Home World Business ASX see-saws higher as US avoids government shutdown

ASX see-saws higher as US avoids government shutdown

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The ASX shrugged off a lacklustre start to rise strongly on a US spending deal that sent Wall Street futures solidly higher. 

The benchmark S&P/ASX 200 closed up 32 points, or 0.6 per cent, to 5956.5, while the broader All Ordinaries index rose 0.5 per cent.

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ASX winners and losers – a snapshot

The stand out listings traded on the Australian Stock Exchange captured at key moments through the day, as indicated by the time stamp in the video.

The index shrugged off its see-saw start after news emerged late Monday morning that Congress had inked a US government spending deal. 

Following the index’s fortunes were the big banks, which at various points rose above and below Friday’s level before rising strongly in late trading. 

Three of the big four banks post profit results this week, starting with ANZ on Tuesday. Three of the big four banks post profit results this week, starting with ANZ on Tuesday. Photo: Paul Rovere

Despite the early wobbles, the movement in the banks’s share prices was fairly “benign”, said Argonaut Securities executive director of corporate stockbroking James McGlew, with few straying far off their close on Friday. 

ANZ finished up 0.6 per cent, Westpac rose 0.7 per cent, the Commonwealth Bank was flat while NAB added 0.3 per cent.

Three of the big four banks post profit results this week, starting with ANZ on Tuesday.

“I think there’s an expectation that most of the banks will be reporting steady as she goes,” Mr Glew said. Investors will be keeping a close eye on bad loan figures, as well as any comments out of the Reserve Bank monetary policy meeting on Tuesday about the likely level of interest rates going forward. 

Macquarie had the biggest impact on the index, after rising 1.2 per cent. 

Outside the financial sector, yield stocks and utilities had some of the day’s best performances. 

Qantas rose 2.6 per cent to trade at its highest level since March 2008. Transurban rose 1.6 per cent, Sydney Airport added 2 per cent while Telstra rose 0.9 per cent. 

“They’re all yield plays – this is a market that’s still chasing the very attractive yields that are on offer relative to bank [deposit] interest rates at the moment,” said Mr McGlew.

Several retailers also traded solidly higher. Wesfarmers rose 1.4 per cent, which Mr McGlew attributed to investors welcoming its decision to pursue an initial public offering for Officeworks. Woolworths added 0.6 per cent, while Metcash rose 1.9 per cent. 

The ASX 200’s worst performer was Mayne Pharma, down 10.4 per cent after it lowered its sales guidance for its Teva generic drugs business. Ramsay Healthcare shed 1.4 per cent after the ACCC launched legal proceedings against it alleging misuse of market power. 

Outside the ASX 200, shares in RCG Corp, which owns the Athlete’s Foot shoe stores, plunged 27 per cent after it issued its second profit downgrade in three months, warning investors its full-year profits would be down 11 per cent on its guidance. 

Stock watch: McGrath 

Shares in real estate company McGrath recovered 2.6 per cent to 59.5¢ on Monday, after hitting a new low of 58¢ on Friday after a newspaper report said five franchisees, who account for half the group’s earnings, could quit the business. McGrath said it had “no information regarding any franchisees intending to leave the company”. The company has in recent months been hit with the departures of several top agents. It told the ASX in January that 36 had left, hence it wouldn’t meet earnings estimates. McGrath’s value has plummeted since founder and major shareholder John McGrath floated it in 2015. Nonetheless, the two analysts who cover the stock currently have it as a buy, with a 12-month price target of 80¢.

US spending deal

US House and Senate negotiators reached a tentative bipartisan deal on Sunday night (Monday late morning AEDT) on a $US1.1 trillion bill to keep the government open until the end of September, according to Republican and Democratic aides. GOP leaders eager to focus on health care and tax overhauls bowed to Democratic demands to eliminate hundreds of policy restrictions aimed at curbing regulations from the bill, leaving the Trump administration with few victories. The spending deal includes money for Planned Parenthood, despite Republican demands to de-fund the group over its provision of abortions. 

Chinese investment

Chinese investment in Australia is at its highest point since the global financial crisis. Despite uncertainly around foreign investment rules, Chinese companies pumped $15.4 billion into Australian deals last year. KMPG’s Doug Ferguson, the co-author of a report on the trend, said Australia’s investment relationship with China continued to diversity, with more deals than ever before done by private companies. Mining dropped to sixth place with deals worth $839 million last year, down 35 per cent from 2015. Deals in the energy sector topped those in mining for the first time last year.

No volatility

The S&P 500 volatility index, or VIX, hit its lowest level since 2014 late last week. “The Vix has plummeted below 11, just as we see the big drivers of the rally beginning to lose steam. Indeed, our derivatives strategy team recently noted that several asset classes were pricing a ‘world almost free of risk’,” a Bank of America Merrill Lynch strategist said in a note late last week. It’s only the second time in a decade the US benchmark index’s volatility has been so low. 

Sugar crash

Raw sugar futures were up on Monday after having fallen for 12 straight weeks, the longest run since data on the contract began, as sugar surpluses hit the market. Sugar was last-year’s best performing raw material as a deficit lured in speculators and hedge funds. But prices are down 17 per cent this year. “When you see a market inflating like a balloon, then, of course, what’s going up is also going down,” said Claudiu Covrig, senior sugar analyst at Platts Kingsman. “I was expecting this low, but how low can we go next?”

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