Australian shares opened the week’s trading with a loss on Monday, ending a streak that saw the market close in the black for six straight sessions.
The S&P/ASX 200 Index closed 31.1 points, or 0.5 per cent, lower at 5818.1, while the broader All-Ordinaries fell 31 points, or 0.5 per cent, to 5904.8.
Healthcare stocks were the biggest drag on the index with CSL falling 2.4 per cent to $187.52, its first loss in seven sessions.
Cochlear announced to the market on Monday it had lost a US patent infringement case and damages in the amount of $US268 million had been awarded against the company.
Cochlear CEO Dig Howitt said the company was surprised by the decision, it would appeal and the case was likely to take years to resolve. The patent in contention is expired and will not disrupt Cochlear’s business. Its shares fell 3.8 per cent to $172.73.
Blackmores shares fell for a second straight session after Citigroup told clients on Friday the company was too expensive given potential risk to its earnings.
The Citi research team gave the health supplements company a price target of $100. Blackmores closed Monday’s trading 3.6 per cent lower at $122.34.
The price of crude oil continued to soften over the weekend, pushing the energy sector lower on Monday. Woodside Petroleum fell 2.3 per cent to $33.40, Oil Search slid 1.3 per cent to $7.56, Santos dropped 1.6 per cent to $6.37 and Beach Energy closed 2.6 per cent lower at $1.71.
The major banks led the market gains on Monday after Westpac reported flat full-year cash earnings of $8.07 billion, in line with expectations.
ANZ led the market, climbing 1.1 per cent to $25.82, Westpac rose 0.6 per cent to $26.65 and NAB lifted 0.7 per cent to $25.39. Commonwealth Bank, due to issue a first quarter trading update and hold its AGM on Wednesday, closed 0.5 per cent lower at $67.98.
TPG Telecom closed the session 3.3 per cent higher at $7.77. A report from the ACCC on Monday showed that TPG was the fastest Australian internet service provider for the quarter and improved 2.8 per cent from the previous quarter.
Greencross shares rose 18.9 per cent to $5.40 after the pet and vet retailer recommended shareholders accepts a $5.55 a share offer from TPG Capital. In early 2016, the company turned down a $6.75 a share offer from the private equity firm.
Treasury Wine Estates
Following its recent 20 per cent sell off on the back of its 2017-18 results, Morgan Stanley upgraded its rating on Treasury Wine Estates from ‘equal-weight’ to ‘overweight’. It said the softening provided an attractive entry point to a unique growth story, adding that China growth concerns were overplayed and the multiple earnings drivers available to the company were underappreciated. The broker did recognise that there was some slower growth in China ahead it still said it arrived at a “healthy” 18 per cent FY19-21 EPS compound annual growth rate. It said that there was plenty of drivers outside of China includes FX tailwinds, the launch of French and Italian portfolios, and US distribution changes. The broker retained its $20.00 price target, at a 26.8 per cent premium to its Friday close price of $15.77.
What moved the market
ANZ Job ads
ANZ Australian Job Advertisements increased 0.2 per cent in October, rebounding from a 0.7 per cent fall in the previous month. On an annual basis, growth slowed to 3.6 per cent this month, down from 4.7 per cent in September. This represents the slowest annual growth for Australian job ads since April 2015. “After a couple of weak months it is pleasing to see a lift in ANZ Job Ads in October, albeit only a modest gain,” said ANZ’s head of Australian economics David Plank. “ANZ Job Ads have effectively tracked sideways since early this year.”
The price of crude oil has continued to slip further on Monday, dropping to $US72.37 a barrel, down close to 7 per cent in the past six sessions. Meanwhile, WTI crude was trading at a six month low of $US62.55 on Monday. “Headlines around the lack of OPEC spare capacity have been replaced by fears of Iranian sanctions failing to reduce exports to zero when they return on November 4, said RBC Capital Markets’ oil & gas analyst Ben Wilson in a note on Monday. “Market trepidation has been exacerbated by buoyant US and Russian production levels amid a prevailing risk-off macroeconomic environment.”
The British pound rose against the US dollar on Monday morning, lifting 0.7 per cent to $1.304. A report in the Sunday Times newspaper suggested there has been a major breakthrough in Brexit negotiations, with the EU conceding to UK Prime Minister Theresa May, allowing her to keep all of Britain in a customs union with the EU in order to avoid a hard border between Northern Ireland and the Republic of Ireland. The pound will now be looking forward to Friday’s UK third quarter GDP report. The Bank of England is projected quarterly growth of 0.6 per cent (or 1.5 per cent for the year) due to stronger construction and retail activity.
Despite the Reserve Bank of Australia, Reserve Bank of New Zealand and US Federal Reserve all meeting this week, there is unlikely to be any changes to monetary policy from any central bank. The RBA and RBNZ are a long way off moving rates, according to market forecasts, however the Federal Reserve is expected to raise rates in December. The RBNZ is expected to remain just as cautious as it did at its last meeting, if not more cautious due to soft business confidence in the country. The RBA’s Tuesday meeting is unlikely to draw much attention but its Friday Statement on Monetary Policy when it could upgrade some of its projections.