The ASX200 is down 9 points in mid-morning trade, after being down as much as 30. Banks holding up, Energy hit by oil price drop. Materials, Utilities, & Healthcare all lower. RIO and OSH Q report, AHY results, PPT FUM, RBA minutes today. #ausbiz



  • RBA Meeting Minutes
  • Chinese data – Industrial Capacity Utilization, House Price Index,


  • UK data – Unemployment Rate, Average Earnings excl. Bonus
  • US economic data – Industrial Production, Capacity Utilization, NAHB Housing Market Index, Net Long-Term TIC Flows
  • US earnings – Goldman Sachs (GS), Johnson & Johnson (JNJ), UnitedHealth (UNH).
  • Fed Chair Jay Powell appears before the Senate Committee on banking, Housing, and Urban Affairs for the semiannual monetary policy report


  • Rio Tinto (RIO) – Q report. Pilbara iron ore shipments up 14% to 88.5mt, benefiting from better weather and reflecting improved productivity across the system. Shipments in 2018 are expected to be at the upper end of the existing guidance range of 330-340mt; Bauxite production up 3% to 13.3mt due to continued operational improvements. Third party shipments increased 10% to 8.7mt due to firm demand; Aluminium production was  down 3% to 0.9mt due primarily to labour disruptions at the non-managed Becancour smelter in Canada and a power interruption at the Dunkerque smelter in France; Mined copper production was up 26% to 156.8 thousand tonnes, reflecting strong production at Escondida following a labour union strike in the first half of last year; Hard coking coal production was 40 per cent higher due primarily to the impact of Cyclone Debbie last year; Cost inflation is being experienced, particularly in the Aluminium group with higher raw material costs. Disruptions during the first half have also impacted unit costs at IOC and RBM ; The major growth projects remain on track, with first bauxite shipment from Amrun expected in the first half of 2019 and construction of the first drawbell at Oyu Tolgoi Underground anticipated in mid-2020.; The AutoHaulTM project achieved two major milestones, with regulatory approval on 18 May 2018 and the first loaded autonomous train journey from mine to port completed on 10 July 2018


  • Asaleo Care (AHY) – The decline reflects: Significantly higher pulp and electricity costs of approximately $10 million; Lower sales volume in the Consumer Tissue business. Asaleo Care proceeded with a price increase to recoup part of the cost increases. During protracted negotiations with customers, promotions were reduced and in some cases cancelled, and significant volume was lost. These negotiations have now largely concluded with promotions resumed and price increases achieved in many cases; Increased trade spend to support market share as a result of continued heavy discounting by competitors; Lower sales in the Baby Care business; Ongoing investment in product quality improvements for the longer term; Lease cost on Springvale property in 1H18 as a result of the sale and lease back in June 2017. Also downgraded guidance to $80-85m from $113-119m and flagged significant impairment charges and write-downs.


  • Sims Metal (SGM) – Has provided greater financial transparency for SA Recycling LLC. SAR operates 73 facilities across North America, specifically California, Texas, Arizona, Nevada, Georgia, Alabama and Tennessee. The core business of SAR is ferrous and non-ferrous metal recycling, servicing US domestic and international customers. The 50% investment in SAR, held through one of the Company’s subsidiaries, has been disaggregated from the historical North America Metals operating segment for market disclosure. The two new segments will be referred to as North America Metals and Investment in SA Recycling.
  • Oil Search (OSH) – Q Production.


  • Perpetual (PPT) – FUA at 30 June 2018 $30.8bn, up $0.6bn. Net outflows were $0.3bn. Total average FUM for the three months to 30 June 2018 was $30.8 billion. The $0.6bn increase was mainly attributable to: Market appreciation of $1.3 billion; $0.3 billion of net outflows ($0.5 billion of net outflows from Australian Equities primarily from the Intermediary channel and $0.2 billion of net inflows into Cash and Fixed Income from the Intermediary channel); a distribution payment to clients (net of automatic re-investments) of $0.4 billion


  • OzMinerals (OZL) – New board members. Charlie Sartain to join OZ Minerals’ Board on 1 August 2018, Marcelo Bastos to join OZ Minerals’ Board on 1 September 2018.
  • National Australia Bank (NAB) – Geoff Lloyd has been appointed CEO of MLC, which NAB is planning to exit. Mr Lloyd is CEO and MD of Perpetual.
  • Newcrest (NCM) – Peter Tomsett appointed independent Non-Executive Director
  • Pengana Capital (PCG) – FUM up 0.45% to $3.5193bn. Distribution of $170.0m , performance fees of $11.7m for the year.


  • Citi on Energy Companies – The analyst has updated all its valuations
    • Woodside (WPL $35.59) – Sell recommendation with a target price of $29.67 (from $29.25).
    • Oil Search (OSH $9.05) – Sell recommendation with a target price of $6.81 (from $6.76).
    • Santos (STO $6.09) – Sell recommendation with a target price of $5.81 (from $5.47). The reserve upgrade at Cooper Basin may have positive implications for STO but the analyst notes that an equivalent upgrade would lead only to a small increase in valuation
    • Senex Energy (SXY $41c) – Upgraded to Neutral (from Sell) recommendation with a target price of 45c (from 40c)
    • Beach Energy (BPT $1.84) – Sell recommendation with a target price of $1.62 (from $1.23). The reserve upgrade suggests not only longer production life but also slower production decline in other fields, but the analyst thinks the longer term growth outlook is less compelling than peers and looks expensive
  • Fortescue Metals Group (FMG $4.38) – Citi has double upgraded to a Buy (from Sell) recommendation with a target price of $$4.90 (from $4.00). The analyst notes FMG’s plans to address widening discounts for lower grade ore by blending in ore from higher grade mines. The analyst has increased iron ore price forecasts and lowered A$ forecast, resulting in a big increase in target price. They do have a concern that bringing new mid-grade ore onto the market to replace lower grade shipments will actually widen the discount for the former and tighten the discount for the latter.


  • Freedom Foods (FNP $6.06) – Morgans has downgraded to a Reduce (from Hold) recommendation with a target price of $5.50 (from $5.90). The analyst notes that the recent downgrade is the fourth year in a row that FNP has missed expectations, while FY19 guidance is also lower. They think consensus estimates are still too high and this may lead to further disappointment over time. They concede the product portfolio is strong, but have downgraded due to valuation.


  • Cabcharge (CAB $2.28) – UBS has downgraded to a Sell (from Neutral) recommendation with a target price of $2.15 (from $1.65).


  • Praemium (PPS 95c) – Morgans has upgrade to an Add (from Hold) recommendation with a target price of $1.07 (from 69c). The analyst notes funds on platform exceeded $8bn for the first time while Australian funds on platform grew 45% to reach a new record of $5.6bn. They also note the SMA platform is considered one of the best platforms currently available.


  • Whitehaven Coal (WHC $5.48) – Credit Suisse has downgraded to a Neutral (from Outperform) recommendation with a target price of $5.00 (form $4.60). The analyst has downgraded on valuation grounds after the recent price strength. They don’t think WHC is expensive, particularly taking into account the capacity for capital management beyond the current dividend policy. But they have less conviction about future returns and see the risk of a moderation in FY19 guidance for Narrabri.





US EQUITIES – S&P500 -3(-0.11%), Dow Jones +45 (+0.18%), Nasdaq -20 (-0.26%).

Main themes

  • Politics were in focus with US president Trump meeting Russian president Vladimir Putin
  • Financials outperform after strong result from Bank of America (+4.31%)
  • Energy lags after 4.2% fall in the oil price.

EUROPEAN MARKETS – Mostly lower. STOXX 600 -0.25%, UK FTSE -0.80%, German DAX +0.16%, French CAC -0.36%.


  • The US dollar was down 0.25% at 94.51
  • The Aussie dollar is little changed at US74.23c.

BONDS 2-yr: +3 bps to 2.60%, 5-yr: +3 bps to 2.75%, 10-yr: +3 bps to 2.86%, 30-yr: +3 bps to 2.97%%


  • WTI crude futures rose US$2.95 or 4.2% to US$68.06, after US Treasury Secretary Steve Mnuchin said there could be exemptions from sanctions against Iran, while concerns about supply disruptions eased, Libyan ports reopened, and potential supply increases by Russia and other oil producers came into focus.
  • Gold futures were down US$1.50 at $1,239.70.
  • Iron Ore – IRESS reports iron unchanged at US$66.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was down US50c at US$63.00/dry ton. (CFR Tianjin port)
  • LME metals – Mostly lower. Cu -0.72%, Ni -2.18% but Al +1.18% the exception


  • US economic data – June Retail Sales 0.5% (consensus 0.5%; prior 0.8%), Retail Sales ex-auto 0.4% (consensus 0.3%; prior 0.9%), and July Empire Manufacturing 22.6 (consensus 21.0; prior 25.0); May Business Inventories 0.4% (consensus 0.4%; prior 0.3%)
  • US earnings – Bank of America (+4.31%), BlackRock (-0.62%). After-market: Netflix (-14.23% in after-hours trade)
  • The US filed complaints against China, the EU, Canada, Mexico, and Turkey at the World Trade Organization over the imposition of retaliatory tariffs
  • European data – May trade surplus €16.50bn (expected €20.90bn; last €16.70bn)
  • Chinese data yesterday – the headline GDP number was in line with expectations and retail sales beat consensus, but industrial production was a disappointment.


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