The ASX200 is down 21 points in mid-morning trade after strength in the US gave way to a tech sell-off. Out IT follows, while defensives are stronger, material mixed and banks mostly lower. Another IVC acquisition, broker downgrade for MFG and target price cut for PTM. Retail sales today and US holiday tonight #ausbiz
- Domestic economic data – AIG Services Index, Balance of Trade, Imports/Exports, Retail Sales
- Chinese – Caixin Composite PMI and Caixin Services PMI
- Japanese data – Nikkei Services PMI
- European data – Markit Composite PMI Final, Markit Services PMI Final
- BoE FPC Minutes
- UK Markit/CIPS UK Services PMI
- US market closed
- Bapcor (BAP) – Has sold its TRS Tyre and Wheel business in New Zealand (“TRS”) to Trelleborg Wheel Systems, a subsidiary of Swedish listed Trelleborg AB for an undisclosed amount. BAP will use the proceeds to reinvest in its core businesses in the Automotive Aftermarket in Trade, Specialist Wholesale, Retail and Service.
- Invocare IVC) – Acquisition of English Rose English Rose Funerals in Old Noarlunga in Adelaide, South Australia. English Rose is the sixth acquisition InvoCare has announced this calendar year. (Lester & Son in Albury-Wodonga, JA Dunn Funerals, Southern Highlands Funerals, Hope & Sons Funeral Directors and Whitestone Funerals). English Rose operates from a single location and provides circa 140 funeral services per annum and generates revenue of approximately $0.7 million.
- Metcash )MTS) – Details of off-market share buy-back announced.
- Macquarie Group (MQG) – Macquarie advisers will no longer receive “Grandfathered” commissions on financial products. It follows a similar move by BT Financial Group. Independent financial advisers now receiving grandfathered payments through its wealth third-party channels would continue to receive trailing commissions. 17.000 customers would benefit from the change.
- Atlas Arteria (ALX $6.41) – ALX has paid its final performance fees to Macquarie Group (MQG) of $115m, funded by $25m cash and $90m in stock (at a 5% premium to yesterday’s close).
- Morgan Stanley has an Equal-weight recommendation with a target price of $6.36. The fees are in line with the analyst’s expectations and they think the issuance is positive.
- Morgans has upgraded to an Add (from Hold) recommendation with a target price of $6.76 (from $6.53). The analyst has adjusted for the payment/raising and updated forex forecasts, particular exposure to the euro. They have upgraded due to the expected targeted return.
- Aveo Group (AOG $2.44) – Macquarie has downgraded to a Neutral (from Outperform) recommendation with a target price of $2.65 (from $4.15). The analyst sees mounting pressure on the fundamentals, as project completions continue to outpace settlements, which leaves a cash flow gap which adds to the risk from a weaker housing markets. They hae revised EPS estimates up by 8% in FY18, 8% in FY19 and 20% in FY20 on higher completions but the target price cut reflects ongoing headwinds.
- CSL – UBS has a Buy recommendation with a target price of $196. The analyst notes the latest US data on IG is still showing growth of 10%. It’s only 55% of the global market, but gives a good indication of trends, and reinforces the good position CSL has to benefit from plasma product growth.
- Sonic Healthcare (SHL $24.71) – Has acquired Pathologie Trier, an anatomical pathology practice in Germany, with annual revenue of ~€20 million and ~160 staff, including 24 pathologists. The initial ROIC exceeds Sonic’s cost of capital, and the transaction is EPS accretive by 1-1.5%. ROIC and EPS accretion will increase as synergies, mainly relating to procurement and logistics, are achieved.Macquarie has a Neutral recommendation with a target price of $26.30 (from $26.20). The analyst notes the limited details but has upgraded EPS forecasts in line with the announcement.
- Magellan Financial Group (MFG $23.73) – Morgan Stanley has downgraded to an Underweight (from Equal-weight) recommendation with a target price of $27.00. The analyst notes the persistent slowdown in retail funds flows, where inflows have slowed for the past the months and risk turning negatives. They also point to above-peer fees, which may face pressure. As a mature business, there are fewer growth options.
- Platinum Asset Management (PTM $5.87) – Morgan Stanley has an Equal-weight recommendation with a target price of $6.00 (form $7.00). They have cut forecasts due to performance in 2H but think the issues are already priced in, while the new listed funds saw consistent demand.
- Domain Group (DHG) – Jason Pellegrino was yesterday appointed Managing Director and Chief Executive Officer (CEO). Jason is from Google (Managing Director Australia and New). Morgans has a reduce recommendation with a target price of $2.66. The analyst thinks the rate of innovation and product development might pick up.
SPI FUTURES -17
US EQUITIES – S&P500 -13 (-0.49%), Dow Jones -132 (-0.54%), Nasdaq -65 (-0.86%).
Main themes –
- Markets closed early ahead of July 4 holiday.
- Technology companies underperformed –Micron (-5.51%) on reports a Chinese court had temporarily banned the sale of Micron chips in China; Facebook -2.35% fell after reports of a broader probe into data sharing; Google -2.26%, Apple -1.74%
- Energy was higher on a rally (and subsequent easing) in the oil price.
- Trade tariffs also in focus. The first round (US$34bn) of tariffs on Chinese goods start on Friday.
EUROPEAN MARKETS – Mostly higher. STOXX 600 +0.81%, UK FTSE +0.60%, German DAX +0.91%, French CAC +0.76%.
- The US dollar was lower at 94.61
- The Aussie dollar is a touch stronger at US73.82c.
BONDS – 2-yr: -3 bps to 2.53%, 5-yr: -2 bps to 2.73%, 10-yr: -3 bps to 2.84%, 30-yr: -2 bps to 2.97%
- WTI oil futures closed up US20c to US$73.14 in a volatile session (range of US$72.73-US$75.27). Libya declared force majeure on some of its exports (representing 850,000 bpd). Production in Canada has also been affected by a power outage at an oil sands facility (representing 360,000bpd).
- Gold futures were up US$11.80 at US$1,253.50.
- Iron Ore – IRESS reports iron unchanged at US$67.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was down 65c at US$63.80/dry ton. (CFR Tianjin port)
- LME metals – Mostly lower. Cu -0.49%, Ni -0.72% and Al -0.86%.
ECONOMIC DATA, NEWS & POLITICS
- US economic data – May Factory Orders 0.4% (consensus -0.2%; prior -0.4% revised from -0.8%).
- Trade – The US Chamber of Commerce denounced President Trump’s handling of global trade disputes, issuing a report that argued tariffs imposed by Washington and the resulting retaliation by its partners would have a negative impact on the American economy
- Oil forecasts – Morgan Stanley raised its forecast for Brent crude to $85 a barrel for the second half of 2018, up $7.50 from its previous estimate, due to the impact of Iran sanctions. It now expects shipments to fall by 1.1 mbpd by year end. It previously saw the sanctions wiping out 700,000 bpd through 2019. For 2018, MS says the market will be undersupplied by 600,000 bpd over the next six months.
- German politics – Chancellor Angela Merkel diffused the crisis by agreeing to establish transit centres for migrants near Germany’s southern border
- European data – PPI +0.8% (expected 0.4%; last 0.0%) to be +3.0%yoy (expected 2.4%: last 1.9%). Retail Sales 0.0% (expected 0.1%; last -0.1%) to be +1.4%yoy (expected 1.5%; last 1.6%)
- RBA yesterday – No change in rates (as expected). Notably, the RBA dropped its long-held reference to the Aussie dollar which noted that a rising AUD is bad for economic growth, instead saying is sits “within the range that it has been in over the past two years”.
QUOTE OF THE DAY
“Money brings some happiness. But after a certain point, it just brings more money.” – Neil Simon, American playwright born this day in 1927.