ‘broad-based weakness in domestic cost pressures’ – and that was the reason they cut.

Importantly, they released a new set of economic forecasts which more or less confirm that they’ll cut again, and are prepared to do more if inflation stays low. They now think that underlying inflation will not reach the bottom of their targeted band (2-3%) until the middle of 2018. They suggested that forecasts assume the cash rate will move "broadly in line with market pricing" which has one more cut fully priced in. So, more cuts in the pipeline it would seem which saw the Aussie Dollar lower today

Macquarie (MQG); reported FY16 results this morning and the stock was up early, but traded off its highs to close at $65.10 – a fall of 0.31%. A decent result with NPAT pretty much inline with consensus and EPS about 4% ahead. The divi came in line. See below….



Macquarie is clearly a risk on stock….so you need to be pretty keen on the global economic outlook to own it. The main issue seems to be around 2017 earnings and the reasonably high chance that global M& A activity will come off if interest rates start rising in the U.S. That said, MQG is not the stock it used to be with 70% of profits now from asset fees (managing assets).

The other macro consideration near term seems to be the $US – which we’ve spoken about in recent times. The $US has bounced which has taken the shine off gold and other commods, however it’s actually a positive for MQG earnings. Anyway, a decent result however if we do see some form is decent correction in U.S markets , then MQG will clearly come under a lot of pressure. Too tricky at the moment it would seem.

Stocks & Sectors Today
Source; Bloomberg


ASX 200 Movers

***What Matters Tonight***

European leads are mixed with the FUTURES on the FTSE +2, DAX -3 & CAC -14
In the US DOW FUTURES are off -12pts and the S&P 500 FUTURES are off 1

US Non-Farm Payrolls are out tonight….Expectations here


Source; Bloomberg

Source; Bloomberg

Regards,
The Market Matters Team
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Sydney, NSW 2000.

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