MID MORNING MARKETS 20-12-17

OVERNIGHT

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SPI FUTURES -11

US EQUITIES – S&P500 -9 (-0.32%), Dow Jones -37, Nasdaq -31 (-0.44%)

Main themes

  • Technology sector underperformed. FANGS show broad weakness. Apple -1.1% after Nomura Instinet downgraded to Neutral from Buy, saying stock’s gains for the iPhone X supercycle are in the late innings and the supply-demand balance for the iPhone X suggested little space to raise sales estimates for the next quarter.
  • Tax bill passed by the House of Representatives today, expected to be followed by the Senate. Muted respone

EUROPEAN MARKETS – Mostly weaker. STOXX -0.42%, UK FTSE +0.09% the exception, German Dax -0.72% and French CAC -0.69%.

CURRENCIES

  • The US dollar closed little changed 93.45.
  • The Aussie dollar is lower at US76.55c.

BONDS – US bonds lower and yield curve steepened – 2-yr: +3 bps to 1.86%, 5-yr: +5 bps to 2.22%, 10-yr: +7 bps to 2.46%, 30-yr: +8 bps to 2.82%

  • Globally, bonds sold off with Greece’s 10-yr yield up 14 bps to 4.01%. Today’s spike in the Greek 10-yr yield has come after a rally which has seen its yield drop more than 120bp since the start of December.

COMMODITIES

  • WTI oil up 0.52% or US30c to US$57.46, with Brent up US59c to US$63.82. Key factors included support from the continuing North Sea pipeline outage, while forecasts of rising production by the EIA (shale forecast by 94kbpd to 6.41mbpd with total from last week up 780kbpd to 10.02mbpd in 2018) kept prices subdued.
  • Gold futures closed US$1.30 lower at US$1,264.20.
  • Iron ore down US9c to US$73.50.
  • LME metals mixed – Copper +0.54%, nickel -0.63%, aluminium +1.21%.

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – Housing Starts 1.297m (consensus: 1.259m; prior: 1.256m) and Building Permits 1.298m (consensus: 1.280m; prior: 1.316m), Q3 Current Account Balance -$100.60 bn (consensus: -$117.40bn; prior: -$124.40bn)
  • Fed Speak – Minneapolis Fed President Neel Kashkari, who will not be a voter in 2018, appeared on CNBC, saying it can be costly if the Fed raises rates as a way of containing the stock market. San Francisco Fed President John Williams, who will have a vote in 2018, said that two or three hikes are likely in 2018 with another three expected to take place in 2019.
  • Bitcoin – Singapore’s central bank urged “extreme caution” about buying cryptocurrencies. The Monetary Authority of Singapore (MAS) said it is “concerned that members of the public may be attracted to invest in cryptocurrencies, such as bitcoin, due to the recent escalation in their prices…MAS considers the recent surge in the prices of cryptocurrencies to be driven by speculation…The risk of a sharp reduction in prices is high. Investors in cryptocurrencies should be aware that they run the risk of losing all their capital”. MAS noted there was no regulatory protection for investors. Follows warnings from the RBA last week and Denmark’s central bank which referred to bitcoin investing as “deadly”. Bitcoin has just plunged $1,000 in less than an hour…the first one was from earlier this morning…

bitcoin

  • US securities regulators temporarily suspended trading in the shares of The Crypto Co (CRCW.PK), up more than 2,700% this month after its cryptocurrency plans, on concerns about the “accuracy and adequacy” of its publicly-available information.

TODAY

  • Economics – Westpac Leading Index
  • CoreLogic Pain and Gain report – Nearly a quarter of Melbourne council areas has resold for a loss (was just over 21% a year ago)

TONIGHT

  • US existing home sales

COMPANY NEWS

  • Bank sector – New code of conduct for the banking sector. Changes to credit card practices, including a ban on unsolicited credit card increases. Also (taken from ABC news report)
    • Notification when introductory credit card interest free period expires
    • Customers only paying interest on what remains on a credit card and not the full amount of purchase if a loan is being paid down
    • Customers informed when a bank reports a payment default on a loan to a credit reporting body
    • Statement fees for customers who can access electronic statements waived or refunded
    • Banks to assess a customer’s ability to repay the entire amount of a loan within a certain timeframe
    • Customers provided with a list of direct debits that come off cards to better inform customers about their commitments
    • Small business banks to provide a minimum of 30 days notice to change conditions of loans and three months before a loan facility ends
    • Loan guarantors who have not received legal advice will be required to wait three days before signing to help avoid potential financial abuse
    • Conspicuous timing ahead of the bank Royal Commission and not sure these measures weren’t already applied.
  • Sydney Airport (SYD) – Traffic numbers. Total passengers up +3.6% year to date. Up 4.5% in November with 7.1% growth in international numbers. During December China Airlines’ new A350-900 double daily product from Taipei commenced, and is expected to add approximately 200,000 seats annually and drive an estimated additional $48 million in annual visitor expenditure for NSW. Qantas also commenced new direct Sydney-Osaka service, marking a new route for the airport. The three-weekly service will operate on an Airbus A330 aircraft, adding 92,000 seats annually. From January Hainan Airlines will operate a new twice-weekly Haikou-Sydney route on a 292-seat A330-300 aircraft. The service will create an important direct link, for both tourists and businesspeople, between Sydney and the thriving capital off China’s southern island, Hainan.

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  • Cimic Group (CIM) – Class action related to disclosure issues from UGL in December 2016 over a LNG project in the NT. CIM has denied the allegations and plans to defend the class action.
  • Orica (ORI) – Has Purchase of GroundProbe from Crescent Capital for $205m. GroundProbe is a provider of monitoring, measurement for the mining industry. The purchase Is funded by cash from existing facilities and will be earnings accretive in the first full financial year of ownership.
  • Ardent Leisure (AAD) – Will sell its Bowling & Entertainment division for $160 million on a debt and cash free basis to The Entertainment and Education Group (owns Timezone and is jointly owned by Quadrant Private Equity and the Steinberg family. Attractive sale price of 27.1x FY17 Core EBITDA. AAD will be in a net cash position, able to fund growth in the remaining Main Event and Theme Parks division. Shares still under pressure following the fatality at Dreamword last year.
  • Villa World (VLW) – Guidance update. Strategic joint venture delivers upside on Wollert site. 1H18 NPAT increased to $17-18m, FY18 NPAT reaffirmed at least $41.6m
  • Downer EDI (DOW) – Has been awarded a $400m contract for Gruyere Gold Project

MIDDAY MARKETS

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