The ASX200 is down 4 points in early morning trade. Yield sensitive companies some of the worst performers after US bond yields continued to march higher overnight. James Hardie (JHX) narrows guidance, Telstra (TLS) makes impairment charge and Woolworths (WOW) gets an upgrade.



  • James Hardie (JHX) – Results for 9 months to 31 December. Operating profit 33% on the quarter and 6% for the 9 months. Net sales up 9% on the quarter and 7% for the 9 months. North America Fiber Cement Segment volume increased 2% (Q) and 1% (9months); NA Fiber Cement Segment net sales up 7% (q) and 6% (9months); NA Cement Segment EBIT margin of 26.9% for the quarter and 23.8% for the nine months; International Fiber Cement Segment EBIT margin of 22.2% for the quarter and 23.6% for the nine months. Dividend of US10c.  NA cement driven primarily by higher net prices and modest volume growth. Net profit down 12%.

“Our group results for the nine months reflected marginal top line growth, as well as EBIT margin and Adjusted NOPAT that were below our expectations. However, we expect performance in North America to continue to improve throughout fiscal year 2018.”

Outlook – Steady growth in US housing market. Similar growth (as 2017) for construction – 1.2-1.3m starts. NA Fiber Cenet marging 20-25%. Australian net sales expected to trend  with average growth.

Guidance: Notes analyst FY range US$267-278, Company expects US$260-275m (lifting the bottom of its range from $the prio forecast of $245m.  Cautious about the outlook though.

  • Telstra (TLS) – Will take Ooyala goodwill impairment of $273m and write down the value of the US-based intelligent video business to zero. Telstra acquired 9% of Ooyala in 2012 and increased its holding to 98% in 2014 as part of a broader strategy to provide end-to-end solutions for broadcasters and over-the-top companies. Managmeent dows see a future in 2 of the businesses (video player and the workflow management system) but the business has yet to achieve sufficient scale.
  • Gateway Lifestyle (GTY) – Has sold two non-core assets. Bass Hill in Nsw for $10.4m and Rainbow Waters for $8m.
  • Aristocrat Leisure (ALL) – Trading Halt. Expecting a Federl Court judgement at midday regarding the compliance of certain electronic gaming machines with the Federal legislation.
  • Macquarie Atlas Roads (MQA) – Tolls on the APRR and AREA motorway networks will increase by 2.00% and 2.04% respectively.
  • Vocus (VOC) – New director Ms Julie Fahey.


  • South32 (S32 $3.89) – Downgraded to sell at Citi and target price cut 6.7% to $3.50
  • Woolworths (WOW $27.28) – Upgraded to Buy by Citi and target price raised 7% to $30.50
  • Wesfarmers (WES $44.14) – Citi raised target price 1.2% to $41.50
  • Resolute Mining (RSG) – Bell Potter cuts target price 3.2% to $1.82
  • Air New Zealand (AIR $6.08) – Upgraded to Neutral (from underperform) by Credit Suisse, UBS cuts its target price by
  • GDI Property (GDI)  upgraded to outperform at Credit Suisse
  • GPT Group (GPT) upgraded to neutral at Goldman
  • Medibank Private (MPL) cut to underweight at JPMorgan
  • Nufarm (NUF) upgraded to outperform at Credit Suisse
  • Vicinity (VCX) upgraded to buy at Goldman
  • Village Roadshow (VRL) downgraded to lighten at Ord Minnett




US EQUITIES – S&P500 -2 (-0.06%), Dow Jones +37 (+0.14%), Nasdaq -26 (-0.35%).

Main themes –

  • US bond sell-off continues. The 10-year just 2 points under the Aussie yield.
  • Yield moves support the financial sector
  • Mixed US data – productivity disappointed (-0.1% compared to 1.0% expected) but ISM at 59.1 was stronger.
  • PMI numbers around the world were all good – all well in growth territory (above 50) and stable or rising. Coming after the reasonable Chinese number yesterday (51.5), it all bodes well for a continuation of the synchronised world growth story.
  • After hours reports – Apple +0.66%, Amazon +5.99% and Alphabet (Google) -1.00%

EUROPEAN MARKETS – Generally lower. STOXX -0.50%, UK FTSE -0.57%, German Dax -1.41%, French CAC -0.50%.


  • The US dollar closed 0.5% lower at 88.63.
  • The Aussie dollar is also a lower at US80.44

BONDS –. 2-yr: +2 bps to 2.16%, 5-yr: +4 bps to 2.56%, 10-yr: +5 bps to 2.77%, 30-yr: +6 bps to 3.01%


  • WTI was up US$1.07 or 1.7% at US$65.80. Brent was up US76c or 1.1% to US$69.65. The rise was despite news from the EIA that US crude oil production in November surpassed 10mbpd for the first time since 1970. Adherence by OPEC producers included in the deal to curb supply rose to 138 percent from 137 percent in December,
  • Gold futures were up US$4.80 or 0.4% to US$1,347.9
  • Iron ore down US40c to US$72.70.
  • LME metals mostly stronger – aluminium +0.27%, nickel +2.94%, copper +01%


  • US Economic data – Weekly Initial Claims 230K (consensus 238K; prior 231K), Continuing Claims 1953K (prior 1940K), Q4 Productivity-Preliminary -0.1% (consensus 1.0%; prior 2.7%), and Q4 Unit Labor Costs – Preliminary 2.0% (consensus 1.0%; prior -0.1%), Construction Spending 0.7% (consensus 0.3%; prior 0.6%) and December ISM Index 59.1 (consensus 58.5; prior 59.3)
  • European data – PMI numbers all good – all well in growth territory (above 50) and stable or rising. Eurozone January Manufacturing PMI 59.6, as expected (last 59.6), Germany’s January Manufacturing PMI 61.1 (expected 61.2; last 61.2), France’s January Manufacturing PMI 58.4 (expected 58.1; last 58.1), Italy’s January Manufacturing PMI 59.0 (expected 57.5; last 57.4), Spain’s January Manufacturing PMI 55.2 (expected 55.7; last 55.8)
  • UK -January Manufacturing PMI 55.3 (expected 56.5; last 56.2)


With bond yields rising and the US 10 year yield approaching the Aussie, though it was interesting to look at the potential winners and losers in the market. From Credit Suisse – “Those stocks that have under-performed the most when bond yields have increased tend to have a combination of high price/earnings ratios, high payout ratios and weakening growth prospects, or are gold producers.”

CS forecasts a 10 year yield of 2.9% by year end (2.71% currently) but says that bond yields won’t overshoot too far because of increased US bond issuance (to finance the latest tax cuts), and reduce purchases from the Fed, PoBC and ECB (as they decreases balance sheets)


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