The ASX 200 is down 16 points in mid morning trade after a strong US session, responding to Chinese “open” policies, developments in Russia and Facebook CEO testimony. Materials rallying, banks lagging. APT update and +ve FNP broker comments  #ausbiz



  • Economic data – Westpac Consumer Confidence Index
  • RBA Governor Philip Lowe Speech
  • Chinese – PPI, Inflation Rate, Vehicle Sales
  • Japanese – Bank Lending, PPI , Machinery Orders


  • ECB Draghi Speech
  • UK – Industrial Production and Manufacturing Production, Balance of Trade
  • US – CPI, FOMC meeting minutes and Treasury Budget
  • Earnings season heats up tonight – 1Q profits overall are forecast to have risen 17% from a year earlier. S&P 500 earnings per share to get a 6.9% boost from lower corporate taxes (Donald Trump cut the corporate tax rate to 21% from 35%.) Even without tax benefits, EPS growth should exceed 15%. US Banks in particular should be supported by higher margins, stronger loan growth, better trading revenues, and benign credit quality trends.
    • Wednesday – Delta, Bed, Bath and Beyond
    • Thursday – BlackRock
    • Friday – Citigroup, JP Morgan, Wells Fargo


  • South32 (S32) – Cerro Matoso Litigation Update. S32 has received notification of the decision handed down by the Constitutional Court of Colombia in relation to alleged health and environmental impacts on the community surrounding its Cerro Matoso operation. S32 is appealing the decision and says it can’t provide details on any potential financial or operational impacts as the decision orders various compensatory and remedial activities which are not yet quantifiable.
  • IAG is holding an investor day in Sydney today. A transcript of the Investor Day will be lodged with the ASX at the end of today.
  • QBE Insurance (QBE) – Senior Management changes. Inder Singh has been appointed as Group Chief Financial Officer replacing Michael Ford who is leaving QBE; Peter Grewal as Group Chief Risk Officer; Liam Buckley as Group Head of Culture and Talent; Matt Mansour as Group Chief Information Officer and Anders Land as Group Head of Internal Audit.
  • Speedcast (SDA) – Has expanded capacity on AsiaSat 9 to Asia Pacific though an expansion and renewal agreement with Asia Satellite Telecommunications Company. This upgrade will enhance high quality managed network services for Speedcast’s global customers in the Mobility, Maritime, Energy, Enterprise and Government sectors, and for cellular backhaul solutions to emerging markets. Has also appointed Caroline Scheltinga to the Board.
  • Nib Holdings (NHF) – Presentation to the Morgan Stanley Australia Healthcare & Insurance Private Health Forum. The slides themselves don’t contain a lot of financial information but they should be available on the nib website shortly if you’re interested.


  • Baby Bunting (BBN $1.31) – Administrators have been called in by competitors Baby Bounce and Baby Saving
    • Citi has a Sell recommendation with a target price of $1.20. The Citi analyst notes that the likely inventory clearance presents downside risk to Baby Bunting’s guidance. While the future of Babies R US remains in the balance, Citi does note operational momentum improved in Q3. Over the longer term, consolidation in the sector is seen as a positive.
    • Macquarie has a Neutral recommendation with a target price of $1.35 (from $1.60). Risks in the specialty baby goods sector continue to manifest, and the Macquarie analyst concludes that further consolidation underlines the importance of scale, having improved the market structure and strengthened Baby Bunting’s competitive position. Going forward, the rolling out of Amazon’s “Prime” is likely to mean further competition. A sustained improvement in performance and market conditions is required before the analyst becomes more positive.
    • Morgan Stanley has an Overweight recommendation with a target price of $2.00. The analyst thinks the developments improve BBN’s long-term competitive position. Meanwhile, they consider Baby Bunting’s third quarter trading is solid, with same store sales growth of 4.7%.
  • Coca-Cola Amatil (CCL $8.99) – Morgan Stanley has an Underweight recommendation with a target price of $8.00. The analyst thinks the valuation now looks stretched. After a visit to Indonesia, they suspect there has been little improvement in weak consumer trends so far in 2018. Beverages competition remains fierce and while an earlier Ramadan will pull profit forward to the first half from the second, they expects underlying volume/pricing to remain soft.
  • Genworth Mortgage Insurance Australia (GMA) – UBS has upgraded to a Neutral (from Sell) recommendation with a target price of $2.30 (from $2.50). The analyst remains cautious about a gradual housing market correction but believes operating challenges that were posed by the decline in net earned premium have now played out and are widely appreciated. As such, the Sell thesis is less compelling. They acknowledge that sentiment could push the stock’s value well below fundamentals if key housing data deteriorates. The surplus capital remains a positive and the they continue to expect a capital returns
  • Freedom Foods (FNP $5.41) – Citi has initiated coverage with a Buy recommendation with a target price of $6.70. The positive view is based upon significant margin expansion prospects in the years ahead, supported by operating leverage, protein fractionation Cand a market shift towards branded products. One of the company’s key export markets is China, considered a strong growth opportunity. Citi describes Freedom Foods as a “healthy disruptor”, predicting its focus on healthy foods and beverages makes Freedom Foods ideally positioned to disrupt much larger fast-moving consumer goods (FMCG) companies. The analyst also notes that FNP has just launched its own A2 protein UHT milk product.
  • Navitas (NVT $4.63) – Credit Suisse has an Underperform recommendation with a target price of $4.00. Australasian enrolment growth has slowed to 4% in the first semester. NVT has indicated that the simplified student visa framework is contributing to a bias towards the highest ranking universities, i.e. those that do not partner with Navitas. This compares with 30% growth in higher education commencements by international students in the second half of 2017 on government estimates. The company has confirmed it expects a -$14m adverse impact in FY18 from the loss of some AMEP contract regions. While the analyst expects a return to growth in FY19, they think it is fully valued. Catalysts for an upgrade would include rationalisation of the portfolio within careers & industry and a re-weighting of student visas towards lower-tier institutions.




US EQUITIES – S&P500 +44 (+1.67%), Dow Jones +429 (+1.79%), Nasdaq +144 (+2.07%).

Main themes –

  • China’s President Xi eases trade war tension, discussing plans to further open up the economy, repeating previously-made pledge to reduce barriers to foreign ownership in the auto sector
  • President Donald Trump cancelled his scheduled trip to multiple South American countries to focus on the US response to developments in Syria, following an alleged chemical weapons attack carried out by Syrian President Bashar Assad’s government over the weekend
  • Materials sector rallied – BHP +4.95% and RIO +4.34% in US. Alcoa +6.84%
  • Energy sector benefits from oil price rally while Technology outperforms with Facebook (+4.5%) rallying after Zuckerberg testimony.

EUROPEAN MARKETS – All higher. STOXX 600 +0.83%, UK FTSE +1.00%, German DAX +1.11%, French CAC +0.84%.


  • The US dollar was weaker, down 0.16% to 89.69.
  • The Aussie dollar is significantly higher at US77.65c.

BONDS – 2-yr: +4 bps to 2.32%, 5-yr: +2 bps to 2.62%, 10-yr: +1 bp to 2.80%, 30-yr: UNCH at 3.02%%


  • WTI oil rallied a further 3.3% or US$2.09 to US$65.51 on increasing concerns over possible military action in the Middle East. In other oil news – Bloomberg News reported that Saudi Arabian officials were seeking $80 a barrel on Brent crude to support the valuation of state-owned Aramco before its initial public offering, which is now expected to be in 2019 (from 2H18)
  • Gold futures were 0.22% higher at US$1,343.10 on the higher geopolitical risks.
  • Iron ore was down US50c at US$64.50
  • LME metals continued to rally following sanctions against Russian companies controlled by Putin’s inner circle – Copper +1.68%, nickel +1.94%, aluminium +2.90%


  • US economic data – March PPI 0.3% (consensus 0.2%; prior 0.2%) and core PPI 0.3% (consensus 0.2%; prior 0.2%); Wholesale Inventories 1.0% (consensus 1.1%; prior 0.9%); NFIB Small Business Optimism 104.7 (prior 107.6),
  • Facebook (+4.50%) CEO Mark Zuckerberg has begun testimony on Capitol Hill, fielding questions regarding Russia’s alleged use of Facebook to influence the 2016 presidential election, as well as the Cambridge Analytica data scandal. Zuckerberg is also scheduled to testify before the House Energy and Commerce Committee tomorrow.
  • China – Measures outlined by President Xi yesterday included lowering import tariffs on autos, enforcing legal intellectual property of foreign groups and reducing duties on other consumer products.
  • ECB member Ewald Nowotny said the ECB could begin its rate hike process by lifting the deposit rate to -0.2% from -0.4%. He said the ECB will end its asset purchases this year, but it is too early to tell when rate hikes will begin. The ECB followed Nowotny’s comments by a reminder that he does not speak for the entire governing council
  • European data – French February Industrial Production +1.2% (expected 1.5%; last -1.8%), Italian Industrial Production -0.5% (expected 1.0%; last -1.8%) to be +2.5% year-over-year (expected 4.8%; last 4.4%)


“Just because we can’t find a solution it doesn’t mean that there isn’t one.” – Andrew Wiles, English mathematician born this day in 1953


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