Market Matters Afternoon Report Wednesday 15th June 2016

Afternoon Report 15/06/2016

Market Matters Afternoon Report Wednesday 15th June 2016

Good Afternoon everyone

Market Data

What Mattered Today

The market fell off a cliff this afternoon – dropping 40pts in the last hour of trade as continued fears around a UK exit from the EU plays on investors’ minds. The FOMC meeting in the US is also playing out, with the press conference tomorrow morning our time. Although no change in interest rates is expected, the rhetoric around future hikes will dictate the market reaction – not just in the U.S.

What the Fed does will impact local interest rate policy. If they allude to an August hike, which is not currently being forecasted, the $US will rally putting downward pressure on the $AU – which suggests the RBA will be less likely to hike. The reverse seems likely. If the Fed hoses down rate hike expectations, the $AU could rally, the $US would fall, which would probably prompt the RBA to cut again.

Here’s the current probability for future rate hikes in the US….Right now, no chance of a hike tomorrow. 15.7% chance of a hike in July & a 30.6% chance in August. We don’t see a positive expectancy for a rate hike until Feb 2017.

Anyway, it seemed much of the afternoon volatility might have been dictated by index hedging as the market failed to punch up through 5200 ahead of options expiry tomorrow. Obviously a decent ‘risk event’ happens before trade in the morning – then index options expiry happens on the open. Should be a wild ride in early trade….

Big volume on the ASX today – all up about $6.7bn which is well up on recent numbers. A range of +/-48pts. 5147 low, 5195 high and a close at 5147; off -56pts or -1.08%.

Looking at the daily ASX 200 chart, shows we’ve come back – more or less – to the 5150 support region as we highlighted this morning. We’re yet to put anything new into the portfolio but we are looking very closely at a number of candidates that might be HIT hard by the potential for a BREXIT combined with tax loss selling into June 30.

Staying with the BREXIT theme, stocks with earnings coming from the UK are worth keeping on a close leash. If the lower probability event happens, and they do leave, the Sterling will most likely get sold off putting pressure on export earnings. Ramsay Healthcare (RHC), Computershare (CPU), Flight Centre (FLT), Sonic Healthcare (SHL), 3P Learning (3PL), IRESS (IRE), Henderson Group (HGG) all generate a decent amount of their earnings from the UK. Clydesdale (CYB) generates 100% of their earnings from the UK so that coy is most in the spotlight – although it’s held up well and is loved by the market as a cost out story.

Sectors Today

Source; Bloomberg

ASX 200 Movers

Top 20 Shorts

It’s important to keep an eye on shorts as it gives insight into companies that can potentially have explosive moves on the upside when they reverse + it gives an idea of targeted stocks for short sellers – which can often be smart money. We watch this daily so thought worthwhile adding it to the MM afternoon report…

What Matters Overseas

A good recovery last night in the US market from the lows. Once again, the U.S is experiencing a tepid, almost lacklustre pullback v what seems to be a very aggressive sell off locally. All eye on Janet Yellen’s press conference tomorrow morning

Global FUTURES Markets as @ 5.00pm

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 15/06/2016. 9:00AM.

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