MID MORNING MARKETS 12-12-19

The ASX200 is down 19 points in early morning trader, after being down as much as 37.  Materials outperforming. Gold finally seeing falls. JBH hit after results. AZJ and BEN also in focus.

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  • Banking Royal Commission gets underway today
  • Chinese data – Foreign direct investment and loan data
  • Results – Ansell Limited (ANN), Aurizon Holdings Ltd (AZJ), Bendigo and Adelaide (BEN), JB Hi-Fi Limited (JHF), SG Fleet Group Ltd (SGF), Transurban Group (TCL), Amcor Limited (AMC), Capilano Honey (CZZ)
  • Dividends – BKI Investment Company (BKI) 3.62c, Oceana Healthcare (OCA) 1.64c

TONIGHT

  • US Treasury budget

COMPANY NEWS

  • JB HI-FI (JBH) –Net profit up 21% on an underlying basis to $151.7m. (Consensus $150m, Citi est $143.5m, CBA est $230m). Revenue up 41%. 1H Australian sales +11%, comparable sales +8%. Dividend 86c (from 72c). Saw strong demand for iPhones, drones and smart speakers at the JB stores and there was a full half year of contribution from the Good Guys (GG). Said consumer electronics were strong over the Christmas Period. Performance since results – January sales rise 6.9% (comparable sales +4.5%), Good guys January sales -3.5% (comparable sales -4.7%). Outlook – Sales growth will exceed gross profit dollar growth. Expects FY NPAT of $235-240m, up 13-16%. Expects FY group sales $6.85bn (JB $4.75bn and GG $2.1bn).

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  • Auziron (AZJ) – Underlying EBITDA down 5% to $485.3m. Net profit up 52% to $281.5m. Revenue fell 3%. Dividend 14c. Reiterates FY18 EBIT guidance of $900-960m. Trimmed above-rail coal guidance to 210.220mt (from 215-225mt) due to revised operating and maintenance plans. Aurizon said that a draft decision by the Queensland Competition Authority (QCA) to limit Aurizon’s earning from its networks during FY18-21 to $3.9bn – nearly $1bn less than what Aurizon believes it should earn – and reflected “a clear approach by the QCA to drive maintenance to the lowest possible cost regardless of the impact on the supply chain and the consequential reduction in volumes,”
  • Bendigo & Adelaide Bank (BEN) – Cash earnings +11% to $225.3. NPAT +11% to $231.7. (Consensus $227m, CBA est $230m). 35c dividend. Income from operations +6% to $842.9m. CET1 capital ratio up 64bp to 8.61%.  Bad debts were up 16% or $6.5m. Impaired assets up 4%.
  • Amcor (AMC) – 1H NPAT up 15% to US$ 329.7. (Consensus US$321m, Citi est US$340m). Dividend 21c. Expects net interest costs of US$195-205m. Expects free cash flow of US$150-250m. Expects modest pretax profit growth in Flexibles. Expects pretax profits in Rigid Plastics broadly in line with year ago.
  • Ansell (ANN) – 1H revenue down 1.2%. Dividend US20.5c. Underlying business performing in line with earlier guidance. Lifted guidance for FY18 EPS to US 96-106c
  • Fletcher Building (FBU) – Trading Halt extended
  • GPT (GPT) – Chairman Robe Ferguson will retire in May, replaced by Viickki Mcfadden

BROKER CHANGES

  • Capilano Honey (CZZ $16.94) Canaccord Genuity has upgraded to a Buy recommendation (from Hold) and raised its target price by 14 % to $18.60
  • AMP – Deutsche Bank has cut its target price by 1.9% to $5.20
  • Myer (MYR 51.5c) – CS has cut its target price by 64% to $20c. UBS has cut its target price by 17% to 50c.
  • AGL – CS has cut its target price by 3.7% to $26.00

RESULTS SCORECARD

A selection showing some of the best and worst price performances since releasing results.

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RBA STATEMENT OF MONETARY POLICY

Great chart from CommSec showing how the RBA’s forecasts have changed over time. Underlying CPI not even to reach the mid-point of its 2-3% target band by June 2020.

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OVERNIGHT

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SPI FUTURES -28

US EQUITIES – S&P500 +39 (+1.49%), Dow Jones +330 (+1.38%). Nasdaq +97 (+1.44%)

Main themes –

  • Trading is still highly volatile – investors search for a market bottom. The range was over 1000 points. -522 to +500. S&P rage was over 100 points. No-one knows whether to buy or sell.
  • Congress passes budget deal that increases spending by $300 billion over two years
  • Amazon – reports it will launch a delivery service to rival UPS and FedEx.

EUROPEAN MARKETS – All weaker. STOXX -1.45%, UK FTSE -1.09%, German Dax -1.25%, French CAC -1.41%. Weekly moves of -5.01% for the STOXX. FTSE -4.72%, DAX -5.30%, CAC -5.33%

CURRENCIES

  • The US dollar closed down 0.13% at 90.32.
  • The Aussie dollar was stronger – up 0.43% to 78.18.

BONDS – 2-yr: -7 bps to 2.06%, 5-yr: -5 bps to 2.52%, 10-yr: -2 bps to 2.83%, 30-yr: UNCH at 3.14%

COMMODITIES

  • WTI was down US$1.95 or 3.2% to $59.20 – the 6th day of fall and the fist dip below US$59 this year. Prices are down around 7% for the week to give the worst weekly performance for 11 months. Brent was down US$1.42 or 2.2% to US$63.39. Weighing on prices – US crude output reached a record high of 10.25mbpd, crude inventories rose 1.9mb, strong US dollar, concerns the OPEC/Russia deal is coming under pressure, and the North Sea’s largest crude pipeline reopened following an outage. The Baker Hughes rig count rose by 26 to 791.
  • Gold down 0.39% at US$1313.90
  • Iron ore down US$1.30 to $76.60.
  • LME metals mostly lower – copper -1.31%, aluminium -2.17%, nickel -1.18%

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – December Wholesale Inventories (actual 0.4%; Briefing.com consensus 0.2%; last 0.6%)
  • Moody’s – warned that a credit downgrade could be in the cards due to the deteriorating fiscal discipline of the US government. It follows Friday’s passage of a spending plan that will increase spending on military and domestic programs by $300bn over two years, leading to increased debt issuance.
  • German politics – Martin Schulz, who was slated to become Germany’s next Foreign Minister, will not accept the post after sharp criticism from former Foreign Minister Sigmar Gabriel.
  • French Industrial Production +0.5% (expected 0.1%; last -0.3%)

LAST WEEK

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NEXT WEEK

Results Season – The major ones are JB Hi-FI (JBH), Bendigo and Adelaide Bank (BEN) on Monday,  Boral (BLD) on Tuesday, CSL and Woodside Petroleum (WPL) on Wednesday, Newscorp (NCM) and Telstra (TLS) on Thursday and Medibank Private (MPL) and Primary Health Care(PRY) on Friday.

  • Monday – Ansell Limited, Aurizon Holdings Ltd, Bendigo and Adelaide, JB Hi-Fi Limited, SG Fleet Group Ltd, Transurban Group, Amcor Limited, Capilano Honey (CZZ)
  • Tuesday – Boral Limited
  • Wednesday – CSL Limited, Dexus, Goodman Group, Insurance Australia, Ridley Corporation, Vicinity Centres, Villa World Ltd., Woodside Petroleum, Orora Limited, Lifestyle Communities
  • Thursday – Evolution Mining Ltd, Healthscope Limited, Inghams Group, Newcrest Mining, Origin Energy, Sonic Healthcare, Suncorp Group Ltd, Telstra Corporation., URB Investments Ltd, Event Hospitality, IOOF Holdings Ltd,, 3P Learning Ltd
  • Friday – Medibank Private Ltd, Super Ret Rep Ltd, Whitehaven Coal, Primary Health Care

Economic Calendar – Domestic employment data will be the main focus, with other key releases including US inflation and retail sales, UK inflation, and Japanese GDP

  • The domestic focus is employment data on Thursday. The consensus is for 9K new jobs to have been added over the month and for the unemployment rate to have fallen to 5.4%. There is also NAB business confidence on Tuesday and Westpac consumer confidence on Wednesday
  • Chinese data is limited to Foreign direct investment and loan data.
  • Japanese GDP is released on Wednesday, with the market consensus for growth of 0.2% for the quarter, or 0.9% annualised. Other Japanese data includes PPI on Tuesday and capacity utilisation, industrial production and machine tool orders on Thursday.
  • In Europe, the second estimate of GDP is released on Wednesday along with industrial production.
  • UK inflation and PPI are out on Tuesday, followed by retails sales on Friday.
  • US data includes inflation and retail sales on Wednesday, with Thursday seeing PPI, the Philly Fe and Empire manufacturing indices as well as capacity utilisation and industrial production, and on Friday we get housing starts and building permits data, along with the Uni of Michigan sentiment index

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QUOTE OF THE DAY

“A man’s friendships are one of the best measures of his worth.” – Charles Darwin, English scientist born this day in 1809. Died 19 April 1882

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