The ASX200 is up 15 points in mid-market trading but gains fading on news US tariffs Healthcare and Energy lead, while AREITS and Staples lag. AGO thinks Hancock offer superior, IAG sells Asian assets and UBS negative on retailers with housing exposure. A$ at 74c#ausbiz




  • RBA Meeting Minutes
  • Domestic data – House Price Index


  • European data – Current Account, Construction Output
  • ECB – Mario Draghi speaking
  • US economic data – Housing Starts, Building Permits


  • Atlas Iron (AGO) – The Atlas Board has determined that the Hancock Offer is superior to the Mineral Resources Limited (“MinRes”) scheme proposal announced by Atlas on 9 April 2018. MIN has 3 days to make a counter-proposal and advises shareholders to take no action at this stage.
  • Insurance Australia Group (IAG) – Has sold its operation in Thailand and Indonesia to Tokio Marine & Nichido Fire Insurance Co., Ltd. (Tokio Marine) for $525m. It covers IAG’s 98.6% of Safety Insurance in Thailand; and 80% of PT Asuransi Parolamas in Indonesia. IAG has also sold its 73.07% interest in AAA Assurance Corporation, based in Vietnam. An after-tax profit of at least $200m is expected to be identified in IAG’s FY19 results and the sale is expected to add at least 13 basis points to IAG’s Common Equity Tier 1 (CET1) ratio. Impact on FY18 guidance: Negligible impact on GWP growth; and an approximately 50 basis points enhancement to reported insurance margin, owing to their lower earnings profile compared to the rest of the IAG business.
  • Reliance Worldwide (RWC) – Retail entitlement offer has been completed.
  • ASX – Mr Robert Priestley has resigned from the ASX Board. It comes after the ACCC laid criminal charges on executives at ANZ Banking Group, Citigroup and Deutsche that were involved in a $2.5bn placement of ANZ shares in August 2015. Mr Priestly is the former boss of JPMorgn


  • Mayne Pharma (MYX) – Bell Potter has downgraded to a Sell (from Hold) recommendation with a target price of 77c (down 4.1%).


  • Theme Parks – Citi has a Buy recommendation on Ardent Leisure (AAD) and a Neutral Recommendation on Village Roadshow (VRL) despite noting that short-term visitor arrivals to Australia in March and April combined rose 5%, below the 12-month average of 6% growth. Citi says this slowdown is “unfavourable for companies exposed to Australian tourism” and theme parks are expected to be loss making in FY18 given the continued fallout from a fatal accident at the Dreamworld park, plus wet weather and reduced visitation due to the Commonwealth Games.



  • Ardent Leisure (AAD) – Morningstar says AAD’s US bowling and entertainment business, Main Event, is facing increasing competition from Dave and Buster’s, which is releasing proprietary virtual-reality attractions across its locations. Morningstar estimates Main Event will eventually account for 80% of group earnings so this is an issue. The analyst finds Main Event’s arcade games and bowling offerings “almost quaint” and is interested to see how management will respond.
  • Flight Centre (FLT $63.04) – Deutsche Bank has a hold recommendation with a target price of $52.00. The analyst notes travel volumes slowed in April (after a strong March). International returns grew 45, less than the 7.3% growth in March.


  • Harvey Norman (HVN $3.47) – UBS has a Neutral recommendation with a target price of $3.50. The analyst has taken a more cautious stance on the housing market and lowered forecast for HVN (the most exposed retailer)by 5-6%. They also see margins under pressure due to competition headwinds from Amazon and see capital management as less likely.


  • Metcash (MTS $2.780 – Deutsche Bank has a hold recommendation with a target price of $2.80. The analyst notes the recent update made no mention of liquor and hardware, and they expect a solid contribution from new liquor contracts. They see the main issues as being whether cost reductions are enough to offset operating deleveraging in food and the impact of the Drakes’ loss.


  • South32 (S32 $3.85) – Has acquired Arizona Mining (remining 83%) in an all cash offer of US$1.3 billion1(C$1.8 billion) or C$6.20 which represents a 50% premium to the closing price on 15 June and implies a total equity value for Arizona Mining of US$1.6 billion (C$2.1 billion).
    • Citi has a Neutral recommendation with a target price of $3.80. The analyst sees the transaction has a mixed outcome. With little margin of error based on preliminary work done so far, they are waiting for a bankable feasibility study to obtain more confidence in the project economics.
    • UBS has a Neutral recommendation with a target price of $3.70. The analyst thinks the acquisition is sound, with upside potential to increase reserves at the Taylor deposit is open at depth and laterally.


  • Super Retail Group (SUL $8.49) – UBS has downgraded to a Neutral (from Buy) recommendation with a target price of $8.70. The analyst has downgraded due to a more negative view on housing. The previous Buy was based on the large negative valuation implied for leisure which is now more balanced.


  • Rio Tinto (RIO $84.01) – Iron Ore presentation. Confirmed 2018 Pilbara shipments of 330-340mt. system capacity of 360mtpa from its Pilbara iron ore operations by the end of 2019 once the rail automation is completed. Capital expenditure will rise over the next few years.
    • Citi has a Buy recommendation with a target price of $86.00. The analyst thinks productivity improvements are required to offset operating costs from higher diesel and the modest cost pressures returning in labour/contractors.
    • Credit Suisse has an Outperform recommendation with a target price of $82.00. The analyst notes the message remains “value over volume”.
    • Macquarie has an Outperform recommendation with a target price of $94.00. The analyst expects integration of AutoHaul together with the scheduled track improvements will lift rail capacity, which should reduce the system bottleneck to the port by the end of 2019.





US EQUITIES – S&P500 -6 (-0.21%), Dow Jones -103 (-0.41%), Nasdaq +1 (+0.01%).

Main themes

  • Shares recover from heavy initial losses
  • Trade was concerns dominate
  • Energy sector outperforms

EUROPEAN MARKETS – Lower. STOXX 600 -0.83%, UK FTSE -0.03%, German DAX -1.36%, French CAC -0.93%


  • The US dollar was little changed at 94.78
  • The Aussie dollar continues to weaker, down at US74.24c.

BONDS – 2-yr: UNCH at 2.55%, 5-yr: UNCH at 2.80%, 10-yr: +1 bp to 2.93%, 30-yr: +1 bp to 3.06%


  • WTI oil futures rose US79c or 1.2% to US$65.85 ahead of Friday’s OPEC meeting. Russian Energy Minister Alexander Novak indicated that those countries which had cut production would now consider increasing output 1.5mbpd in the third quarter only. China’s trade restrictions put further pressure on the crude/brent spread, which widened to US$9.73.
  • Gold futures were up 0.2% to US$1,280.90.
  • Iron Ore – IRESS reports iron ore unchanged at US$67.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was unchanged at US$66.00/dry ton. (CFR Tianjin port)
  • LME metals – Mixed. Cu -0.80%, Ni -1.38% and Al +0.70%.


  • Economic data – NAHB Housing Market Index 68 (consensus 70; prior 70)
  • JPMorgan – US Commodities Futures Trading Commission charges $65m civil penalty to settle charges for attempting to manipulating ISDAFIX benchmark swap rates between 2007 and 2012
  • Argentina – Central Bank of Argentina hiked reserve requirements for banks to 25.0% from 20.0%. Argentine peso jumped on the news, but has since pulled back
  • Volkswagen – Audi boss Rupert Stadler was arrested Monday in relation to its emissions test cheating scandal.
  • UK economy stalling – Forecasts from the British Chamber of Commerce show the economy is on track for it weakest growth since 2009 as a result of Brexit, higher oil prices and concerns over a trade war.


“I have made this letter longer than usual, only because I have not had the time to make it shorter.” Blaise Pascal, French philosopher born this day in 1623. Died 19 August 1682


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