ASX Soars on Bank Rally | James Hardie Jumps

6 February 2019


Global markets continued to trend higher overnight with technology and consumer discretionary stocks lifting Wall Street as upbeat results from Estée Lauder and Ralph Lauren fuelled earnings optimism.

The Australian market soared on Tuesday on the back of a rebound from the major banks (chart below), recording its biggest single-day gain since November 2016. The big four banks led the market rebound, adding more than $19.1 billion worth of market capitalisation to the board alone, as investors reacted to the better-than-expected final report from the Hayne royal commission.

Westpac shares rose +7%, Commonwealth Bank climbed 4%, ANZ lifted 6%, and NAB closed 3.9% higher despite Commissioner Kenneth Hayne singling out the bank by criticising its senior leadership. Financial services companies AMP and IOOF Holdings were among the market's best performers, up +10% and 8% respectively. Some of the stocks would have likely been experiencing a short squeeze (a situation where traders betting a stock will fall have to cover their positions by buying the shares).

Stock in Focus: James Hardie (JHX:ASX)

James Hardie shares rebounded +5% yesterday as the US-exposed building materials company posted its quarterly earnings update. The relief rally came after the companies 3rd quarter results and 2019 financial year guidance reduced concerns of a sharp and painful slowdown in the US home construction market. 

Operating profit was up 8% on the prior period, and group sales of US$586.2m for the quarter represented an 18% improvement. Forward guidance also came in line with market expectations, and chief executive Jack Truong said “We expect to see modest growth in the US housing market to continue through the remainder of fiscal year 2019. The single-family new construction market and repair and remodel market growth rates in fiscal year 2019 are expected to grow, albeit at a growth rate lower than that in fiscal year 2018”.

We currently have a BUY rating on James Hardie which is under review.

Members should look out for a full update on James Hardie to be released in today’s weekly report.

Australia & New Zealand Market Movers

The Australian share market rallied strongly on Tuesday (ASX 200 index +1.95%) as beaten up financial stocks soared. Insurance companies also closed in the green on Tuesday, despite threats the regulatory regime governing insurers would be intensified. Mortgage brokers could not avoid a major sell-off, however, as the commission recommended mortgage brokers be subject to a "best interests" duty and the government said it would look at banning trailing commissions from July next year.

The Reserve Bank of Australia also kept interest rates unchanged at 1.50% yesterday. The RBA did say in final paragraph of its statement that the current interest rate was consistent with sustainable growth in the economy.

The New Zealand market was higher yesterday (NZX 50 index +1.05%) as NZ shares followed Aussie stocks higher. In other news, Hawke's Bay Regional Council, the owner of rival Napier Port, yesterday appointed Deutsche Craigs and Goldman Sachs as joint lead managers of a planned initial public offering.


3 Things Markets Will be Watching this Week

  1. US corporate earnings season continues this week.
  2. Local earnings season also kicks off in Australia this week, with CBA among the heavyweights to release profit figures.
  3. The Reserve Bank of Australia makes an interest rate decision on Tuesday.


Have a Great Day,


The Australian market soared on Tuesday on the back of a rebound from the major banks, recording its biggest single-day gain since November 2016.

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