Australian Investment Blog

Good Afternoon everyone

Market Data

What Mattered Today

A reasonable start the week following a pretty good session overseas on Friday with US employment data coming in better than expected – particularly around wage growth which we know is very important for future policy decisions. Wage growth fuels higher prices, higher prices = inflation, inflation = higher interest rates. We’ll likely cover this theme in more detail tomorrow morning…

On the market today we had a range of +/- 42 points, a high of 5549, a low of 5507 and a close of 5537, up +40 points or +0.73%

ASX 200 Intra-Day Chart

BANKS; We covered our positive view on banks over the weekend and continue to think that market expectations are too bearish, and less bad news will be met with BUYING of the sector. We started to see it play out today following a reasonable report from Bendigo Bank (BEN) - the stock popped up +4.32% to close at $10.15.

As with Suncorp (SUN), the result was OK, yet they showed very good discipline on the cost side, which the market liked. Elsewhere, csash earnings were $439m v market expectations for $436m, the dividend was inline, margins were a little lower than expected, bad debts were low (as expected), loan growth of +5.1% was okay, some reserve releases which pumped up the result was a slight negative, and it could be argued that it was a ‘low-quality beat’, however, a beat non-the-less.

Bendigo Bank (BEN) Daily Chart

ANZ gives a trading update tomorrow then CBA is out with their full year result on Wednesday morning…

Regarding ANZ, look for an 82cps dividend on earnings per share of $2.08 & a cash profit of $6.423b. The most focus here will be on commentary/clarity around Asia, their views on capital position and any guidance – particularly around ROE as they shift focus back domestically.

ANZ is trading on a low multiple – a discount to the sector with the biggest gripe from the market being around the ability to forecast with any clarity. If ANZ present a clear, well thought out message, with good detail on the numbers, the stock should do well…

Commonwealth Bank (CBA) is more important though for the sector and the market more generally. CBA is the biggest stock on our market, accounts for 8.57% of the ASX 200 and will have a big bearing on whether or not this market will push higher. A good result on Wednesday, above market with decent guidance and the stock should ignite a rally for the banks which will drag the broader market higher. Expectations are fairly low, negativity is high, operating conditions are tough however this is well known.

We’ll cover our expectations for the CBA result tomorrow afternoon

Commonwealth Bank (CBA) Daily Chart

Telstra (TLS) – we’ve covered this is recent notes – and it seems the selling continues with pressure being applied for much of the session today. We remain negative TLS leading into its result this week.

Telstra (TLS) Daily Chart



Sectors

Source; Bloomberg


ASX 200 Movers

Reporting this week

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

Good result from BEN today – ANZ out tomorrow with a trading update then CBA on Wednesday morning before market the real key.

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

What Matters Overseas

US payrolls were good on Friday printing +255k v +180k expected plus we saw upward revisions to prior months. The six-month average now sits at 189k. Importantly, average work week hours + hourly earnings and participation rates were very strong which suggests this report has decent underlying strength.

As discussed above, wage growth feeds inflation which should get the Fed off the sidelines, and we think they’ll hike rates this year. Currently, expectations of a hike by December ticked up to 46.7%, which is still too low in our view. The US$ rallied, but not a lot. That put pressure on GOLD.

Interestingly, the payrolls print last month prompted a very good rally in stocks. Below the ASX 200 marked with the payrolls print…

FUTURES pointing to a reasonable start…

Regards,
The Market Matters Team
Level 12 28-34 O'Connell St
Sydney NSW 2000


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