The ASX200 is down 9 points following subdued global trade. Energy, Materials, Banks all lower. Bid for APA at $11.00 (last $8.27), CGF investor day, another 20% stake in AGO, talk about BAP interest in Kmart auto, RBA’s Lowe speaking today. #ausbiz
- Challenger Group (CGF) Investor Day, Link Administration (LNK) Investor Day
- Ex–dividend – CIMIC Group (CIM) 75.0c
- Economic data – Westpac Consumer Confidence
- RBA Governor Philip Lowe speaking
- European – Employment Change, Industrial Production
- UK – Inflation Rate, PPI Output
- US economic data – PPI, Core PPI
- FOMC Rate Decision – Rate hike pretty much priced in (96.3%)…
- APA Group (APA) – Unsolicited proposal from CK Infrastructure for $11 (permitting a distribution of up to 24c for the half). The board makes no recommendation and is engaging further with APA offering an opportunity for due diligence. To address ACCC concerns, CKI divest assets including APA’s interests in the Goldfields Gas Pipeline, Parmelia Gas Pipeline, Mondarra Gas Storage Facility and a standalone management team.
- Reliance Worldwide (RWC) – Has completed the acquisition of John Guest.
- Bluescope Steel (BSL) – Changes to External Reporting segments. i) With executive responsibility for China moving to Charlie Elias, the China businesses will now form part of a broader Building Products Asia and North America segment; ii) BlueScope Buildings will now be called Buildings North America; and iii) the Buildings ASEAN business, which is in the process of being closed, is moved out of BlueScope Buildings and categorised as a Discontinued Operation.
- Investa Funds Management (IOF) – Final share buy-back notice
- Challenger Investor Day (CGF) –
- Minerals Resources (MIN) – Will acquire the assets. tenements and infrastructure used by Cliffs Asia Pacific Iron Ore Pty Ltd to run its Koolyanobbing iron ore operation in the Yilgarn region of Western Australia.
- AMP – Morgan Stanley has an Overweight recommendation with a target price of $4.50. The analyst thinks AMPs earnings and franchise resilience will surprise and sees this as an opportunity. They think the market isn’t taking account of the impact tighter regulations will have beyond the major players and capital requirements post RC. The chart is definitely looking interesting and should be a buy (trade only) if the RSI can break above 30.
- Catapult (CAT $1.24) – Morgans has an Add recommendation with a target price of $1.76. CAT has achieved FIFA approval for its athlete monitoring systems to be worn in-game. The analyst notes this should make it easier for Catapult to initiate sales discussions with clubs and associations. While FIFA approval does not imply endorsement, the certification should be an advantage in signing up new customers. Shares look to have bottomed and there is a MACD buy signal (the indicator blue bars have moved from negative to positive) and positive Bollinger Band signal but nothing convincing at this stage.
- Ramsay Health Care (RHC $57.24) – Macquarie has an Outperform recommendation with a target price of $74.50. The analyst has reviewed the company. They expect $300m in brownfield development over 2018 to support growth, while procurement savings will support margins. Overall, they think shares are cheapo at current prices. More positive commentary about RHC . There has just been an RSI buy signal , although the MACD indicator is still negative and growing (getting worse)…but looks to be about to bounce off the lower downtrend support line. Well worth a closer look.
- Watpac (WTP $76c) – Morgans has an add recommendation with a target price of 91c. The scheme of arrangement with Besix did not go through and it holds 28.1%, which means potential overhang. The analyst sees upside risk from a full takeover proposal over time. They are positive of asset value and opportunity for improved deliver. Based on the overhang and the negative technical configuration, it would be a wait and see at best.
- AGL – Changes to residential standing electricity prices (slight falls) for NSW, QLD and SA from 1 July.
- Morgan Stanley has an Equal-weight recommendation with a target price of $22.88 (from $24.28). The analyst has cut estimates due to lower pool prices, but thinks the headwinds are already priced in.
- Ord Minnett has an Accumulate recommendation with a target price of $24.50. AGL will lower prices but unlike Origen (ORG), will increase gas prices to both residential and business customers. They see little surprise and expect earnings growth to come from wholesale rather than retail businesses.
- Platinum (PTM) – Credit Suisse has a Neutral recommendation with a target price of $5.50. FUM fell 0.9% due to underperformance of the international fund. Net flows were positive. CS notes flows are modest deposits fears about PM changes. The analyst notes downside risk to FY19 forecasts if poor flows continue, there could be large inflows from maturing offshore UCITS products and new US distribution agreements. The bounce has stalled and the daily chart (not shown) suggest waiting to see how things play out before assuming a new uptrend.
HOUSING FINANCE YESTERDAY
Housing finance fell 0.8% in trend terms, consisting of a 0.1% fall in owner-occupied lending and a 2% fall in investment lending. There are now established falls in both owner-occupied and the investor series. Within the owner-occupied, most of the falls (number basis not value basis) were loans for the construction of dwellings (-1.7%), compared to purchase of new dwellings (-0.9%) and purchase of established dwellings (-1.0%).
Also worth noting, In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 17.6% in April 2018 from 17.4% in March 2018. This is back to where it was after a fall in March.
On a state-basis (trend owner occupied) the number of owner occupied housing commitments (trend) fell in Victoria (down 168, 1.1%), Queensland (down 159, 1.6%), New South Wales (down 116, 0.7%), Western Australia (down 59, 1.2%), South Australia (down 32, 0.9%), the Australian Capital Territory (down 7, 0.6%), the Northern Territory (down 3, 0.9%) and Tasmania (down 2, 0.2%).
The bottom chart is the seaosnally adjusted series
SPI FUTURES -8
US EQUITIES – S&P500 +5 (+0.17%), Dow Jones -2 (-0.01%), Nasdaq +44 (+0.57%).
Main themes –
- Trump and Kim sign agreement after historic summit which will see North Korea work towards denuclearisation of the Korean Peninsula. Lack of detail kept euphoria in check.
- Fed meeting underway – Current expectations for a rate hike are 96.3%
EUROPEAN MARKETS – Mostly lower. STOXX 600 -0.11%, UK FTSE -0.43%, German DAX -0.00%, French CAC -0.38%. Peripheral markets were stronger
- The US dollar was up 0.3% to 93.82
- The Aussie dollar eased further to US75.73 after a volatile day yesterday
BONDS – 2-yr: +3 bps to 2.55%, 5-yr: +1 bp to 2.81%, 10-yr: UNCH at 2.96%, 30-yr: -1 bp to 3.09%
- WTI oil futures were up US26c at US$66.36. The OPEC monthly reports said a high degree of uncertainty was hanging over the global oil markets. Saudi Arabia also reports production of 10mbpd in May, up from 9.9mbpd.
- Gold futures were down US$3.80 to US$1,299.40.
- Iron Ore – IRESS reports iron ore unchanged at US$67.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was up US60c to US$65.70/dry ton. (CFR Tianjin port) +0.8% to US$67.23
- LME metals – Mixed. Cu -0.45%, Ni -0.52% and Al +0.04%.
ECONOMIC DATA, NEWS & POLITICS
- Fed press conferences – The WSJ reported that the Fed was considering press conferences after every meeting, instead of every other. It addresses the view that the Fed does not take policy action at meetings where a conference is not scheduled to follow but raised speculation that the Fed was preparing to accelerate the pace of rate hikes.
- US Economic data – CPI 0.2% (consensus 0.3%; prior 0.2%), Core CPI 0.2% (consensus 0.2%; prior 0.1%). May NFIB Small Business Optimism Index 107.8 (prior 104.8). Annual inflation of 2.8% was the highest since February 2012. Core CPI rose 2.2% yoy due to exclusion of gasoline.
- European data – ZEW Economic Sentiment -12.6 (expected 0.1; last 2.4); German June ZEW Economic Sentiment -16.1 (expected -14.6; last -8.2), ZEW Current Conditions 80.6 (expected 85.0; last 87.4); Italian Unemployment Rate 11.1% (as expected, last 11.1%); French Nonfarm Payrolls +0.2% (expected 0.3%; last 0.4%)
- UK data – Claimant Count Change -7,700 (expected 11,300; last 28,200). Average Earnings Index + Bonus +2.5% (as expected, last 2.6%)
- The Central Bank of Brazil announced the sale of $20bn of currency swaps to supporting the real
QUOTE OF THE DAY
“When it comes to doing my job, I keep my ego in my handbag.” – Ngozi Okonjo-Iweala, Nigerian economist and first female Minister of Finance, born this day in 1954.