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US EQUITIES – S&P500 -1, Dow Jones +81, Nasdaq +13

Main themes

  • Fed raises interest rates 25 basis points, as widely expected, to 1.25-1.50%
  • Dot plot chart remains the same for 2018 – with 3 rate rises implied – but a more aggressive rate-hike path in the long run was suggested, compared to projections from September.
  • 2 dissenters to the decision – Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari
  • Growth rate forecast for 2018 increased, the FOMC Statement described economic activity as “rising at a solid rate. ” The median forecast for growth this year was raised to 2.5% form 2.4%, next year it was increased to 2.5% from 2.1%, while the longer run projection was left unchanged at 1.8%.
  • The unemployment rate is seen falling to 3.9% next year, compared to 4.1% in the last set of projections
  • House and Senate Republicans agree on final version of a tax reform bill
  • Democrat Doug Jones beat Republican Roy Moore in a bitter US Senate race in Alabama, putting pressure on the US dollar

EUROPEAN MARKETS – STOXX -0.24%, UK FTSE -0.05%, German Dax -0.44% and French CAC -0.51%.


  • The US dollar closed weaker, despite the rise in rates, closing down 0.71% at 93.43. Weaker CPI data the main issue while political developments and pressure on the Republicans to get the tax bill through (Alabama loss) was also a concern.
  • The Aussie dollar is stronger at US76.39c.

BONDS – US bonds rallied after the FED decision – 2-yr: -2 bps to 1.79%, 5-yr: -6 bps to 2.11%, 10-yr: -5 bps to 2.35%, 30-yr: -5 bps to 2.73%


  • WTI oil fell 1.0% or US54c to US$56.60, despite larger than expected drawdown in inventories (actual: -5.1m; expected 3.8m; previous: -5.6m). The UK pipeline is expected to be shut down for several weeks. Offsetting this, weekly US crude production jumped by 73kbpd to 9.78mbpd. US output is approaching the all-time high of roughly 10 million barrels reached in 1970.
  • Gold futures closed up 1.34% to US$1,258.50.
  • Iron ore up US20c to US$67.2
  • LME metals mixed – Copper +0.99%, nickel +0.27%, aluminium -0.35%.


  • US economic data – November CPI 0.4% (consensus: 0.4%; previous: 0.1%) and core CPI 0.1% (consensus: 0.2%; previous: 0.2%). Weaker core number offsetting stronger core PPI yesterday.
  • Eurozone data – Q3 Employment Change +0.4% quarter-over-quarter, as expected (last 0.4%). October Industrial Production +0.2% month-over-month (expected -0.2%; last -0.5%); +3.7% year-over-year (consensus 3.5%; last 3.4%)
  • UK data – October Unemployment Rate 4.3% (expected 4.2%; last 4.3%). November Claimant Count Change 5,900 (expected 3,200; last 6,500). October Average Earnings Index + Bonus +2.5%, as expected (last 2.3%)
  • Italy’s President Sergio Mattarella will dissolve parliament during the final week of December, paving the way for a general election on March 4. Italian debt and equities markets fell.
  • Caterpillar (CAT +3.6%) rose after reporting a year-over-year increase of 26% in November machine sales
  • 21st Century Fox (FOXA -4.0%) following reports that a deal with Walt Disney (DIS 107.61, +0.18) could be announced as soon as Thursday. As a reminder, Disney is reported to be interested in acquiring around $60 billion of assets from 21st Century Fox.


  • Employment data – Consensus is for 19.2K new jobs added after a small increase of 3.7K in October. The unemployment rate is expected to remain unchanged at 5.4%.

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  • Chinese dataIndustrial production, retail sales and fixed asset investment

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  • Japanese data Industrial production, capacity utilisation and the flash reading of the Nikkei Manufacturing PMI.
  • Ex-dividend – Metcash (MTS) 6.0c, Tatts (TTS) 16c, Iron Mountain (INM) 53.27c.,


  • US retail sales, import and export prices
  • Bank of England and ECM meetings
  • UK retail sales


  • Myer (MYR) – Negative Trading Update. Sales and profit have deteriorated in recent weeks (5% in the first 2 weeks in December) following a subdued Q1 performance; The recent trading environment is expected to result in a profit shortfall that is unlikely to be recovered in the remainder of the first half; Reduced foot traffic continues to impact the business; Myer’s online business continues to deliver strong growth but it is not yet of sufficient scale to compensate for the subdued performance of some stores; New Myer strategy is a five year turnaround and we remain focused on the long term transformation which will further strengthen the business to compete. “A significant proportion of annual NPAT is generated during the second quarter. Myer expects 1H 2018 NPAT (pre implementation costs and individually significant items) to be materially below the previous corresponding period. Given the recent sales volatility and considering the magnitude of sales expected in the coming weeks, Myer does not have a reasonable basis to provide a specific profit range for the half or full year at this time.”
  • Woolworths (WOW) – The ACCC intends to oppose the proposed acquisition by BP Australia Pty Ltd of WOW’s network of retail service station sites, saying “We consider that BP acquiring Woolworths’ service stations will be likely to substantially lessen competition in the retail supply of fuel”. Woolworths currently operates 531 sites and has 12 sites in development. BP supplies fuel to approximately 1,400 BP-branded service stations throughout Australia, setting fuel prices at roughly 350 of them. Giving a bit of a boost to Caltex (CTX).
  • Monadelphous (MND) – Contract update – Has been awarded new maintenance and construction contracts in the resources and infrastructure sectors with a combined value of approximately $11m.
  • Nextdc (NXT) – Will wind-up the Asia Pacific Data Centre Trust (AJD). NXT holds 29.2% interest. NXT says it has “elevated concerns over the governance track record of the 360 Capital Group (TGP), which now controls APDC, with limited true independent controls.
  • Domino’s Pizza (DMP) – Announced that the term of its Master Franchise Agreement for Australia and New Zealand has been renewed with no material changes for 10 years until 1 February 2028.
  • A2 Milk (A2M) – Managing Director and CEO succession. Qantas executive Jayne Hrdlicka to take over from the start of FY19.
  • Mineral Resources – Market Update, proposal to acquire AWE and FY guidance confirmation
  • Origin Energy (ORG) – To halve emissions by 2032.
  • Newcrest Mining (NCM) – Highly prospective Tanami Land Package Secured


  • ANZ – upgraded by Shaw & Partners to a Buy
  • Cleanaway (CWY) – Downgraded by Morgans Financial to a Hold

 MID MORNING MARKETS (as at 10:30am)14-12 4.png

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