The ASX200 is up 32 points in mid-morning trade after strong global leads. Materials and Energy leading the way, banks ok and Utilities lag. WES investor day, will demerge Coles in FY19, ING CEO steps down, speculation about AMP dividendtrade data #ausbiz
TODAY
- Ex-dividend – Kathmandu Holdings (KMD) 3.2c, OFX Group (OFX) 3.0c, PTB Group (PTB) 5.0c, Salmat (SLM) 8.0c, Transmetro Corporation (TCO) 5.0c
- Economic data – AIG Construction Index, Balance of Trade, Imports/Exports
- Japanese Coincident Index Prel, Leading Economic Index Prel
TONIGHT
- European – GDP Growth Rate (3rd Est)
- UK Halifax House Price Index
- US Consumer Credit
COMPANY NEWS
- Wesfarmers (WES) – Analyst meeting. Expects demerger of Coles during FY19. Dividend policy will remain unchanged after the demerger.
- Inghams (ING) CEO Peter Bush will step down after result in August. A domestic and international executive search process has commenced and it is expected there will be internal candidates for the role. Quinton Hildebrand, currently Chief Commercial Officer, will be acting CEO effective August 2018 in the meantime. Quinton was previously the Chief Executive Officer of Mackay Sugar.
- AMP – Paterson Securities has picked AMP as the most at risk big company of cutting dividends. Other listed at risk include Bank of Queensland, National Australia Bank and Harvey Norman.
ANALYST CHANGES
- BHP Billiton (BHP $33.39) – Media reports that BHP has received early bids worth US$7-9bn from majors including BP, Chevron and Royal Dutch Shell. No obvious sell signals in the chart at this stage. It’s a Hold.
- Creddit Suisse has a Neutral recommendation with a target price of $31.00. The analyst has upgraded near-term copper estimates but expects prices falling a price forecast of US$2.70/lb from 2020. They note the exit of the US onshore business remains on track.
- Macquarie has an Outperform recommendation with a target price of $36.20. The analyst notes the emergence of multiple interest in positive and could represent upside risk to its estimates (US$8-10bn). The expect a result by year-end.
- Transurban (TCL $11.83) – Citi has reinstated coverage with a Sell recommendation with a target price of $10.52. The anlayst thinks it unlikel that 100% of free cash flow will be distributed beyond 2020, forecasting a fall to 90% in FY20 and 87% in FY21. They see further pressure on balance sheet and credit metrics.
- Sydney Airport (SYD $7.21) – Citi has reinstated coverage with a Buy recommendation with a target price of $7.93). The analyst sees international passenger growth of 6.3% pa, as well as a strong retail outlook, but sees a declining distribution pay-out from 2020.
- Magellan (MFG $22.39) – Total FUM was up 1.74% to $67.354m. Net outflows were $47 million, including net retail outflows of $57m and net institutional inflows of $10m. Credit Suisse has an Outperform recommendation with a target price of $28.00. The analyst thought the numbers were weak but they are still positive given valuation and think concerns over future flows or overdone. I’m not so sure from a technical perspective. Downtrend looks to be forming.
- Link Administration (LNK $6.97) – Macquarie has an Outperform recommendation with a target price of $8.30 (from $8.10). They analyst thinks the disappointment form recent announcements has been factored into the share price. They see further positive catalysts and other avenues for growth ahead. Technically, there are definitely sogns that the share price is bottoming
OVERNIGHT
SPI FUTURES +28
US EQUITIES – S&P500 +24 (+0.86%), Dow Jones +346 (+1.40%), Nasdaq +51 (+0.67%).
Main themes –
- Strong performance from the banks – US and European.
- Materials also stronger. BHP +2.75% and RIO +3.30% in the US
- Hawkish international influences – India surprised with an interest rate hike and ECB officials expect inflation to hit targets soon.
EUROPEAN MARKETS – Mostly higher. STOXX 600 +0.00%, UK FTSE +0.33%, German DAX +0.34%, French CAC -0.06% Italian MIB +0.26%
CURRENCIES
- The US dollar was down 0.3% at 93.65.
- The Aussie dollar has rallied 0.6% to US76.69.
BONDS – 2-yr: +5 bps to 2.53%, 5-yr: +5 bps to 2.81%, 10-yr: +6 bps to 2.98%, 30-yr: +5 bps to 3.13%. European bonds sold off.
COMMODITIES
- WTI oil futures dropped US79c or 1.2% to US$64.73, after US crude inventories rose 2.1mb compared to expectations of a 1.8mb decrease. US production also hit a record 10.8mbdp, up 1.5mbpd on year ago levels. Key factors included Venezuela considering force majeure on some exports as well as comments from India that the Saudis were reconsidering production cut policy.
- Gold futures dropped US80c to US$1301.40.
- Iron Ore – IRESS reports iron ore down US50c at US$65.50.0 a tonne. The CommSec site says China Import (Fines 62% Fe) was up US45c to US$65.20/dry ton. (CFR Tianjin port)
- LME metals – Mostly higher. Cu +1.70%, Ni -0.73%, Al +1.43%
ECONOMIC DATA, NEWS & POLITICS
- US economic data – Weekly MBA Mortgage Index 4.1% (prior -2.9%), trade balance -$46.20bn (consensus -$48.80bn; prior -$47.20bn), Revised Q1 Productivity 0.4% (consensus 0.6%; prior 0.7%), and Revised Q1 Unit Labor Costs 2.9% (consensus 2.8%; prior 2.7%)
- European Central Bank – comments from policymakers suggesting the ECB is preparing a hawkish policy shift. Four key ECB members, ncluding Bundesbank President Jens Weidmann, mentioned expectations eurozone inflation would reach the 2.0% target soom.
- The Reserve Bank of India raised interest rates for the first time in 5 years by 25bp to 6.25%, surprising the markets, in an attempt to alleviate pressure on offshore dollar liquidity.
- European Retail PMI 51.7 (last 48.6)
QUOTE OF THE DAY
“A man’s pride can be his downfall, and he needs to learn when to turn to others for support and guidance.” – Bear Grylls, British explorer born this day in 1974.
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