MID MORNING MARKETS 3-4-18

The ASX 200 is down 22 points in mid morning trade after a huge sell-off in the US. Gold and Materials doing ok but industrials and banks underperforming. Takeover offer for STO and A2M talks about the bigger pie again from Nestle #ausbiz

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TODAY

  • RBA meeting – no change in rates is expected.
  • Economic data – ANZ job ads, AiG manufacturing index.
  • Ex-dividend – Clime Capital (CAM) 1.3c, Freedom Foods Group (FNP) 2.3c

TONIGHT

  • Fed speak – Minneapolis Fed President (alternate voter in 2019) Neel Kashkari; Fed Governor (FOMC voter) Lael Brainard tomorrow at 16:30 ET

COMPANY NEWS

  • Santos (STO) – Harbour Energy, Ltd. Takeover offer of more than $10bn or US$4.98 per share (A$6.501) representing a premium of 28% to the last closing price of Santos of A$5.07 per share on 29 March 2018, or 30% to the one month VWAP of A$5.00. The indicative offer price includes a cash offer price of US$4.70 per share (equivalent to A$6.131 per share); plus a special dividend of US$0.28 per share (equivalent to A$0.371 per share) which is expected to be fully franked. Santos has agreed to allow Harbour the opportunity to undertake confirmatory due diligence, although there was no certainty the proposal would result in a firm offer. Santos rejected an earlier offer (at $4.55) last November
  • A2 Milk (A2M) – Response to recent media speculation. Confirms that it expects broader interest in the A1 protein free category generally given positive developments in the science and the strong growth being achieved by the Company. Says it is uniquely positioned to benefit from expansion of the category over time
  • CSR – Property update. CSR has sold the first tranche of surplus land at Horsley Park, NSW. The sale of the 10-hectare site is expected to generate Property EBIT of approximately $30 millionIt’s the first tranche of a total 30 hectares of surplus land available for sale at Horsley Park
  • Speedcast (SDA) – FY results
  • Newcrest Mining (NCM) – Newcrest recommenced processing at Cadia over the Easter weekend with associated tailings being deposited into the southern tailings facility. Processing is currently at a run rate of approximately 8mtpa due to limitations in infrastructure to the southern tailings facility.

BROKER NEWS

  • Nine Entertainment (NEC $2.27) – Nine has won the exclusive live tennis rights for the 2020-24 seasons for $60m per annum. UBS has a Neutral recommendation with a target price of $1.90. The analyst believes there is potential for the company to monetise the pay-TV component. They question whether NEC will spend another $100m or more to continue with the same cricket broadcasts it has now, suggesting another FTA TV network or consortium may take the cricket rights.

OVERNIGHT

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SPI FUTURES +10

US EQUITIES – S&P500 -59 (-2.23%), Dow Jones -459 (-1.90%) after being down as much as 759, Nasdaq -193 (-1.74%).

Main themes –

  • Trade war concerns were reignited after China imposed extra tariffs on 128 US products in response to U.S. duties on imports of aluminium and steel. The tariffs take effect on Monday and match a list of potential tariffs on up to $3 billion in US goods published by China on March 23.
  • S&P 500 breaches its 200-day simple moving average (2590)
  • The technology sector underperformed, with Amazon (-5.21%) showing notable weakness, dropping to a seven-week low after President Trump promised to intervene in the company’s relationship with the US Post Office, which he says is losing “a fortune” by delivering Amazon packages
  • President Trump threatens to withdraw from NAFTA if Mexico doesn’t do more to curb illegal immigration and the flow of drugs to the US

EUROPEAN MARKETS – Closed for the Easter break

CURRENCIES

  • The US dollar is trading at 89.23.
  • The Aussie dollar is currently trading at US77.26.

BONDS – 2-yr: -2 bps to 2.24%, 5-yr: -1 bp to 2.55%, 10-yr: -1 bp to 2.73%, 30-yr: UNCH at 2.97%

COMMODITIES

  • WTI oil closed down US$1.93 or 3% to US$63.01 a barrel on fading geopolitical risks. Rising Russian production and the US-China trade developments were also negative.
  • Gold futures rose 1.17% to US$1,342.80 on trade tensions.
  • Iron ore was up 50c at US$65.00

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – ISM Index 59.3 (consensus 60.0; prior 60.8) and February Construction Spending (actual 0.1%; Briefing.com consensus 0.5%; prior 0.0%)
  • Chinese PMI data mixed, with the official numbers coming in better than expected while the price Caixin manufacturing number was lower than expected.

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  • President Trump will host Japan’s Prime Minister Shinzo Abe at Mar-a-Lago on 17-18 April to discuss the planned meeting with North Korea’s Supreme Leader Kim Jong-un
  • US reporting season is coming up, with expectations for strong growth. Consensus is for 19% for the year, boosted by tax changes and strong operating performance. .

QUOTE OF THE DAY

“Never confuse the size of your paycheck with the size of your talent.” – Marlon Brando, American actor born this day in 1924. Died 1 July 2004

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