MID MORNING MARKETS 1-3-18

The ASX200 is down 44 points in mid-morning trade, with Gold the only sector showing strength. Materials and Energy lagging. ORI -2.6% under pressure after profit warning. Lots of ex-divs. BEN 35c, FMG 11c, WOW 43c, RIO 228.5c, REA 47c, PTM 16c #ausbiz

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TODAY

  • Ex-dividend – Auswide Bank (ABA)) 16.0c, Aust Ethical (AEI) 165.0c, Apollo Tourism & Leisure (ATL) 2.0c, Accent Group (AX1) 3.0c, Australian Masters Yield Fund No 4 (AYK) 28.0c, Australian Masters Yield Fund No 5 (AYZ) 53.0c, Blue Sky Alternatives Access Fund (BAF) 1.0c, Baby Bunting Group (BBN) 2.8c, Bendigo Adelaide Bnk (BEN) 35.0c, Capral (CAA) 1.3c, Estia Health (EHE) 7.8c, Fortescue Metals (FMG) 11.0c, FSA Group (FSA) 3.0c, Genworth Mortgage Insurance Australia (GMA) 12.0c, Healthscope (HSO) 3.2c, Kina Securities (KSL) 3.4c, NIB Holdings (NHF) 9.0c, Pact Group Holdings (PGH) 11.5c, Platinum Asset Mgmt (PTM) 16.0c, REA Group (REA) 47.0c, Rhipe (RHP) 0.5c, Rio Tinto (RIO) 228.5c, SkyCity (SKC) 9.2c, Tox Free Solutions (TOX) 5.0c, URB Investments (URB) 0.5c, Wellcom Group (WLL) 35.0c, Woolworths Group (WOW) 43.0c
  • CAPEX data today – The consensus is for 0.9%, a drop from 1.0% in the September quarter.

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  • Chinese Caixin manufacturing index
  • Japanese data – Consumer confidence, Nikkei manufacturing index and capital spending

TONIGHT

  • European – Markit Manufacturing and Unemployment Rate
  • UK – BoE Credit and Lending data and Markit/CIPS Manufacturing PMI
  • US economic data – Personal Income, Personal Spending, PCE Prices, ISM Index, Construction Spending. The ISM index is a significant manufacturing survey which could be highly significant, while the PCE price index is the Fed’s preferred measure of inflation so it should be market moving also if it raises inflationary expectations and a resulting increase in interest rate hike expectations.
  • Fed speak – Fed Chair Jay Powell’s gives monetary policy testimony before Senate Banking Committee at 2am our time, FOMC Vice Chair William Dudley is also speaking.

COMPANY NEWS

  • Orica (ORI) – Profit warning. Now expects to report lower EBIT for 1H. Unplanned plant maintenance at the Yarwun and Kooragang Island plants would take $17m off 1H earnings, while a further $15m is linked to disruptions because of extreme weather in North America, continued challenges in the cyanide market and ongoing underperformance of the Minova business, which services the mining, tunnelling and engineering industries. “Whilst we do not anticipate any interruption to customer supply, there will be a one-off net negative EBIT impact of approximately $19 million for the full financial year, expected to be weighted towards the first half…mainly due to additional freight and sourcing costs,”

There will also be a noncash impairment and increase in provisions of $300m relating to its underperforming Minova business as well as a $55m restatement to the value of its US deferred tax assets.

Its JV operating partner in the Burrup Technical Ammonium Nitrate plant, Yara International ASA, is addressing problems with heat exchangers that have shown some premature cracking.

Forecast a significantly stronger second half, saying continued volume growth, particularly in Australia, and a better operational performance in Latin America and Europe would contribute to a $60m boost to earnings in the second half.

  • Yancoal (YAL) – Net profit of $229m compared to loss of $227m last year. Revenu more than doubled to $2.6bn. Continues to consider timin of future dividends.
  • Aconex (ACX) – All government agencies have now cleared takeover plan by Oracle.
  • Adelaide Brighton (ABC) – Barro Properties Pty Ltd has alerted ABC that Deutsche Bank has issued an offer to purchase up to approximately 19 million shares on market at an offer price of $6.75 per share. Barro said it and its associates have “no current intention to make a takeover offer for Adelaide Brighton”.
  • Mayne Pharma (MYX) – Lauch of methylphenidate extended-release (ER) capsules, 10mg, (the generic vrsion of Ritalin for ADHD) in the United States. It complements the existing methylphenidate product range that includes 20mg, 30mg, 40mg and 60mg dose strengths. US brand sales of methylphenidate 10mg capsules were approximately US$20m for the 12 months ending 31 December 2017.
  • Murray Goulburn (MGC) – The ACCC has concerns about the Saputo deal relating to the Koroit dairy plant and the affect it will have on competition for farmers’ milk in south-west Victoria and south-east Victoria. Anticipated date for the regulator’s final decision is 29 March.

BROKER CHANGES

  • Bega Cheese (BGA) – Bell Potter has cut its target price by 4.7% to $7.85
  • Bingo (BIN) – UBS has raised its target price by 3.2% to $3..2
  • Oil Search (OSH) – UBS has cut its target price by 1.25 to $8.10
  • Harvey Norman (HVN) – UBS has downgraded to a Neutral (from Buy) recommendation and has cut its target price by 18% to $4.10. UBS says the weakness is likely to worsen, driven by costs from additional investment and discounting. A possible slowing housing market in Australia and new competition from Amazon also suggests that “risks to HVN’s earnings are increasing”. UBS thinks the need to invest in initiatives such as a two-hour click and collect service to strengthen the online offer negatively impacted margins.
  • Mesoblast (MSB) – Bell Potter has raised its target price by 4.9% to $3.87.
  • Macquarie Atlas Roads (MQA) – UBS has cut its target price by 3% to $6.45

YESTERDAY

Chinese PMI numbers were disappointing yesterday – The manufacturing PMI fell the most in 6 years and was well below estimates lunar new year holiday which this year fell entirely in February disrupted the production

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OVERNIGHT

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SPI FUTURES -45

US EQUITIES – S&P500 -30 (-1.11%), Dow Jones -381 (-1.50%). Nasdaq -57 (-0.78%)

Main themes –

  • Major falls occurred in last hour of trade.
  • Technical influence – Selling intensified when the S&P slipped below the 50-day moving average
  • Losses were broad-based with all sectors lower but the Energy sector underperformed after a bigger than expected increase in oil stockpiles

EUROPEAN MARKETS – All lower. STOXX -0.71%, UK FTSE -0.69%, German Dax -0.44%, French CAC -0.44%.

CURRENCIES

  • The US dollar was up another 0.32% at 90.65.
  • The Aussie dollar again lower, down 0.33%, at US77.67c.

BONDS – 2-yr: UNCH at 2.26%, 5-yr: -2 bps to 2.65%, 10-yr: -4 bps to 2.87%, 30-yr: -5 bps to 3.13%%

COMMODITIES

  • WTI oil was down US$1.37 or 2.2% at US$61.64 and was down almost 5% over February. US crude inventories rose by 3mb, above expectations for 2.1mb.
  • Gold futures were little changed at US$1319 after the 1.1% fall on Tuesday.
  • Iron ore unchanged at$81.00.
  • LME metals were all significantly weaker – copper -1.28%, aluminium -0.70%, nickel -0.36%

ECONOMIC DATA, NEWS & POLITICS

  • Lowes fell 6.5% after missing q$ earnings estimates and cutting its profit guidance
  • US economic data – Weekly MBA Mortgage Index 2.7% (prior -6.6%), Q4 GDP 2nd est downwardly revised from 2.6% to 2.5% (consensus 2.5%; prior 2.6%) and Q4 GDP Deflator 2nd est 2.3% (consensus 2.4%; prior 2.4%), Chicago PMI 61.9 (consensus 64.5; prior 65.7), Pending Home Sales (actual -4.7%; Briefing.com consensus 0.4%; prior 0.0%)
  • European data – Eurozone February CPI +1.2% as expected (last 1.3%). Core CPI +1.0% as expected (last 1.0%); German Unemployment Change -22,000 (expected -15,000; last -25,000) and Unemployment Rate 5.4%, as expected (last 5.4%). UK GfK Consumer Climate 10.8 (expected 10.8; last 11.0); French CPI -0.1% mom (expected 0.3%; last -0.1%). January PPI +0.1%mom (last 0.0%). French Q4 GDP +0.6%qoq, as expected (last 0.6%) and Consumer Spending -1.9%mom (expected 0.5%; last -1.2%); Italian CPI +0.1%mom (expected 0.3%; last 0.3%); +0.6%yoy (expected 0.7%; last 0.8%)

QUOTE OF THE DAY

“When you’re around me, you’re going to get glitter on you.” – both from Ke$ha, American musician born this day in 1987.

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