MID MORNING MARKETS 7-3-18

The ASX is down 40 points in mid-morning trade. Cohn resignation weighing on market. All except Gold in the red. Another daily “dearth” of news…corporate news anyway. GDP out later in the day. #ausbiz MMM6MMM7MMM8TODAY

  • RBA Governor Philip Lowe speaking at The Australian Financial Review Business Summit – said the “economy is moving in the right direction” and that growth will be stronger in 2018 than in 2017, with lower unemployment
  • Ex-dividend – Ariadne (ARA) 1.0c. Blackmores (BKL) 150.0c. Brambles (BXB) 14.5c, Corporate Travel Management (BXB) 15.0c, Glennon Small Companies (GC1) 1.0c, Hansen Technologies (HSN) 3.0c, IDP Education (IEL) 8.5c, iSentia Group (ISD)0.7c, Maca (MLD) 3.0c, Monadelphous (MND) 30.0c, OceanaGold (OGC) 1.3c, PM Capital Global Opportunities Fund (PGF) 1.8c, Qantas Airways (QAN) 7.0c, Qube Holdings (QUB) 2.7c, RedHill Education (RDH) 2.0c, Scottish Pacific Group (SCO) 9.0c, Sunland Group (SDG) 5.0c, Select Harvests (SHV) 5.0c, Think Childcare (TNK) 6.0c, Treasury Wine Estates (TWE) 15.0c, Universal Coal (UNV) 1.0c
  • Domestic data – AIG Construction Index and the big one – GDP Growth Rate. Estimates have been coming down due to weaker partial indicators.

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  • Chinese – Foreign Exchange Reserves
  • Japan – Coincident Index, Leading Economic Index

TONIGHT

  • European GDP Growth Rate 3rd Est
  • UK – Halifax House Price Index
  • US data – ADP Employment Change, Productivity-Rev., Unit Labor Costs – Rev., Trade Balance, Consumer Credit
  • Fed Speak – Governor Lael Brainard, Dallas Fed President (non-voter) Robert Kaplan, Atlanta Fed President (FOMC voter) Raphael Bostic, New York Fed President (permanent voter) William Dudley

COMPANY NEWS

  • Corporate Travel (CTD) – Morgan Stanley Asian presentation
  • St Barbara Mines (SBM) – Short term gold protection to December 2019
  • Commonwealth Bank (CBA) – To raise $750m PERLS X capital notes offer. Will qualify as Tier 1 capital. Will fund bank’s business.

BROKER CHANGES

  • Retail Food Group (RFG) – UBS has downgraded to a Sell (from Neutral) recommendation and cut its target price to $90c (from $2.15). The analyst has downgraded EPS estimates by 50-60% from FY20 onwards. They note the pressure on major shopping centres, particularly the increasing amount of floor space dedicated to competing food offerings, and think the new banking covenants will be difficult to comply with. There is nothing in the chart below to get excited about just yet….

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  • Nufarm (NUF) – Citi has upgraded to an Add (from Hold) recommendation) and raised its target price to $9.50 from $9.07. The analyst believes Nufarm is entering an era of continuous double-digit percentage growth (three year CAGR of 11%), due to higher margins from recent acquisitions and the launch of Nufarm’s long-awaited Omega-3 canola product. They’ve raised earnings estimates and think interim financials should confirm a strong rebound in profits. There is also an Investor Day scheduled for May. MACD indicator still falling although RSI is approaching oversold levels. Technically there is no need to be there just yet.

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OVERNIGHT

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SPI FUTURES +3

US EQUITIES – S&P500 +7 (+0.26%), Dow Jones +9 (+0.04%), Nasdaq +41 (+0.56%)

Main themes –

Trade war concerns continue to recede as congressional Republicans challenge President Trump about his proposals – however there were also concerns that Gary Cohn, Trump’s chief economic adviser, could resign over the tariff proposal (which .

North Korea is reportedly open to discussing an end to its nuclear program

EUROPEAN MARKETS – Mostly higher. STOXX +0.13%, UK FTSE +0.43%, German Dax +0.19%, French CAC +0.06%. Italy +1.75%.

CURRENCIES

  • The US dollar was down 0.55% at 89.59 on the North Korean developments.
  • The Aussie dollar is 0.81% higher at US78.27c.

BONDS – 2-yr: +1 bp to 2.25%, 5-yr: UNCH at 2.64%, 10-yr: UNCH at 2.88%, 30-yr: -1 bp to 3.14%%

COMMODITIES

  • WTI oil was little changed, up US3c at US$62.60.
  • Gold futures were up 1.2% to US$1335.20 on the weaker US dollar and uncertainty on trade policy.
  • Iron ore was down US$1 at $79.00.
  • LME metals were mostly stronger – copper +1.36%, nickel +1.86%, aluminium +0.07%%.

ECONOMIC DATA, NEWS & POLITICS

  • North Korea – Chung Eui-yong, head of the South Korean presidential National Security Office, returned from a visit to the north and reported that North Korea said there was no need to keep its nuclear programme…as long as there was no military threat against it and the safety of its regime was secured.
  • US economic data – January Factory Orders -1.4% (consensus -1.3%; prior 1.8%). It was the first drop in 6 months.
  • European data – Eurozone Retail PMI 52.3 (last 50.8)
  • CVS will sell $44bnin investment grade bonds to fund its acquisition of Aetna. It’s the largest corporate debt sale since Anheuser-Busch issued $46bn of debt in 2016.

QUOTE OF THE DAY

“Succeeding is not really a life experience that does that much good. Failing is a much more sobering and enlightening experience.” – Michael Eisner, American businessman born this day in 1942.,

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