MID MORNING MARKETS 8-5-18

The ASX200 is up 22 points in mid-morning trade after good offshore leads. Healthcare in the lead after HSO strategic interest. Telcos dragging. More board action at AMP. Trading downdates from BBN, NUF and FWD. Retail sales and Chinese trade data today and budget tonight. #ausbiz

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TODAY

  • Economic data – Retail Sales. (Consensus is for 0.3% growth after a 0.6% rise last month)
  • Ex-dividend – Sandon Capital Investments (SNC) 3.5c
  • Chinese trade data

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Japanese data – Household Spending

TONIGHT

  • German – Current Account, Industrial Production, Balance of Trade, Imports/Exports
  • UK – Halifax House Price Index
  • US economic data – NFIB Small Business Optimism Index, JOLTS – Job Openings
  • Fed Speak – Fed Chairman Jay Powell

COMPANY NEWS

  • AMP – 3 non-executive directors to step down from the AMP Limited Board ahead of the AGM on Thursday.
  • CYBG (CYB) – Made an offer for Virgin Money. 1.1297 new CYBG shares for each Virgin Money share.
  • ANZ –  Has finalised its reinsurance arrangements with Zurich and has received around $1 billion of reinsurance proceeds. This results in an increase of ~25bps in ANZ’s APRA Common Equity Tier 1 capital
  • Exlipx (ECX) – Results. NPATA up 23% to $38.5. Dividend 7c Reaffirmed full year guidance for 27% to 30% growth in NPATA and 10% to 12% growth in Cash EPS.”
  • Nufarm (NUF) – Downgrades guidance for FY18  underlying EBIT to +5% on FY17 ($302.3m) from 5-10% due to  challenging climatic conditions across the key regions of Australia/New Zealand, Europe and North America.
  • Stockland (SGP) – Has sold Stockland Wallsend in Newcastle, which is unconditionally contracted for $81 million, and an office building at 77 Pacific Highway in North Sydney, which is unconditionally contracted at $112.35 million.
  • Healthscope (HSO) – NorthWest Healthcare Properties REIT (NWH) has acquired a 10% strategic interest in HSO at $2.39 (through a derivative with Deutsche Bank). Northwest says the acquisition of HSO’s “underlying hospital related real estate is of interest to NWH and Vital Healthcare Property Trust (Vital) in line with their long term strategy to invest in healthcare real estate assets in the Australasian market. NWH and Vital currently intend to pursue any potential Healthscope real estate acquisition jointly, with scope to introduce other capital partners as appropriate”.
  • Fleetwood (FWD) – Earnings update. Now expects 2H FY18 underlying EBIT around $1.5m, bringing full year underlying EBIT for FY18 to approximately $5.5 million. (Was for underlying full year EBIT result marginally ahead of FY17 or $14.6m). Driven primarily by ongoing losses in Caravan Manufacturing (RV) and smaller secondary effect in Modular Accommodation related to timing of capital spend in the education sector and lower volume from the affordable retirement sector. Review of the business ongoing.
  • Baby Bunting (BBN) – Sales and gross margin performance has been adversely affected by the distressed trading of competitors and the liquidation of stock and FY2018 EBITDA now expected to be in the range of $18 and $20 million (excluding employee equity incentive expenses). After comparable store sales growth of 4.7% in Q3, comparable store sales have been negative 2.5% in the first 6 weeks of Q4, driven by a higher level of market discounting and reduced transactional volumes as competitors liquidate stock. Shares have been under pressure since August 2016. Retailing is proving difficult.

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BROKER CHANGES

Medibank (MPL $3.02) and nib (NHF $5.69) – Morgan Stanley has Underweight recommendations on MPL (target price of $2.35 from $2.60) and nib (target price of $5.10 from $5.95). Policy uncertainty will drive a new era of low premium increases, which could crunch margins and put negative pressure on health insurers. Addressing affordability and improving the value proposition is emerging as a key election policy debate.

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  • Macquarie Group (MQG $110.09) – Citi has upgraded to a Neutral (from Sell) recommendation with a target price of $110.15 (from $79.50). The analyst has finally moved the target price and recommendation in line with market performance, noting the result on Friday was boosted by lower taxes but there ae also plenty of growth opportunities ahead. Could this be a contra-indicator???

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Westpac (WBC $29.34)) – Most of the analyst commentary is positive today and the result was broadly ahead of expectations, with focus on the strong NIM. However forward expectations were cautious. Citi cites ongoing RC risks. CS has increased FY forecasts by 1% but lowered outer years (and cut target price to $31.50 from $33.50). Macquaire reduce target price 1.5% to $33.50. MS raised target price by 50c to $30.50. Morgans cut target price to $35 from $36.00

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  • Platinum (PTM $5.60) – Credit Suisse has upgraded to a Neutral (from Outperform recommendation with a target price of $5.50 and Morgan Stanley has also noted the strong performance of the Platinum funds. The technical picture here is quite interesting, with the RSI rising off the oversold 30 levela nd the MACD histogram (the blue bars) showing a big uptick…while the share price has moved away form the lower Bollinger Band. These are all buy signals

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OVERNIGHT

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SPI FUTURES +20

US EQUITIES – S&P500 9 (+0.35%), Dow Jones +95 (+0.39%), Nasdaq +561 (+0.77%).

Main themes – The oil price was in focus after US President Trump tweeted that he will make an announcement about the Iran trade deal tomorrow.

EUROPEAN MARKETS – Mostly stronger. STOXX 600 +0.64%, UK FTSE closed, German DAX +1.00%, French CAC +0.28

CURRENCIES

  • The US dollar is 0.2% higher at 92.77.
  • The Aussie dollar is a lower at US75.15.

BONDS – 2-yr: UNCH at 2.50%,5-yr: UNCH at 2.78%, 10-yr: +1 bp to 2.95%, 30-yr: UNCH at 3.12%

COMMODITIES

  • WTI oil futures lost early gains to close up US$1.01 or 1.5% at US$70.77 after President Donald Trump said he’d announce his decision on the Iran nuclear deal on Tuesday at 2 p.m. ET. It is widely expected that the US will withdraw from the deal, which has supported prices. The crisis in Venezuela, a major oil exporter, has also provided underlying support. It is the first time since November 2014 that WTI has breached $70 per barrel.
  • Gold futures fell US60c to US$1314.10.
  • Iron ore was down US$1.00 to US$67.00
  • LME metals – LME was closed due to Bank holiday in the UK

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – March Consumer Credit $11.6bn (consensus $16.1bn; prior $13.6bn)
  • Italian election – M5S leader Di Maio and Lega leader Salvini have suggested scheduling an election for July 8. Separate reports suggested President Mattarella is considering a new election after December
  • European data – May Sentix Investor Confidence 19.2 (expected 21.2; last 19.6) and Retail PMI 48.6 (last 50.1); German March Factory Orders -0.9% (expected 0.5%; last -0.2%)

QUOTE OF THE DAY

“The schoolteacher asks Billy Bob: “If you have 12 sheeps and one jumps over the fence, how many sheeps do you have left?” Billy Bob answers, “None.” “Well” says the teacher, “you sure don’t know your subtraction.” “Maybe not,” Billy Bob replies, “but i darn sure know my sheeps.”” – Benjamin Graham (The Intelligent Investor), American economist born this day in 1894. Died 21 September 1976

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