The ASX 200 is down 22 points in mid-morning trade, with Materials leading but banks under pressure. WBC ex, TWE under pressure after media speculation about China glut, and DLX result. Jobs data today #ausbiz



  • Ex-dividend – Westpac (WBC) 94.0c, Z Energy (ZEL) 20.5c, Dicker Data (DDR) 4.4c
  • Company Events – Dulux (DLX) results, Link (LNK) Investor Day, Adelaide Brighton (ABC) AGM, Ooh! Media (OML) AGM, Speedcast (SDA) AGM, Syrah (SYR) AGM
  • Domestic economic data – Unemployment Rate, Employment Change. The consensus is for 20K new jobs to have been created, and for the unemployment rate to remain unchanged at 5.5%



  • European – Construction Output
  • US economic data – Philadelphia Fed, Leading Indicators
  • Fed Speak – Minneapolis Fed President (no FOMC vote until 2020) Neel Kashkari; Dallas Fed President (no FOMC vote until 2020) Robert Kaplan at 13:30 ET


  • Treasury Wines Estates (TWE) – Responsding to media speculation, saying it’s comfortable with the sustainability of its operating model in China, to build a portfolio of brands, and of its disciplined approach to managing inventory levels with its customers. Separately commenting on a slowing on clearance on imports, TWE confirms it is “also experiencing delays for some of its Australian Country of Origin shipments being cleared by the General Administration of Customs China (GACC) to replenish its inventory levels.”
  • Santos (STO) – Revised proposal at US$4.98. No change in price but number of changes to the transaction structure previously announced. These changes include: a US dollar offer of cash consideration for shareholders other than ENN and Hony, with no fixed Australian dollar component; and an offer to ENN and Hony to roll-over their existing Santos shares into a Harbour investment vehicle and subscribe for new shares. This option is not available to other Santos shareholders. STO shareholders will consider the proposal and update shareholders
  • Dulux (DLX) – 1H NPAT up 9.0% to $79.2m; sales revenue up 4.2% to $918.1 million; EBIT up 7.5% to $114.0m; net debt to EBITDA of 1.4x, consistent with September 2017. Interim dividend 14c fully franked. Outlook: Lead indicators for key markets remain largely positive. The core existing home renovation markets (approx two thirds of DuluxGroup revenue) expected to continue providing resilient, profitable growth. “Subject to economic conditions, and excluding non-recurring items, we expect that 2018 net profit after tax will be higher than the 2017 equivalent of $142.9 million.” Chairman Peter Kirby will retire from the Board (30 June) to be succeeded by current non-executive director Graeme Liebelt.)


  • Adelaide Brighton (ABC) – AGM today. Also confirmed Zlatko Todorcevski has succeeded Leslie Hosking as Chairman )of 15 years) while CEO Martin Brydon will retire after 30 years with the company. A formal executive search process is underway.
  • Speedcast (DSA) – AGM. Management is “comfortable with the current equity market sell-side analysts’ 2018 EBITDA consensus (~US$155m)”.


  • Transurban (TCL) – The ACCC has concerns about Sydney Transport Partners’ (consortium led by TCL) proposed acquisition of a majority interest in the WestConnex project. TCL controls 15 of 19 road toll concessions in Australia, and 7 of the 9 existing concessions in New South Wales (including the M1, M2, M5 and M7 motorways.) “We are concerned that the proposed acquisition may cement Transurban’s advantages when competing for future toll roads,”
  • Link (LNK) – Investor Day presentation.
  • Tassal Group (TGR) – Has entered a JV with Petuna to cooperatively manage marine farms in Macquarie Harbour, setting a new benchmark in aquaculture biosecurity standards in Tasmania. TGR says it reflects positive international practices in biosecurity and also reflects the principles outlined in the Tasmanian Government’s Salmon Sustainable Industry Growth Plan, which encourages improved area management planning. Also PAC Partners AgFood and Life Science conference and Goldman Sachs 9th Annual Small and Mid-cap conference


  • Bank of Americal Merril Lynch conference – Iluka (ILU), Syrah (SYR)


  • A2 Milk (A2M $10.54) – Trading Update and F18 Outlook yesterday. 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.
    • Macquarie has an Outperform recommendation with a target price of $12.40 (from $13.00). The analyst believes the new package transitioning largely explains the shortfall, the fundamentals are intact and the share price reaction is overdone.
    • UBS has a Neutral recommendation with a target price of NZ$11.20 (from NZ$11.70). The analyst assumes the new guidance assumes a 10% downgrade to estimates.


  • ALS (ALQ $8.01) – Deutsche Bank has downgraded to a Sell (from Hold) recommendation with a target price of $6.99. The analyst doesn’t think ALQ can sustain above-industry growth and thinks the stock appears expensive. Life sciences is supported by structural growth drivers but this is being offset by price pressure across key markets.


  • Myer (MYR 44c) – 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. 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.
    • Deutsche Bank has a Sell recommendation with a target price of 38c.
    • UBS has a Sell recommendation with a target price of 37c (from 40c). The analyst sees the main risk is margins, given strong growth in online and the potential markdowns in 4Q.





US EQUITIES – S&P500 +11 (+0.41%), Dow Jones +63 (+0.25%), Nasdaq +47 (+0.63%).

Main themes

  • Bond yields continue to climb,
  • Concerns about potential Italian request for debt forgiveness
  • Retailers boosted by Macys (+10.8%) after better than expected results

EUROPEAN MARKETS – Mostly stronger. STOXX 600 +0.21%, UK FTSE +0.15%, German DAX +0.20%, French CAC +0.26%.


  • The US dollar was little changed at 93.32.
  • The Aussie dollar is stronger at US75.23c.

BONDS –  2-yr: UNCH at 2.58%, 5-yr: +1 bp to 2.94%, 10-yr: +2 bps to 3.10%, 30-yr: +1 bp to 3.22%. Italian yields spiked 16 bp to 2.11% (see below),


  • WTI oil futures rose US35c to US$71.31. Crude inventories fell 1.4mb for the week, compared with expectations for a decrease of 763,000 barrels. The International Energy Agency cut its forecast for global demand growth to 1.4mbpd for 2018 (from 1.5mbpd).
  • Gold futures closed up US$1.20 at US$1291.50.
  • Iron ore rose US22c a tonne to US$71.53
  • LME metals – Prices were mostly stronger. Cu +0.26%, Ni +0.35%, Al -0.49


  • US economic data – April Housing Starts 1287K (consensus 1325K; prior 1336K) and April Building Permits 1352K (consensus 1350K; prior 1377K); April Capacity Utilization 78.0% (consensus 78.4%; prior 77.6%) and April Industrial Production 0.7% (consensus 0.6%; prior 0.7%); Weekly MBA Mortgage Index -2.7% (prior -0.4%)
  • Italian politics – There was growing concern following the leaking of a draft proposal from the two anti-establishment parties seeking to form a coalition government. The draft reportedly advocates for procedures that would allow countries to quit the euro and for debt forgiveness from the European Central Bank. Lega deputy Claudio Borghi says debt forgiveness not part of the government’s platform and ANSA later reported that the final governing plan does not discuss exiting the euro.
  • European economic data – April CPI +0.3% (as expected, last 1.0%) to be +1.2%yoy (as expected, last 1.2%). April core CPI +0.2% (as expected, last 1.4%) to be +0.7%yoy (as expected, last 0.7%); German April CPI 0.0% (as expected, last 0.0%) to be +1.6%yoy (as expected, last 1.6%); Italian April CPI +0.1% (as expected, last 0.1%) to be +0.5%yoy (as expected, last 0.5%).


“Some people worry that artificial intelligence will make us feel inferior, but then, anybody in his right mind should have an inferiority complex every time he looks at a flower.” – Alan Kay, American scientist born this day in 1940.


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