XJO and Position Update: ASX lifted higher over U.S. lift-off! | Slater and Gordon (SGH) lowers earnings

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Shares rallied strongly today as we had lift-off!

A US rate rise is finally behind us…. signalling that the US economy is strong enough to withstand higher borrowing costs…

Other fund managers and PEAK gave our thoughts about this historical event: http://www.smh.com.au/business/markets/markets-rally-as-us-federal-reserve-interest-rate-rise-removes-uncertainty-20151216-glph41.html

So how did markets react?

The ASX gained 1.45 per cent to 5102.0, building on yesterday’s surge…

All sectors ended higher, but gains were most cautious among energy stocks after the oil price slid again overnight. The big banks offered the most support to the benchmark index, with all four rising around 2 per cent, which is also the gain that Telstra posted.

CSL rallied 2.6 per cent to an all-time closing high of $103.53 (the stock hit $103.63 during the session), while Blackmores closed above $200 for the first time, at $200.72, rising 0.7 per cent, after shooting as high as $204.00 during the session.

BHP was once again the biggest drag on the index, falling 0.9 per cent to $17.02. Other energy and mining stocks were also among the losers, with Origin dropping 3 per cent,Fortescue losing 3.4 per cent and Oil Search falling 1.8 per cent. Slater and Gordon was the biggest loser among the top 200 stocks after the law firm canned its profit guidance just weeks after issuing it.

CHARTS OF THE DAY – Golden Cross on Nasdaq? Bull Run Here We Come….

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Local Equity News

Official figures have shown the average self-managed superannuation fund valued at more than $1 million for the first time, and that a growing number of do-it-yourself funds are borrowing to invest in property. Self managed super funds (SMSFs) are wielding a growing influence in shaping the domestic economy, stock exchange and property market as the number of individuals choosing to take control of their own retirement savings grows and the wealth controlled by the baby boomer generation swells as they near retirement and inherit from their thrifty war-era parents.

The latest annual statistics on the sector released by the Australian Taxation Office on Wednesday showed that in the financial year ended June 2014 the average assets of SMSFs grew to over $1 million.

“For the first time the average assets of SMSFs grew to over $1 million in 2014, a growth of 23 per cent over five years,” ATO assistant commissioner Kasey Macfarlane said. “In the five years to 2014-15 we have seen the number of SMSFs grow by 27 per cent to 557,000, with total assets worth $590 billion,” Ms Macfarlane said. SMSFs now control 29 per cent of the $2 trillion superannuation pool.

As the baby boomer generation starts to hit retirement age more individuals are choosing to take their compulsory retirement savings out of one of the big managed funds governed by the Australian Prudential Regulation Authority and set up their own SMSF. One of the special privileges of running an SMSF is the ability to, under special circumstances known as limited recourse borrowing arrangements (LRBA), leverage some of the assets. Wednesday’s ATO statistics show the practice remains on the rise.

Slater and Gordon has dumped its earnings guidance for this financial year because of its UK business performing below expectations. Shortly after the market opened, the company’s shares fell 21 per cent to 84.5¢. Slater and Gordon’s shares have fallen 89 per cent in the past 12 months. The law firm told the ASX that it was reviewing its approach to financial forecasting and has withdrawn its recently reaffirmed full-year guidance for 2016 of revenue in excess of $1.15 billion.

“There is a significant risk that full year guidance will not be met and accordingly the company withdraws its previous full year guidance pending the outcome of the review,” the firm said in a statement. The announcement comes one week after the law firm said it had formally appointed Ernst & Young as its auditor, ending its long-standing arrangement with boutique firm Pitcher Partners. Slater and Gordon’s shares slumped from an all-time high of $8.07 in April to an all-time low of 59.5¢ in November on concerns about its UK business and revisions to its financial reports.

Caltex Australia is poised for a record full-year profit thanks to a confluence of strong refining margins, reliable refinery operations and continuing increases in marketing profits that are likely to fan accusations the industry is profiting at the expense of motorists. Benchmark net profit for calendar 2015 is set to rise to between $615 million and $635 million, excluding one-off items, which would be as much as 29 per cent higher than last year’s $493 million.

Bottom line net profit, a figure less watched by the market because it includes changes in the value of inventories, should be between $560 million and $580 million, up to 29 times more than the $20 million reported in 2014, according to guidance given by the fuels supplier on Thursday. The company’s share price jumped as much as 12 per cent and last traded 8 per cent ahead at $37.20.

The record outlook for Caltex comes just two days after the Australian Competition and Consumer Commission (ACCC) took petrol retailers to task for enjoying their highest margins on retail petrol and diesel sales since price monitoring started in 2002. The watchdog said retail prices had not followed crude oil prices lower to the same extent, leading to higher profits for the petrol companies at the expense of motorists.

The findings led to claims of price-gouging by petrol retailers, accusations rejected by the industry through the Australasian Convenience and Petroleum Marketers Association. Caltex said the higher figures reflect higher profits in supply and marketing that includes the new Ampol Singapore operation that sources crude and fuels for the Australian business since the closure of the company’s second refinery in Australia. Cost cutting and efficiency improvements seen through Caltex’s Tabula Rasa program also helped. These were only partly offset by “ongoing competitiveness” of wholesale and commercial markets and higher costs at the Kurnell import terminal south of Sydney

Asian News

Japanese stocks rallied on Thursday morning after the U.S. Federal Reserve announced a gradual tightening cycle with its first rate hike in nearly a decade, boosting sentiment and risk appetite enough for investors to shrug off worse-than-expected Japan export data for November.

The 3.3 percent fall in exports from a year earlier compared with a 1.5 percent decrease expected by economists in a Reuters poll, but the impact was softened as investors took the U.S. rate hike as a mark of confidence in the world’s largest economy. The Nikkei share average had gained 2.3 percent to 19,483.38 in midmorning trade.

“The markets are really hanging onto Janet Yellen’s comments about a strengthening economy, particularly in big export countries like Japan, which relies on U.S. consumers to buy its goods,” said Gavin Parry, managing director of Parry International Trading. “Recently things have been hanging on liquidity expansion, which has nothing to do with the economy, so the fact that she’s talking up the economy now is in a sense a return to normality.”

The yen resumed its weakening against the dollar following the Fed decision, which further fuelled the morning’s upbeat sentiment and helped to boost the shares of major exporters. Panasonic Corp gained 1.5 percent while Bridgestone Corp climbed 3.3 percent and Toyota Motor Corp rose 2.1 percent. Sumitomo Metal Mining Co shares jumped 5.9 percent to a two-week high after Credit Suisse raised its rating to “outperform” from “neutral” while Seibu Holdings climbed 4.8 percent after SMBC Nikko Securities raised its rating to “outperform” from “neutral”.

The Topix subindex for insurance shares rose 4 percent while real estate shares were up 3 percent. The broader Topix gained 2.3 percent to 1,576.06 with all of its 33 subindexes in positive territory. The JPX-Nikkei Index 400 rose 2.3 percent to 14,199.21.

Position Update

PEAK OPPORTUNITY

Fat Fish (FFG) closed 10% lower

8common Limited (8CO) closed unchanged

Crowd Mobile (CM8) entered $0.25, closed 3.92% higher

Other Levels (OLV) closed unchanged

Ensurance (ENA) closed unchanged

Paradigm (PAR) closed unchanged

 

PEAK ACTIVE

AMP closed 0.18% higher

Incitec Pivot (IPL) closed 1.35% higher

Suncorp Group Ltd (SUN) closed 0.43% lower

 

PEAK GROWTH

FreeLancer(FLN) closed 0.58% lower

Radar Iron Limited (RAD) closed unchanged

Avanco (AVB) closed unchanged

 

PEAK INCOME

We are currently sitting on no open positions.


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