HAPPY EOFY!. The ASX200 is down 2 points in volatile EOFY mid-morning trade. Not much corporate news. IT and utilities strong, banks mixed, CSL a bit of a drag. MS and UBS update commodity forecasts. RBA next week, RC moves to Darwin. #ausbiz



  • Domestic data – HIA New Home Sales, Private Sector Credit
  • Exdividend – Vicinity Centres (VCX) 8.2c, Concentrated Leaders Fund (CLF) 2.3c, Eildon Capital (EDC) 1.9c, Graincorp (GNC) 8.0c, MCP Master Income Trust (MXT) 1.0c, Russell Invest Aust Select Corp Bond ETF (RCB) 12.1c, Russell Invest High Div Aust Shares ETF (RDV) 60.6c, Russell Invest Aust Govt Bond ETF (RGB) 6.3c, Russell Invest Aust Semi-Govt Bond ETF (RSM) 7.4c
  • Japanese data – Tokyo CPI, Unemployment Rate, Industrial Production, Construction Orders, Consumer Confidence, Housing Starts


  • European data – Inflation Rate,
  • UK data – BoE Credit/Mortgage data, Current Account, GDP Growth Rate, Business Investment
  • US economic data – Personal Income, Personal Spending, PCE Prices, Chicago PMI, Univ. of Michigan Consumer Sentiment – Final


  • BHP Billiton (BHP) – Samarco Update. BHP will fund a US$211 million in financial support for the Renova Foundation and Samarco Mineração S.A. (Samarco) until 31 December 2018. US$158 million will be used to fund the Renova Foundation to undertake the remediation and compensation programs. This US$158 million will be offset against the Group’s provision for the Samarco dam failure. A short-term facility of up to US$53 million (BHP Brasil’s share) will be made available to Samarco to carry out ongoing repair works, maintain Samarco’s facilities and support restart planning.
  • Fletcher Building (FBU) – Exits Sims Pacific Metals joint venture. FBU will sell its 50% stake in the Sims Pacific Metals joint venture to Sims Metals Management for NZ$42 million. Based on current estimates, total proceeds of the divestment are expected to be between NZ$55m and NZ$60m.
  • Unibail-Rodamco-Westfield (URW) – Has announces the implementation of cross guarantees
  • Swick Mining Services (SWK) – Two contract signed will increase order book by $160m. One is a contract renewal at Junee Gold Min from Northern Star Resources (NST).
  • APA Group (APA) – Update on proposal from CK Infrastructure. The Board confirms that it has made no recommendation on the Consortium proposal (at $11 cash) at this time. The Consortium is still undertaking its due diligence process which will take some time to work through. If the proposal proceeds to a firm offer, it is likely to be subject to a number of conditions including government regulatory approvals.


  • Morgan Stanley – MS has upgraded commodity prices, driving upgrades for metals and bulks while earnings estimates for lithium players are reduced. They see market cap weighted downside of 6%, which has reduced their view on the industry to Neutral from Attractive.
    • Evolution Mining (EVN $3.51) – MS has an Underweight recommendation with a target price of $2.70(from $2.60)
    • Independence Group (IGO) – MS has an Equal-weight recommendation with a target price of $4.45 (from $4.55).
    • Iluka Resources (ILU $11.14) – MS has an Overwieght recommendation with a target price of $12.60 (from $13.40)
    • Mineral Resources (MIN $15.82) – MS has an Overweight recommendation with a target price of $21.50 (form $22.80). The analyst finds growth at a reasonable price in Mineral Resources and the stock is the top pick.
    • Newcrest Mining (NCM) – MS has an Equal-weight recommendation with a target price of $19.50 (from $19.75).
    • Northern Star ($7.19) – MS has an Underweight recommendation with a target price of $5.05 (from $5.00)
    • Orocobre (ORE $5.30) – MS has an Underweight recommendation with a target price of $4.25 (no change)
    • Regis Resources (RRL $5.14) – MS has an Underweight recommendation with a target price of $4.35 (form $3.80).
    • Syrah Resources (SYR $2.79) – MS has an Equal-weight recommendation with a target price of $3.15 (from $3.55).
    • Whitehaven Coal (WHC $5.64) – MS has an Overweight recommendation with a target price of $6.50 (from $5.70)
    • Western Areas (WSA $3.51) – MS has an Underweight recommendation with a target price of $2.75 (from $2.45).
  • UBS has also made some changes to its commodity price forecasts. It has increased nickel price forecasts by 12% in 2018 and 6% in 2019, trimmed its copper price forecasts but also reduced its AUD assumptions
    • Independence Group (IGO) – UBS has a Neutral recommendation with a target price of $5.20 (from $5.10). Nickel price upgrades lead to a 37% FY18 forecast earnings upgrade and 27% in FY19. The see the Nova mine as well placed to benefit from global growth in EV demand.
    • OzMinerals (OZL $9.50) – UBS has a Neutral recommendation with a target price of $10.50 (from $11.00). The analyst thinks the existing Prominent Hill production and development of Carrapateena are both fairly valued in the share price. While other growth options might lead to a re-rating, they don’t see upside until these are proved up and/or Carrapateena is further de-risked.
    • Sandfire Resources (SFR $9.33) – UBS has a Sell recommendation with a target price of $7.50 (from $7.40). Strong copper exposure, free cash flow near term, production growth and the imminent start-up of high-grade Monty are driving a strong share price performance, but the analyst is concerned about the mine life of less than four years. Exploration success, or M&A using the strong balance sheet, would allay these concerns but it’s a Sell until then.
    • Western Areas (WSA $3.51) – UBS has upgraded to a Neutral (from Sell) recommendation with a target price of $3.50 (from $3.02). Higher nickel forecast lead to an 82% FY19 forecast earnings upgrade and 19% in FY20 for Western Areas. The analyst thinks the planned Odysseus project should see first production at a time global EV demand has led to higher nickel prices. They would be even more positive but feel the share prices is fully valued.
  • ResMed (RMD $14.13) – A US Department of Health report on Medicare claims for replacement positive airways pressure (PAP) supplies has found a large proportion of claims were found non-compliant with Medicare requirements. They analyst thinks it may present downside risk to forecasts for masks/accessories and scenario analysis shows the risk/reward profile is skewed to the downside.


  • Macquarie Group (MQG $126.70) – Morgan Stanley has an Overweight recommendation with a target price of $130.00. The analyst acknowledges concerns about its recent upgrade, which centre on the quality of earnings growth, lumpy items and valuation. MS believes MQG is in an earnings upgrade cycle and there is upside risk to consensus estimates. The pipeline of lumpy items means the near-term risk is low and the benefit of increasing diversity is counter cyclical.




Excluding the name change from Macquarie Atlas Roads (MQA) to Atlas Arteria (ALX), the major short increases over the month were Inghams (ING), National Storage (NSR) and iSelect (ISU), all of which increased over the week as well. There was major short covering in APN Outdoor (APO), no surprises there, although APO was still over 2% short sold a week ago (oops).




US EQUITIES – S&P500 +17 (+0.62%), Dow Jones +98 (+0.41%), Nasdaq +59 (+0.79%).

Main themes

  • GDP downwardly revised to 2.0% (from 2nd estimate of 2.2%).
  • Amazon (+2.47%) will acquire online pharmacy PillPack. CVS Health (-6.1%) and Walgreens Boots Alliance (-9.9%) fell on the news.

EUROPEAN MARKETS – All lower. STOXX 600 -0.82%, UK FTSE -0.08%, German DAX -1.39%, French CAC -0.97%.


  • The US dollar was little changed at 95.32
  • The Aussie dollar is stronger at US73.49c.

BONDS – 2-yr: +1 bp to 2.52%, 5-yr: +3 bps to 2.73%, 10-yr: +2 bps to 2.85%, 30-yr: +1 bp to 2.98%


  • WTI oil futures closed up US69c or 0.95% to US$73.45. Factors include a recent fall in oil inventories, US administration attempts to restrict Iran’s oil exports, and concerns about Libyan production and a major supply outage in Canada.
  • Gold futures were down US$5.10 at US$1,251.00.
  • Iron Ore – IRESS reports iron unchanged at US$66.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was up 15c at US$63.95/dry ton. (CFR Tianjin port)
  • LME metals – Big falls. Cu -1.04%, Ni -0.64% and Al -0.97%.


  • US economic data – Q1 GDP – Third Estimate (actual 2.0%; Briefing.com consensus 2.2%; prior 2.2%), Q1 GDP Deflator – Third Estimate (actual 2.2%; Briefing.com consensus 1.9%; prior 1.9%), weekly Initial Claims (actual 227K; Briefing.com consensus 220K; prior 218K), and Continuing Claims (actual 1705K; prior 1723K)
  • European data – June Business and Consumer Survey 112.3 (expected 112.0; last 112.5); German July GfK Consumer Climate 10.7 (expected 10.6; last 10.7); Spanish June CPI +0.3% (last 0.9%) to be +2.3% yoy (as expected, last 2.1%). May Retail Sales -0.3%yoy (last 0.3%); Italian June CPI +0.3% (expected 0.2%; last 0.3%) to be +1.4%yoy (expected 1.3%; last 1.0%)


“There’s a fine line between character building and soul destroying.” – Colin Hay. Australian musician born this day in 1953


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s