MID MORNING MARKET 30-01-18

MID MORNING MARKETS

The ASX is down 34 points at 11am, with all sectors weaker, led by Gold (-1.6%). Earnings reports (NVT, CCP) and production reports (NCM, FMG) dominate, along with a poor trading update from VRL

COMPANY NEWS

Fortescue Metals Group (FMG) – Total iron ore shipments down 4% on pcp to 40.5mt, Cash production costs also down 4% to record $12.08, Cash of US$0.9bn and gross debt of US$4.2bn at 31 December 2017. Looks to be in line with forecasts, although prices released were a little lower. Cost guidance maintained

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Newcrest Mining (NCM) – DecQ production. Gold production 17.2% to 612,695/oz, Cu +34% to 22,321t. All-in sustaining cost $829/oz. In line with guidance

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IOOF (ILF) – FUMAA $120m at 31 Dec. Positive net flows of $895 in 2Q.
Sirtex Medical (SRX) – Shares in a trading halt ahead of a “potential material corporate transaction”.
Navitas (NVT) – Net profit down 53% to $24.7m on revenue down 4.6%. Revenue growth in ongoing operations offset by impact of closed colleges and reduced Australian migrant English contracts.
Village Roadshow (VRL) – Poor trading update. Challenging trading conditions in the two main division. Results for the 1H expected to be substantially below the pcp. Due to weighting of major cinema releases to the 2H and continued impact of the Dreamworld tragedy. Cinema to recover in 2H and improvement in theme parks. expects FY18 attributable NPAT of $12-17m.
Credit Corp (CCP) – 1H NPAT +18% to $29.8m, Australia/New Zealand lending business on track for 30% earnings growth in 2018, US debt buying operation is profitable and will achieve a full year turnaround of up to $3 million, solid core Australia/New Zealand debt buying earnings and collections growth. Proft growth guidance reaffirmed but PDL guidance upgraded.

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Transurban (TCL) – Successfully completes entitlement offer.
Regis Resources (RRL) – December quarter
LNG – Q report

BROKER CHANGES

G8 Education (GEM) – Morgan Stanley has initiated coverage with an Overweight recommendation and a price target of $4.25 (last $3.28)

TODAY

NAB business confidence
Reporting Season – Navitas (NVT) and Credit Corp (CCP)
Japanese household spending, unemployment and retail sales

TONIGHT

US data – consumer confidence
European data – GDP (expectations are for 0.6% and 2.8%yoy, up from 2.6% in the September quarter).

OVERNIGHT

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SPI FUTURES -27

US EQUITIES – S&P500 -19 (-0.67%), Dow Jones -177 (-0.67%), Nasdaq -39 (-0.52%).

Main themes –

US and core European yields continue climbing: German 10-year bonds +7bp and German 5-year yields shifted into positive territory for the first time in over two years.
Apple (-2.07%) lower following reports that it plans to slash iPhone X production by 50% in Q1 due to weak sales. (Apple reports Thursday night – Microsoft, Google and Amazon also report this week).
Dr Pepper Snapple (+22.4%) to $118.50 after agreeing to merge with Keurig Green Mountain. DPS shareholders will receive $103.75 per share in a special cash dividend and will retain 13% of the combined company
Dutch ECB member pushes back against continued easing
European banks lower – Spanish bank Bankia over 3% lower after reporting a 4Q loss.
FBI Director Andrew McCabe, a frequent target of Trump, has stepped down

EUROPEAN MARKETS – Mostly weaker. UK FTSE +0.08% the exception. STOXX -0.19%, German Dax -0.12%, French CAC -0.14%.

CURRENCIES

The US dollar closed up 0.55% at 89.56.
The Aussie dollar has taken a breather, down to US80.91

BONDS – Lower, and worth noting that the 10 year yield is now only 14bp lower than the Aussie 10 year. 2-yr: +1 bp to 2.13%, 5-yr: +4 bps to 2.51%, 10-yr: +5 bps to 2.71% (the first time above 2.7% since April 2014), 30-yr: +5 bps to 2.96%

COMMODITIES – Lower on the back of US strength

WTI was US58c lower, or 0.9%, to US$65.56. Factors included a pull-back in the US dollar and rising US output. Brent was down US$1.06 or 1.5% to US$70.52.
Gold futures were down US$11.80 or 0.90% to US$1,343.
Iron ore down US85c to US$73.75.
LME metals were mostly stronger – aluminium -1.42% the exception, nickel +1.14%, copper unchanged

ECONOMIC DATA, NEWS & POLITICS

US economic data – December PCE Prices 0.1% (consensus 0.2%; prior 0.2%), PCE Prices – Core 0.2% (consensus 0.2%; prior 0.1%), Personal Income 0.4% (consensus 0.4%; prior 0.3%), and Personal Spending 0.4% (consensus 0.5%; prior 0.6%), with savings falling to a 10-year low.
Dutch ECB member Klass Knot said the ECB must end its asset purchase program as soon as possible – the euro has declined regardless, slipping 0.6% to 1.2355.
Reporting season – 78% have reported surpassed earnings expectations, while 77% have beaten revenue estimates, according to FactSet.
Goldman Sachs sees a “high probability” of a stock market correction in coming months.
Market “Fear and Greed index” fell 9 points to 70 after today’s pull-back

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