ASX200 closes flat as banks and industrials drag on gains

The benchmark S&P/ASX 200 is on track to close at its highest level since August 2 with around 20 minutes left to trade. However, the gains have been anything but convincing with the index having tried and failed to close above the 6760 level on five separate occasions, including today, since the middle of September. The closing price on August 2 was 6768.5 and was recorded as the index retreated from the historical all-time high of 6845 reached on July 30. 

The broader All Ordinaries Index is currently on track for its highest close since September 24, siting up 0.2 per cent at 6854.2 in late trade.

Bravura Solutions this morning announced plans to buy software company FinoComp for $25 million and its shares are trading about 4 per cent higher today in a positive response at around $4. The purchase is expected to be earnings accretive in the current financial year and is funded from existing cash. Bravura plans to keep all 35 employees across Australia and the UK. 

"The combination of Bravura and FinoComp unlocks a strategically compelling opportunity for Bravura's market-leading technology to drive more our clients' mission-critical operations,'' Bravura chief executive Tony Klim told shareholders this morning. 

"Combined with FinoComp's cutting-edge technology, the acquisition extends Bravura's wealth management offering.'' 

Interest rate markets are continuing to pare expectations for a follow-up rate cut from the Reserve Bank of Australia (RBA) at its November 5 meeting. The implied probability of a 25 basis point rate cut now sit at just 14 per cent, according to Australian interbank futures, pulling back further have been more than 50 per cent earlier in the month.
Signs of a continued thaw in trade tensions between the United States and China, helping to bolster confidence among investors, has been the main catalyst behind the recent unwind of near-term rate cut bets.
While an additional rate cut in November, taking the cash rate to a new record low of just 0.5 per cent, is now seen as highly unlikely, that could quickly change over the next 24 hours.
Not only will RBA governor Philip Lowe be speaking later this evening but Australia’s September quarter inflation report, highly influential on monetary policy settings in the past, will also be released tomorrow morning.

Despite a strong lead from Wall Street, Asian shares are trading mixed on Tuesday with weakness in China and Hong Kong offset by gains in other major markets. Just before the mid-session break, China’s benchmark Shanghai Composite Index is down 0.3 per cent. Large cap stocks are faring better while small cap indexes such as the CSI500 and ChiNext have fallen by a larger 0.4 to 0.7 per cent. Hong Kong’s Hang Seng, along with the Kospi in South Korea, are also sitting in the red with declines of less than 0.1 per cent.
Helping to offset those losses, Japan’s Topix is leading regional gains with a rise of 0.9 per cent, helped by the Japanese yen falling the lowest level against the greenback since August 1 earlier in the session.
Singapore’s Straits Times Index has also added 0.8 per cent while the NZX50 in New Zealand has lifted by 0.1 per cent.
Ahead of the resumption of trade this evening, US S&P 500 futures are pointing to a small rise of 0.1 per cent on the open. The index closed at record highs on Monday, supported by a raft of corporate earnings beats along with signs of further progress in trade negotiations between the United States and China. 

The local information technology sector continues to outperform, thanks to some local company news from Iress and Bravura Solutions, but also due to a strong performance from the US tech sector overnight. 

Chief investment officer at Munro Partners, Nick Griffin, says the quarterly results from American information technology companies have so far been broadly in line with expectations. Microsoft has been the stand-out due to its growing cloud business Azure. Meanwhile Amazon has been a little disappointing with its same-day delivery offer eating into profit margins.

"[Same day delivery] gains customer loyalty,'' Mr Griffin explained.

"It is very hard for people in Australia to understand because Amazon is not really here in the way they are off-shore. You become very loyal and so you start ordering everything from them.''

Their US distribution network is well developed with an Amazon warehouse within 40 minutes drive of 75 per cent of the population. But in Europe and other countries it is different.

"The margins on their US online retail business are 5 per cent. Their margins internationally are zero as outside the US they are still building out their footprint”

Mr Griffin noted the revenues in the US tech sector are growing at astounding rates, with all the big players bar Apple growing revenues in excess of 10 percent annually with several companies taking in over $US100 billion of sales. But that must be at the expense of other smaller companies.

"The economy is not growing at double digits. But Big Tech is, which means they are still winning and they are still taking market share,'' he said.

Shares of outdoor media company QMS media are up more than 21 per cent after the company confirmed that private equity group Quadrant has made a $420 million cash bid for the company on Tuesday.

The QMS board has said it will back the $1.22 a share bid, plus a 1.3c final dividend, in the absence of a superior offer. Shares which had been trading at 90c last week - before takeover speculation appeared - rose 21 per cent to a high of $1.215 on Tuesday. 

Not everyone would be selling into the offer.  QMS chief executive Barclay Nettlefold, and executive John O’Neill, will retain a combined stake of 14.8 per cent in the business if the acquisition succeeds.

Costa Group boss Harry Debney says the the fruit and vegetable giant has learned an important lesson from the rapid expansion it has pursued since it listed four years ago. The company's fast growth across Australia and overseas included two recent major growth projects undertaken "back-to-back", he said.

"So I guess the lesson from that is to probably space those out a little bit more in future. And also, we didn't expect all of the headwinds we've had this year. So if we'd had a reasonable year this year, there would be no issue," he said.

"So I think going forward, we will probably be even more conservative on our balance sheet management," he said.

Mr Debney made the comments in the aftermath of the company's $176 million capital raising announced late Monday after the market closed, which coincided with its fourth profit warning for calendar 2019.

The company's shares have been in a trading halt for more than a week, since October 21, but are due to resume trading on Wednesday.

Costa, the biggest grower and marketer of fresh produce in the country, has hit a range of agricultural challenges this year including "crumbly" raspberries which are unfit for sale, severe heat and dry conditions which have hurt the quality and size of crops and pressures from low prices for their goods. Addressing speculation in the market before the announcement about Costa's debt levels, Mr Debney said Costa was in "no danger of breaching our debt covenants", even without the capital raise.

"The money is to strengthen our balance sheet, but it's also to allow us to continue to do the right growth projects. So it's basically to strengthen the balance sheet and to ensure that we continue growing at the appropriate rate," he said

Traders are keen in trading software provider IRESS, sending the shares up 5.6 per cent to a one-month high of $12.35. 

The big change today for the company is a price traget upgrade from respected Morgans analyst Ivor Ries. He increases his price target to $15.33 from $15 after it signed a deal with Emergency Services and State Super to provide automated pension services.  Meanwhile Macquarie Bank analysts have cut their price target down to $13. 

IRESS was trading up around $14.58 at the start of May, but has drifted down as low as $10.63 in the past six months