MID MORNING MARKETS 29-01-18

OVERNIGHT

MMM 01

SPI FUTURES +30

US EQUITIES – S&P500 +34 (+1.18%), Dow Jones +224 (+0.85%), Nasdaq +95 (+1.28%). More record highs

Main themes –

President Trump pitches investing in the US to international companies at the World Economic Forum in Davos, Switzerland and also warns about the consequences of unfair trade.
US dollar down half a percent, triggered by Trump’s comments and concerns about a trade war.
Earnings continue to support the market – Intel (+10%) rallies after better-than-expected earnings and revenues; company says it sees no material impact from security concerns. The healthcare sector also boosted from performance of drugmaker AbbVie (13.8%).
US economic data – Q4 GDP-Advance 2.6% (consensus 2.9%; prior 3.2%),

EUROPEAN MARKETS – All stronger. STOXX +0.50%, UK FTSE +0.65%, German Dax +0.31%, French CAC +0.87%.

CURRENCIES

The US dollar closed down 0.05% at 89.02 and its down 1.9% in the week.
The Aussie dollar continues to rally, up at US81.02c at a 3 year high

BONDS – 2-yr: +4 bps to 2.12%, 5-yr: +5 bps to 2.47%, 10-yr: +4 bps to 2.66%, 30-yr: +3 bps to 2.91%

COMMODITIES

WTI oil was up US63c or 1.0% to US$66.14 to a 3-year high, helped by the weaker US dollar. Brent crude futures rose 29c to US$70.71. The Baker Hughes rig count rose by 12 to 759, the biggest weekly increase in the rig count since last March.
Gold futures were down 0.81 to US$1,351.10.
Iron ore down US45c to US$74.60.
LME metals were mixed – aluminium +0.71%, nickel -0.26%, copper -0.74%

ECONOMIC DATA, NEWS & POLITICS

US economic data – Q4 GDP-Advance 2.6% (consensus 2.9%; prior 3.2%). The key takeaway from the report is that consumer spending, which accounts for roughly 70% of GDP, was alive and well in the fourth quarter, increasing 3.8% — the fastest growth rate since the first quarter of 2015. Moreover, business spending also increased, with spending on equipment increasing 11.4% — the strongest since the third quarter of 2014.
Other data – Q4 Chain Deflator-Adv. (actual 2.4%; Briefing.com consensus 2.4%; prior 2.1%), December Durable Orders 2.9% (consensus 0.9%; prior 1.7%), Durable Orders excluding Transportation 0.6% (consensus 0.7%; prior -0.1%), December Advance Intl Trade in Goods -$71.60bn (prior -$69.70bn), and December Advance Wholesale Inventories 0.2% (consensus 0.3%; prior 0.7%)
UK – Q4 GDP +0.5% (expected 0.4%; last 0.4%); +1.5%yoy (consensus 1.4%; last 1.7%)

TODAY

New home sales
Production reports – Iluka (ILU), Atlas Iron

TONIGHT

US personal income and spending
UK house prices

MARKET OVERALL

Good start to the week, although not as strong as suggested by the 30 point rise in the futures. Market dominated by the news of the new CBA CEO, which appears to have disappointed the market, considering there was no “fresh blood” to reset culture and create change.

COMPANY NEWS

CBA – New chief executive. Matt Comyn, effective 9 April. A bit of a surprise to markets who had been expecting an external appointment.
AMA Group (AMA) – Has confirmed a press report that it has received a confidential, nonbinding, conditional, indicative proposal from Blackstone Private Equity in relation to its Panel business. The proposal values the panels business at $530m on a cash-free, debt-free basis. AMA says there is no certainty.
AWE – Mitsui makes a $488m bid (95 c a share), a premium of nearly 15% to a deal agreed upon between AWE and Mineral Resources Ltd. (MIN.AU) in December and well above where shares were trading prior to the approach from China Energy Reserve & Chemicals Group Co.

BROKER CHANGES

Fortescue (FMG) downgraded to neutral at JPMorgan
JB Hi-Fi (JBH) upgraded to overweight at JPMorgan
Nextdc (NXT) – Price target raised 16% by Citi to $7.02
Treasury Wine Estates (TWE) – Macquarie has raised its target price by 14% to $14.64
Health insurance – Citi has raised its target price for Medibank Private (MPL) MPL by 10% to $3.25 and for NIB (NHF) by 14% to $6.00
Retailers – Macquarie has cut its target price for Myer (MYR) by 8.3% to $66c but raised its targets for J B Hi-Fi by 8.7% to $31.30, for Wesfarmers (WES) by 9.7% to $3.50, and for Harvey Norman (HVN) by 3.4% to $4.50
Flight Centre (FLT) – Macquarie has raised its target price by 7.9% to $42.20.
Worley Parson (WOR) – Target price raised by Morgan Stanley by 32% to $16.44.
Whitehaven Coal (WHC) – Upgraded by Morgan Stanley to an Equal weight (from underweight) and target price raised by Morgan Stanley by 35% to $5.05. UBS has also upgraded its target price by 9.2% to $5.35.
CSL – Morgan Stanley raised target price by 3.9% to $132.

MID MORNING MARKETS

MMM 07

CALENDAR

A very big week for data and events with an FOMC meeting and US employment data, as well European GDP, inflation and employment data, and Chinese manufacturing data, while domestically inflation data and the start of results season will be the focal point.

Company reporting season –

Tuesday – Navitas (NVT) and Credit Corp (CCP), both on Tuesday.
Wednesday – GUD*
Thursday – Downer EDI (DOW)*, Tabcorp (TAH)*
Friday – Capilano (CZZ)*,

Economic data – Inflation data on Wednesday will be the main domestic focus. Expectations are for an increase in the quarterly inflation rate to 0.8%, from 0.6%, giving an annual increase of 2.0%, up from 1.8% previously.
Other data includes new home sales on Monday, NAB business confidence on Tuesday, manufacturing data and building permits on Thursday and PPI on Friday.
Chinese PMI data is released, with the official services and manufacturing numbers on Wednesday and the Caixin manufacturing series out on Thursday.
Lots of data out in Japan, including unemployment, retail sales and household spending on Tuesday, industrial production, housing starts and consumer confidence on Wednesday and the Nikkei manufacturing PMI on Thursday.
It’s also a big week in Europe – GDP is released on Tuesday, followed by inflation and unemployment data on Wednesday and the Markit manufacturing PMI on Thursday.
UK data includes house prices, consumer credit, consumer confidence, and manufacturing and construction data.
There is an FOMC meeting in the US but little expectation of any change in rates at this meeting. The main data release is employment data on Friday (consensus 175K), while the other major releases include the ISM manufacturing index on Thursday, both measures of consumer confidence, and factory orders .