RBA extends a very boring record, the banks sell off (NUF, WBC)
WHAT MATTERED TODAY
Today it was the bank’s turn to send the market well off the day’s highs, but also well off the day’s lows. Futures were sold off early, the index followed once it opened and the market spent most of the day trading back below 6300. The RBA was unwavering in its stance of rates at 1.5%, now extending to 25-months on hold – in our view, the next move will be higher, but are unsure of the timing. Westpac’s decision to hit loans with an out-of-cycle hike will likely delay the RBA’s need to raise rates, particularly if the other banks follow suit. The dollar squeezed higher on the news, a sign that a lot of money is short the Aussie. The trend certainly remains to the downside, however a short term bounce would not surprise given the markets positioning around our currency.
Orocobre remained in a trading halt for the session today whilst drawing up a market announcement in relation to Argentinian export taxes, proposed in an effort to help with the government’s soaring debt position. Elsewhere Suncorp announced it will receive $725mil for the sale of its life insurance unit to Japan’s TAL Dai-chi and plans to return $600mil of the proceeds to shareholders – more detail on how will be revealed once the transaction is complete later this year. From outside the top 200, Kogan fell a huge -8.96% to $6.40 after another round of selling by founders Ruslan and Shafer. The pair sold another $40 mil worth of shares in a block trade at $6.41 but did say this would be the last round of selling from the pair at least until the half year result in February.
Overall, the index closed down -17 points or -0.28% today to 6293.
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE
Broker Moves;
- ClearView (CVW AU): Rated New Buy at Blue Ocean; PT A$1.50
- Zenitas (ZNT AU): Zenitas Downgraded to Hold at Wilsons; PT A$1.46
Nufarm (NUF) $7.20 / +4.2%; Herbicide producer Nufarm has jumped today on news that Brazil had overturned its ban on glyphosate products despite the continuing review into products that contain the chemical. Glyphosate is common in many weed control products, including Roundup, and came under fire after a US court ruled in favour of a cancer suffer who took Roundup to court claiming that the chemical had contributed to the disease.
Before this court case, Nufarm had come under pressure from the Australian drought which forced it to downgrade guidance back in July and had fallen -34.7% from a June high of $9.60 to an August low of $6.27 when fears peaked on glyphosate bans and drought impacts were factored in. The bounce back for Nufarm has been impressive highlighting why buying agriculture stocks into weather related issues holds credit.
Nufarm (NUF) Chart
Westpac (WBC) $28.31 / -0.81%; Westpac caved to ASIC today, accepting a $35 mil penalty for breaches to the Consumer Credit Protection act on 50,000 approved loans. The breaches related to an automated system which didn’t factor in the applicants declared expenses, but rather used the Household Expenditure Measure benchmark which has been found to grossly underestimate many peoples weekly expenses. The breach also relates to the calculation of repayments after the interest only period expires on owner-occupier loans. The review found that over 10,00 loans in question should not have been approved.
The penalty, if approved by the Federal Court, will be the largest under the national Credit act although it would represent a drop in the ocean to Westpac. It does however highlight the growing regulation and monitoring of the big banks. All the banks were notably lower today.
Westpac (WBC) Chart
OUR CALLS
No trades across the MM Portfolio’s today.
Have a great night
Harry & the Market Matters Team
Disclosure
Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.
Disclaimer
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