The ASX 200 is up 10 points in mid-morning trade after negative leads from the US. US10yr at 3.07%, A$ at US 74.68c. A2M update disappoints, IVC double upgrade, MYR sales, CCL AGM, more losses for TLS, wages later today (0.6%/2.1% expected). Euro inflation and US IP tonight #ausbiz



  • Domestic data – Wage Price Index. Consensus is for growth of 0.6% in the quarter (the same as the increase in the December quarter) to give an annual increase of 2.1% (again, unchanged).
  • Company news – Boral (BLD) Investor Day, Coca-Cola (CCL) AGM, Sigma Healthcare (SIG) AGM
  • Ex-dividend – Autosports Group (ASG) 4.2c, Plato Income Maximiser (PL8) 0.5c, Regional Express (REX) 4.0c
  • Chinese data – House Price Index
  • Japanese data – GDP Growth Rate, Capacity Utilization, Industrial Production



  • European Inflation – Expectations are for an increase of 0.3% to give an annual increase of 1.2% (down from 1.3%)
  • US economic data – Housing Starts, Building Permits, Capacity Utilization, Industrial Production


  • A2 Milk (A2M) – Trading Update and F18 Outlook. Revenue for the 9 months ended 31 March 2018 were up 70% to NZ$660 million, reflecting continued sales growth in both nutritional products and liquid milk. A2M also warned it includes the impact of seasonal sales from key China selling events weighted towards 1H18. Outlook – FY revenue of NZ$900-920m, taking into account the planned move to the new infant formula packaging during Q4. FY gross margins broadly consistent with 1H18. Marketing investment NZ$82-87m given higher expenses in the US and China in 2H.
  • Myer (MYR) – Q3 FY2018 sales for the 13 weeks to 28 April 2018: Total sales down 2.7% to $635.3m and down 3.1% on a comparable basis; Online sales up 49.4% to $35.9m; Total year to date sales down 3.4% to $2,355.0m or down3.0% on a comparable store basis; Online sales year to date up 49.0% to $141.1m. Sales affected by warm weather, particularly for winter apparel, shoes and accessories. New CEO and MD John King will start on 4 June. No more quarterly sales updates from FY19.
  • CocaCola (CCL) – Catherine Brennar will no run for re-election


  • Downer EDI (DOW) – Downer and Spotless complete combined $1.3bn refinancing, comprising a $400 million syndicated debt facility for Downer and a $900 million syndicated debt facility for Spotless Group Holdings Limited (Spotless).
  • Boral (BLD) – Is holding a site tour of operations. For Boral Australia, gave a trading update in line with that announced 24 April.
  • Fletcher Building (FBU) – has completed the NZ$750m retail component of its entitlement offer, raising NZ$229.5m
  • Computershare (CPU) – Has acquired Equatex Group Holding AG (Equatex), a leading European employee share plan administration business headquartered in Zurich, from Montagu Private Equity for €354.5m from existing cash and debt facilities. The acquisition is expected to be Management EPS accretive in FY19 before the full impact of synergy benefits of at least US$30mpa; estimated to be delivered over 36 months. One-off costs to achieve the synergy benefits are estimated to be US$47m
  • Qantas (QAN) – 2018 foreign persons potentially held relevant interests in 44.13% as at 2 May, up from the 43.6% held at 29 December 2017. (Foreign investors are not permitted to hold more than 49% and notice must be given when foreign ownership exceeds 44%)
  • Presentation at Bank of America Merrill Lynch conference – Rio Tinto (RIO) and BHP Billiton (BHP)


  • Bluescope Steel (BSL) – Expects underlying EIBT for 1H18 of $680m (prior guidance $606m). With continued strong steel spreads in North America, the increase is mainly due to stronger performance at the North Star mini-mill in Ohio. Other factors include moderately better performance in Australian steel products., including higher margins on export coke sales; and lower contributions from the ASEAN building products business, partly offset by stronger margins in NA.
    • Credit Suisse has an Outperform recommendation with a target price of $16.90. The new EBIT guidance is in line with the analyst’s forecasts and they see upside risk
    • UBS has a Buy recommendation with a target price of $20.50 (from $18.75). The analyst also points to the upgrade being in line with guidance and suggest if spot prices were to continue, there is upside to the new guidance.


  • Invocare (IVC $11.86) – Citi has double upgraded to a Buy (from Sell) recommendation with a target price of $14.00 (from $13.50). A big change in view with the analyst saying the Protect & Grow capex plan will deliver and the current valuation is too low. Upside will come from cost savings, gains in market share, stronger case average growth and rural acquisitions. They are, however, ahead of market consensus. The chart look really interesting, with an RSI buy-signal and the MACD indicator (the blue bars) looking to be very close to a buy signal…it might be too late to wait for that though


  • Link Administration (LNK) – Update on the impact of the budget. Impact up to $55m (if sweep date was 30 April 18). Shares a looking very oversold and with the impact largely “de-risked” further upside could be expected.
    • Credit Suisse has upgraded to an Outperform (from Neutral) recommendation with a target price of $8.10 (from $9.00). The analyst estimates the new legislation impact is around 8% in FY21 but there is upside risk if the policy is diluted. FY20 EPS estimates downgraded by 7% and FY21 by 10%. Upgraded on the view that shares represent a buying opportunity.
    • Morgans has an Add recommendation with a target price of $8.25 (from $8.52), The analyst sees a worst case scenario of 13.5% impact on FY20 EPS but a smaller high single-digit EPS fall is more likely because of potential cost reduction actions and other mitigating factors. They think shares are oversold
    • UBS has a Neutral recommendation with a target price of $7.65. The impact is more that the $47m the analyst has estimated but this is offset by the later commencement date.


  • Noni-B (NBL $2.35) – Will acquire brands from Specialty Fashion Group (Except City Chic) for $31 and raise $40m. Morgans has an Add recommendation with a target price of $3.50 (from $2.73). The analyst sees this accretive acquisition as a key catalyst, with cost reductions/earnings benefits over the coming years. They note the acquisition provides buying power and removes a distressed competitor from the industry


  • Santos (STO) – Macquarie has a Neutral recommendation with a target price of $6.30. ENN, STO’s larget shareholder, has reached a preliminary agreement with Harbour Energy regarding exchanging shares in Santos although there are still major uncertainties. The analyst still believes the biggest risk to the takeover is approval from the Treasurer. With gas and electricity prices a major political concern, they envisages this development adds a further layer of risk to the Harbour offer.



This is the list of the 30 most shorted companies from ASIC sorted on the basis of the change over the last month. No surprises to see Invocare (IVC) top the list, with a move from 7% to 10.8% shorted, while three others I am interested in, Nanosonics (NAN), Greencross (GXL) and G8 Education, have also crept up the list to now make the Top 30.





US EQUITIES – S&P500 -19 (-0.67%), Dow Jones -193 (-0.78%), Nasdaq -60 (-0.81%).

Main themes

  • The US 10 year bond yield reached 3.07%, overtaking the previous cyclical high. Rates were last this high in July 2011.
  • Home Depot (-1.62%) met earnings forecasts but missed revenue expectations due to a “slow start” to Spring sales
  • Retails sales data was strong (in line at 0.3%) supporting retailers
  • North Korea calls off talks with South Korean talks off due to military drills

EUROPEAN MARKETS – Were little changed. STOXX 600 +0.05%, UK FTSE +0.16%, German DAX -0.06%, French CAC +0.23%.


  • The US dollar has rallied 0.7% to 93.24.
  • The Aussie dollar is lower as a result at US74.74c.

BONDS – Some major weakness overnight with the 10 year bond yield up to 3.07%. 2-yr: 2-yr: +1 bp to 2.55%, 5-yr: +5 bps to 2.90%, 10-yr: +8 bps to 3.07%, 30-yr: +7 bps to 3.20%



  • WTI oil futures rose US35c to US$71.31.
  • Gold futures closed US$27.90 lower at US$1290.30.
  • Iron ore rose US$1.00 a tonne to US$69.00
  • LME metals – Prices were mixed. Cu -1.12%, Ni -0.52%, Al +0.34%


  • US economic data – April Retail Sales 0.3% (consensus 0.3%; prior 0.8%), Retail Sales ex-auto 0.3% (consensus 0.5%; prior 0.4%), and May Empire Manufacturing 20.1 (consensus 15.0; prior 15.8); March Business Inventories 0.0% (consensus 0.1%; prior 0.6%) and May NAHB Housing Market Index 70 (consensus 69; prior 68)
  • Interest rate expectations have been edging up, with the probability of a 4th interest rate rise this year hitting 51%.
  • European data – Q1 GDP +0.4% (as expected, last 0.4%) to be +2.5%yoy (as expected, last 2.5%). industrial production was a little below expectations at +0.5% (expected 0.7%, previous -0.9%) to be +3.0% yoy (expected 3.7%, previous 2.6%); German Q1 GDP +0.3% (expected 0.4%; last 0.6%) to be +1.6%yoy (expected 1.8%; last 2.3%). May ZEW Current Conditions 87.4 (expected 86.2; last 87.9) and May ZEW Economic Sentiment -8.2 (expected -8.0; last -8.2); French April CPI +0.2% (expected 0.1%; last 0.1%) to be +1.6% year-over-year (as expected, last 1.6%). Q1 Nonfarm Payrolls +0.3% quarter-over-quarter (expected 0.4%; last 0.4%)
  • UK economic data – Average Earnings Index + Bonus +2.6%yoy (expected 2.7%; last 2.8%). April Claimant Count Change 31,200 (expected 13,300; last 15,700). March Unemployment Rate 4.2% (as expected, last 4.2%)
  • Chinese data yesterday


  • RBA – Minutes of the Meeting held last year. Interestingly, the RBA actually mentioned further tightening in lending standards (in the context of the current high level of public scrutiny of banks) as one of the key risks to its forecasts (AUD appreciation was the first) due to the impact on household borrowing and spending.


“What counts is what you do with your money, not where it came from.” – Merton Miller, American economist born this day in 1923. Died 3 June 2000.


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