RunningMoney

The ASX is down 39 points in mid morning trade. Materials, Gold & Energy up, everything else lower. Banks under pressure. All about the FOMC, $US and employment data ahead. FLT and CAR ex-div #ausbiz

TODAY

• Ex-dividend – Anglogold (AGG) 1.2c, Big River Industries (BRI) 3.5c, Carsales.com (CAR) 20.5c, Flight Centre Travel Group (FLT) 60.0c, Huon Aquaculture Group (HUO) 5.0c, Joyce Corporation (JYC) 5.0c, Maxitrans (MXI) 2.0c, Ryder Capital (RYD) 1.0c, SDI (SDI) 1.1c
• Employment data today

Japanese  – Nikkei Manufacturing PMI Flash, All Industry Activity Index,

TONIGHT

• Europe – Markit Composite PMI Flash, Current Account, Markit Manufacturing PMI Flash, Markit Services PMI Flash
• UK Retail Sales
• BoE Interest Rate Decision
• US economic data – FHFA Housing Price Index and Leading Indicators

COMPANY NEWS

• Bank Royal Commission continues today – Yesterday the focus was on administration failures and mistakes in interest rate calculations with mortgage offset accounts.
• Washington H. Soul Pattinson and Company Limited (SOL) – Interim results.
• Sigma Healthcare (SIG) – FY results. Underlying NPAT down 10.5% to $59.9 on revenue down 5.4%. Excluding Hep-C sales revenue was steady with growth able to offset other conditions. Operating costs up 4.0%. EBIT margin down from 2.3% to 2.2%. Current guidance confirmed.

• Brickworks (BWK) – 1H results. Underlying NPAT up 4.0% to $115.6m on revenue up 7.0%. Outlook – “Building activity across the east coast remains elevated and continues to drive strong demand. In New South Wales and Victoria there remains a significant pipeline of work that has translated to a very strong order book in these states. Conditions in Western Australia remain difficult, although they appear to have bottomed, and a range of restructuring initiatives and capital projects has resulted in improved performance that is expected to continue in the second half.” Overall the short to medium term outlook for Building Products remains strong, with price increases already implemented, the strong order book on the east coast, and the restructuring initiatives undertaken in the west expected to underpin 2018 earnings. The outlook for the Property Trust is also strong, with developments at Oakdale in New South Wales and Rochedale in Queensland expected to drive growth in rent and asset value over both the short and longer term.”
• Reliance Worldwide (RWC) – 1,440,000 ordinary shares will be released from voluntary escrow on 11 April 2018.
• Lynas Corporation (LYC) – Nasdaq Virtual Investor Conference
• Cromwell Property Group (CMW) – Announced an offer of €230 million + €20 million (upsize option), seven year, guaranteed convertible bonds due 2025 (2025 Convertible Bonds) to be issued by Cromwell SPV Finance Pty Ltd (Issuer). The proceeds will be used to fund the concurrent repurchase of up to €150 million of the Issuer’s existing convertible bonds maturing in February 2020 (2020 Convertible Bonds), to repay other financial indebtedness and for general corporate purposes.

BROKER CHANGES

MYER (MYR 41c) – 1H profit of $40.1m, at the top end of the guidance range of $37-41m. Non-cash impairment charge of $500.2 million (post-tax) on the carrying value of Myer goodwill and brand name intangibles on the Company’s balance sheet and other asset impairments of $6.4m (post-tax). Implementation costs were $9.7 million (posttax). No dividend. Sales down 3.6% or 3.0% on a comparable store basis. Online sales grew 48.9% to $105.2m but this is still only 6.1% of sales. Margins declined by 5.5%. Outlook: CEO search ongoing and sales have improved in the second-half but week-to-week volatility remains. Expect a bit of a relief rally in the shares today as the numbers were not as bad as feared but ultimately without a CEO there shold be some caution ahead. Was up 6.4% at best. Analyst view today

• Citi has a Sell recommendation with a target price of 41c (from 50c). Cutting the dividend will enable debt facilities to be refinances and create more headroom for covenants. The analyst believes the low-margin online channel is cannibalising the bricks and mortar sales, and the only solution is to reduce floor space significantly.
• Macquarie has a Neutral recommendation with a target price of 50c (from 60c). While a non-event due to recent downgrades, the analyst says the near term earnings outlook remains weak. The focus is now on product, price and customer service and they think the last 2 should be a given. With debt covenant breach levels not far off, they think investment capacity and thus turnaround potential are limited and they see risk to the downside. They’ve kept a Neutral recommendation due to the current price and (limited) potential for corporate activity.
• UBS has a  Sell recommendation with a target price of 40c (from 50c). Cash flow may have improved but there was little else that the analyst saw as positive, with a step away from medium-term targets and suspended dividend. They have downgraded FY18-20 earnings estimates by -5-19% and continue to believe MYR will struggle to sustainably grow earnings over the medium term.

Rio Tinto (RIO) – Yesterday Rio Tinto announced it will sell its interest in Hail Creek coal mine and the Valeria coal development project in Queensland to Glencore for $1.7 billion. The sale includes Rio Tinto’s 82.0% interest in the Hail Creek operating mine and its 71.2% interest in the Valeria project. Rio Tinto will use some of its surplus liquidity to further reduce gross debt, today launching a bond purchase and redemption plan for up to $2.25 billion equivalent.

Macquarie has an Outperform recommendation with a target price of $94.00. The aggregate sale price achieved for the Hail Creek and Valeria coal project stakes was 40% higher than the analyst’s forecast and well ahead of book valuation and implies a greater valuation for Kestrel.

UBS has a Buy recommendation with a target price of $88.50. UBS expects another round of shareholder returns via a buy-back once cash is received.

Oil Search (OSH) – Macquarie has an Outperform recommendation with a target price of $8.10. After a site visit to PNG LNG, post earthquake, the analyst is more confident on the timeline for restart and believes the company will not have to raise extra capital. Catalysts ahead include Alaska drilling results, a P’nyang resource upgrade and the PNG government’s response and terms.

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OVERNIGHT

SPI FUTURES -8

US EQUITIES – S&P500 -5 (-0.18%), Dow Jones -45 (-0.18%), Nasdaq -19 (-0.26%).

Main themes –

• FOMC raises fed funds target range 25 bps to 1.50% – 1.75%, as expected. The accompanying dot plot showed that policymakers see two more rate hikes in 2018. But they now see four rate hikes in 2019—up from three in previous forecast.
• Central bank officials also raised their GDP forecast and raised a flag about President Donald Trump’s trade policies.

EUROPEAN MARKETS – STOXX -0.16%, UK FTSE -0.32%, German Dax +0.01%, French CAC -0.24%.

CURRENCIES

• The US dollar sold off, down 0.74% to 89.71. This was an interesting move since the FOMC decision and statement was in line with expectations and the FED increased its economic growth and interest rate projections…maybe the market was expecting even more!
• The Aussie dollar has rallied to US77.66.

BONDS – 2-yr: -3 bps to 2.31%, 5-yr: +2 bps to 2.70%, 10-yr: +3 bps to 2.91%, 30-yr: +1 bp to 3.13%

COMMODITIES

• WTI oil rallied US$1.63 or 2.6% to US$65.17 a barrel, a 6 week high. The EIA reported a surprise 2.6mb draw in crude inventories (2.5mb increase had been expected.) Concern also persists over possible disruption to Middle East supply.
• Gold futures were up 1.17% at $1327.00
• Iron ore was up US$1.10 to US$67.90.
• LME metals were mostly stronger – copper +0.56%, nickel +0.04%, aluminium -0.67% the exception.

ECONOMIC DATA, NEWS & POLITICS

• Powell Comments on trade – “A number of participants in the [Federal Open Market Committee] did bring up the issue of tariffs. If I could summarize what came out of it was, first, there’s no thought that changes in trade policy should have any effect on the current outlook.” However, “a number of participants reported that about their conversations with business leaders around the country and reported that trade policy has come a concern going forward for that growth.”
• US economic data – MBA Mortgage Applications Index -1.1% (prior +0.9%), Q4 Current Account Balance -$128.2B (consensus -$125.0B; prior -$101.5B), Existing Home Sales 5.54M (consensus 5.42M; prior 5.38M)
• UK – Average Earnings Index (+ Bonus) +2.8%yoy (expected 2.6%; last 2.7%), February Claimant Count Change 9,200 (expected -3,100; last -1,600), March CBI Industrial Trends Orders 4 (expected 9; last 10), and January Unemployment Rate 4.3% (expected 4.4%; last 4.4%)

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QUOTE OF THE DAY

“You’re the luckiest person in the entire world if you know what you really want to do, which I was lucky enough to know when I was very young. And you’re the luckiest person in the world if you can then make a living out of it.” – Andrew Lloyd Webber, British composer born this day in 1948. I’m feeling lucky today, Andrew…punk (think I’m mixing up my quotes).