MID MORNING MARKETS 13-3-18

The ASX is down 9 points in mid morning trade after a very quiet night in the US. Very little company news. Banking royal commission and “franking credit” cash crack-down the main focus. Aussie politicians appear (even more) stupid today. #ausbiz

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MM5.pngTODAY

  • Exdividend – Apiam Animal Health (AHX) 0.8c, Centrepoint Alliance (CAF) 1.2c, Cleanaway Waste Management (CWY) 1.1c, Duxton Water (D2O) 2.4c, Equity Trustees (EQT) 40.0c, GR Engineering Services (GNG) 6.0c, Grange Resources (GRR) 1.0c, NAOS Small Cap Opportunities Company (NSC) 2.5c, National Tyre & Wheel (NTD) 1.0c, News Corporation (NWS) 9.0c, PSC Insurance Group (PSC) 2.7c, Regis Healthcare (REG) 9.3c, Sims Metal Management (SGM) 23.0c, SRG (SRG) 2.0c, Shaver Shop Group (SSG) 1.8c
  • Economic data – Housing finance, NAB Business Confidence, Westpac Consumer Confidence
  • Chinese Vehicle Sales
  • Japanese PPI

TONIGHT

  • UK Spring Budget 2018
  • US economic data – CPI

BANK ROYAL COMMISSION GETS UNDERWAY TODAY

The NAB case study will be the number of home loans connected to NAB’s Introducer Program. In an open letter to customers and employees, NAB CEO Andrew Thornburn said that “while many of the details of the issue are known, the Royal Commission’s focus when public hearings begin today will demonstrate that what happened “is regrettable and unacceptable.” Thorburn says the problems were identified in 2015 through an internal whistleblower program, and since then it has worked with regulators, made changes to the introducer program and begun customer remediation

LABOR’S PROPOSED TAX CHANGES

The main point for the media is that Labour plans to abolish franking credits cash refunds. Scott Morrison is getting all confused about what is actually happen, saying that pensioners are now paying tax twice. That’s not the situation. It is the tax that the company has paid that they would no longer get back. They are not being asked to pay tax themselves.

Other measures:

  • Increasing the top marginal tax rate to 49.5%.
  • Limiting negative gearing in the future to new homes only.
  • Limiting capital gains tax deductions for investors – halving the CGT exemption for investors who held an asset for a year from 50% to 25%.
  • Clamping down on the tax treatment of trusts, including clamping down on income splitting by imposing a 30% tax on distributions from family trusts.
  • Limiting tax deductions for preparing a tax return to $3000.
  • Labor has also announced the Australian Investment Guarantee, where all businesses in Australia will be able to immediately deduct 20 per cent off any new eligible asset worth more than $20,000.

Labor says about 200K SMSF will be affected, as well as about 1.2m other taxpayers. . The measures will be expected to save about $5.6bn in the first year.

COMPANY NEWS

  • Banking Royal Commission gets underway today
  • Independence Gold (IGO) – Euroz conference
  • Aurizon Networks (AZJ) – Response to QCA UT5 draft decision

BROKER CHANGES

  • Newcrest Mining (NCM $20.60) – Macquarie has downgraded to an Underperform (form Neutral) recommendation following the failure of the tailings dam wall at Cadia and suspension of operations, which they see as a big concern. The analysts sees at least a 6 week shutdown and has cut the target price from $23 to $19. Ord Minnett thinks there will be a 10% cut in output which reduces FY18 EBITDA by 6%. The analyst doesn’t think there will be a long-term impact and has kept the Accumulate rating and $25 target.
  • Domino’s Pizza (DMP $43.91) – Morgan Stanley has an Overweight recommendation with a target price of $55. Some bullish research after a visit to DMP’s European operations, where DMP has guided to 2500 stored by 2025 versus 891 today.
  • Rural Funds Group (RFF $2.14) – UBS has initiated coverage with a Buy recommendation with a target price of $2.39. The analyst notes that RFF is one of the few farmland real estate investment trusts globally and the only one on the ASX. With strong momentum and compelling growth prospects, the analyst sees acquisitions, specifically cattle properties in northern Queensland, should provide significant accretion over time.
  • Wisetech Global (WTC) – Macquarie has raised its target price by 61% to $11.39, saying WTC is a high-quality growth business capable of long value creation through organic growth and acquisitions. Its industry leading products should continue to win market share from legacy in-house systems and from competitors.

OVERNIGHT

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SPI FUTURES +3

US EQUITIES – S&P500 -4 (-0.01%), Dow Jones -157 (-0.62%), Nasdaq +28 (+0.36%)

Main themes –

  • It was a quiet day on Wall Street. Following the rally in Friday markets on the good employment reports.
  • Volume was light

EUROPEAN MARKETS – Mostly stronger. STOXX +0.25%, UK FTSE -0.13% the exception, German Dax +0.58%, French CAC +0.04%.

CURRENCIES

  • The US dollar was down 0.19% at 89.92.
  • The Aussie dollar is little changed at US78.72c.

BONDS – 2-yr: -1 bp to 2.26%, 5-yr: -1 bp to 2.64%, 10-yr: -2 bps to 2.87%, 30-yr: -3 bps to 3.13%

COMMODITIES

  • WTI oil was down US68c or 1.10% at US$61.36. The Baker Hughes rig count fell on Friday for the first time in 2 months, down 4 to 796, although this is higher than the 617 rigs this time last year.
  • Gold futures were down US$3.20 or 0.2% at $1320.80.
  • Iron ore fell US$3.00 or nearly 4% to $73.00.
  • LME metals were all weaker – copper -0.70%, nickel -1.33%, aluminium -1.37%.

ECONOMIC DATA, NEWS & POLITICS

  • New highs for Apple and Amazon.
  • There are reports Larry Kudlow is the front runner to replace Gary Cohn as President Trump’s top economic advisor. Mr. Kudlow is a proponent of free trade and served in the Office of Management and Budget during the Reagan administration’s first term.
  • Donald Trump has issued an executive order blocking Broadcom from acquiring Qualcomm – a $117bn deal that had been subject to US government scrutiny – on national security grounds.

QUOTE OF THE DAY

“Live rich, die poor; never make the mistake of doing it the other way round.” – Walter Annenberg, American businessman born this day in 1908. Died 1 October 2002.

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