MID MORNING MARKETS 9-02-18

Deadcat disappointment delivers day’s dummyspit. The ASX 200 is -96 in early trade, Gold the only thing with shine. Everything else being dumped. Another shocker downgrade for MYR. SFH strong on results. REA result and MFG ex-dividend. Very little green on the screen. #ausbiz

MMM@MMM7MMM8


TODAY

  • Ex-dividend – Magellan Financial Group (MFG) 44.5c
  • Chinese inflation and PPI
  • Results – REA Group (REA).

TONIGHT

  • US Wholsesale inventories

 COMPANY NEWS

  • REA Group (REA) – 1H EBITDA up 21% to $242.8m, revenue up 21% to $406.8m, net profit up 21% to $147.3m, interim dividend of 47.0 cents per share, up 18%, EPS up 21% to 111.8 cents. Slowing EBIT growth due to different expense timing and earlier Easter. Expects EBITDA growth to be slower in 3Q. Expects revenue growth to exceed cost growth over FY. Expects 1H fall in new projects to continue, hurting developer business. Expects 1H revenue to exceed 2H.
  • Specialty Fashion Group (SFH) – 1H results and appointment of David Bracken as CEO and MD. Underlying profit down 66.5% to $6.2m. Underlying earnings down 39% to $18.5m. This was above the trading range provided in October. Revenue -7.2%. Opened 12 stores (mostly City Chic and closed 56 (mostly Millers and Crossroad.
  • Myer (MYR) – Another shocker of a trading update. “As a result of the further deterioration in trading, Myer anticipates 1H 2018 NPAT to be between $37-41m pre implementation costs and individually significant items…Myer does not anticipate an improvement in retail trading conditions during the second half and, given the recent sales volatility, Myer does not have a  reasonable basis to provide a specific profit range for the full year 2018 NPAT at this time.”

BROKER CHANGES

  • Village Roadshow (VRL $3.16) – Citi has upgraded to a Neutral recommendation but cut its target price by 2.8% to $3.45,
  • Macquarie on the Oil Sector – Santos (STO $4.95) target price cut 6% to $5.35, Oil Search (OSH $7.44) target price cut 3% to $8.40; Woodside Petroleum (WPL $31.92) target price but 2% to $29.50.
  • Class (CL1 $2.74) – Ord Minnett has cut its target price by 2.8% to $3.50.
  • Tabcorp (TAH $4.76) – Citi has cut its target price by 2.5% to $5.85. UBS has upgraded to a Buy recommendation but cut its target price 7.1% to $5.20.
  • Michael Hill (MHJ $1.13) – Citi has cut its target price by 3.1% to $1.55
  • CIMIC (CIM $47.16) – Citi has raised its target price by 22% to $36.35
  • Ansell (ANN) – UBS has upgraded to a Neutral (from Sell) recommendation and raised its target price by 24% to $26.00
  • Rio Tinto (RIO) – UBS has raised its target price by 7.6% to $85.00
  • AGL Energy (AGL $22.01) – Citi has downgraded to a Sell from Neutral recommendation and cut its target price by 19% to $20.54. Macquarie has cut its target price by 4.3% to $23.01. UBS has cut its target price by 6.8% to $27.50. Morgan Stanley has cut its target price by 3.3% to $24.28
  • Amaysim (AYS $1.75) – Macquarie has downgraded to a Neutral (from Outperform) with a target price cut 17% to $1.95.
  • Janison Education (JAN 41c) – Bell Potter has initiated coverage with aa Buy recommendation and a target price of 55c
  • AMP – Bell Potter has cut its target price by 1.7% to 3.97. Macquarie has upgraded to an Outperform (from Neutral) recommendation with a target price up 3.7% to $5.65.
  • Wagners (WGN $3.99) – Macquarie has initiated coverage with an underperform recommendation and a target price of $3.25.
  • Infigen Energy (IFN $61c) – Macquarie has initiated coverage with a Neutral coverage and a target price of 69c.
  • Imdex (IMD) – Canaccord Genuity has raised its target price by 9.5% to $1.15.

OVERNIGHT

MMM1

SPI FUTURES -131

US EQUITIES – S&P500 -101 (-3.75%), Dow Jones -1,003 (-4.15%). Nasdaq -275 (-3.90%).

Main themes –

  • Trading remains volatile
  • House Speaker Paul Ryan said there are enough votes in the house to pass the two-year budget deal that will increase spending
  • BofE left rates unchanged but sets scene for a hike in August.
  • US earnings – Twitter (+12.2%) after reporting better-than-expected earnings and revenues and achieving GAAP profitability for the first time ever. Tesla (-8.6%) despite reporting above-consensus earnings and saying that it’s on track to meet its goal of producing 5,000 Model 3 cars per week by the end of June.
  • Comments from Fed officials raising concerns about a policy mistake (see below)

EUROPEAN MARKETS – All weaker. STOXX -1.60%, UK FTSE -1.49%, German Dax -2.62%, French CAC -1.98%.

CURRENCIES

  • The US dollar closed up a touch at 90.30.
  • The Aussie dollar continues to weaken – down 0.27% to 77.87.

BONDS – 2-yr: UNCH at 2.13%, 5-yr: UNCH at 2.57%, 10-yr: +1 bp to 2.85%, 30-yr: +2 bps to 3.14%

COMMODITIES

  • WTI was down another 1% or US64c at US$61.15. Brent was down US72c or 1.1% to US$64.79. US crude output reached a record high of 10.25mbpd, crude inventories rose 1.9mb and the North Sea’s largest crude pipeline reopened following an outage. Higher imports into China (a record 9.57mbpd) provided a bit of support.
  • Gold futures were up 0.41% to US$1,320.00
  • Iron ore up 35c to $77.90.
  • LME metals mostly lower – copper -0.51%, aluminium +0.56%, nickel -2.62%

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – Weekly Initial Claims 221,000 (consensus 234,000; prior 230,000) and Continuing Claims 1.923m (prior 1.956m)
  • Fed Speak – Retiring New York Fed President William Dudley called the recent turbulence, “small potatoes”, hinting at a change of tone at the Federal Reserve. (The GFC was accompanied by almost-daily verbal support from Fed officials). Dudley also acknowledged up to four rate hikes could take place in 2018.
  • The Bank of England voted unanimously to keep its key rate and asset purchase program at their respective 0.5% and £435bn, which was expected. The BoE’s policy statement set the stage for a rate hike in August.

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