The ASX200 is down 45 points in mid-morning trade, with Trump tweets again ruffling feather. Au only +ve sector. Telcos and AREITS the worst. Banks and miners both down. WES Coles demerger update, NUF downgrade, BT fees hurt other platforms. Inflation, ECB meeting and US GDP  this week  #ausbiz.



  • European Consumer Confidence
  • US economic data – Existing Home Sales
  • US earnings – After market – Alphabet (GOOG)


  • Wesfarmers (WES) – Coles demerger update. Demerger of Coles expected to be completed in November 2018; Wes to retain 15% of Coles and 50% of flybuys; The demerger represents a significant repositioning of the Group’s portfolio to set up both Wesfarmers and Coles for success over the next decade; Coles balance sheet; net debt of approximately $2.0 billion to support a Baa1/BBB+ credit rating with substantial headroom; Coles intends to follow WES approach to dividends; dividend payout ratio 80-90%; James Graham AM to be appointed Chairman of Coles on completion of the demerger, and David Cheesewright, Jacqueline Chow and Richard Freudenstein to be non-executive directors. Discussions underway with potential additional directors.
  • Mayne Pharma (MYX) – Has acquired generic Efudex® (fluorouracil cream 5%) from Spear Pharmaceuticals, for US$20.0m (US$16.0m in cash and US$4.0m in Mayne Pharma equity) plus contingent payments of up to US$10.0m. The product is immediately EPS accretive with an implied acquisition EBITDA multiple in the low single digits. Mayne Pharma will fund the acquisition from cash and undrawn debt.
  • Westpac (WBC) – BT Financial Group (BT) is today announcing three new initiatives: significant pricing changes to its flagship platform, BT Panorama, the launch of a ‘compact’ BT Panorama offer; an online adviser services hub, BT Open Services. The revenue impact will depend on take-up growth in customers and funds under administration. However on a pro forma basis, if all customers that would benefit from the administration fee changes had transitioned to this new pricing structure at the beginning of 2017 then the full year revenue impact would have been approximately $70m or $50m on a cash earnings basis for the 2017 financial year.
  • Nufarm (NUF) – Trading update. Dry weather has had a significant impact on the A/NZ business, with EBIT contribution now expected to be $5-10m ($51.6m pcp). Now unlikely that a viable crop season would occur in many parts of the country. NUF is also expecting working capital to be $200-300m higher than last year and expects a $12, earnings shortfall in the FY result due to a delay in a French decision to approve its Nuprid 600. Now expects group FY EBIT of $255-270m.
  • Navitas (NVT) – Will expand into the Netherlands with an agreement with the University of Twente to takeover its pathway program.
  • Transurban (TLC) – Has submitted a bid for the WestConnex assets for sale by the NSW government, despite concerns from the ACCC but says the all bids must ultimately receive regulatory approval from the ACCC and the Foreign Investment Review Board. TCL remains confident that it will obtain all necessary approvals


  • Coca-Cola Amatil (CCL) – Macquarie has double downgraded to an Underperform recommendation with a target price of $8.87 (from $9.26). The downgrade follows recent share price strength and the analyst thinks Australian beverages remain susceptible more will need to be spent to keep volumes steady. Ongoing weakness in Indonesia is also likely to affect near-term earnings


  • RCR Tomlinson (RCR) – Citi has a Buy recommendation with a target price of $3.50 (from $4.10). The analyst notes that most of projects were connected to the grid on time and concerns centre on Sun Metals. RCR has confirmed it has not been hit with liquidated damages for that particular project. They believe the risks to the solar projects are more than priced in at the current share price and reflected in their revised forecasts (although there are downside risks). They have cut FY18-20 operating earnings estimates by 7-18% to reflect lower pricing for solar projects and a delay in FY19 contract announcements.


  • Sydney Airport (SYD) – June traffic stats. International passenger growth was strong (+5.0%), while domestic was flat. Key growth came from Taiwan, Vietnam, India, Indonesia and USA, all with double digit growth.
    • Macquarie has downgraded to a Neutral recommendation with a target price of $7.10 (from $6.85). The traffic growth was consistent with the analyst’s expectations. While some interest could emerge around Sydney Airport’s masterplan, they think its will be offset by the Productivity Commission review and associated aeronautical negotiations. They think shares are currently overvalued.
    • Morgans has a Hold recommendation with a target price of $7.30 (from $7.12). They analyst saw international passenger growth running at above long-term trend rates in the first half (up 5.2%). Domestic passenger growth is 2.1%. They forecast revenue growth of 8% in 1H which should 9% growth in earnings. They don’t expect an upgrade to guidance at 37.5c and say, despite defensive qualities and strong balance sheet, there isn’t enough upside for a more positive stance.


  • Treasury Wine Estates (TWE $18.62) – Macquarie has a Neutral recommendation with a target price of $16.66 (from $15.83). The analyst thinks FY19 guidance is attainable, given the strong inventory, but that FY20 consensus earnings appear ambitious.


  • Wesfarmers (WES $49.49) – Macquarie has cut earnings estimates by 6% ahea of reporting season, reflecting the inclusion of the Curragh mine sale. Focus should be on the Coles demerger, balance sheet and CAPEX.k
  • Citi on Wesfarmers (WES $49.49) and Woolworths (WOW $30.30) – Citi has a Neutral recommendation for WOW with a target price of $32.90 and a Sell recommendation on WES with a target price of $43.50 (from $41.10). The analyst notes online penetration is rising towards 3% it is loss-making for both retailers. They think there is only room for one of them to turn online into a profitable channel through an exclusive deal with Ocado. Ocado has signed up 5 major retailers (4 in the past year) to its smart platform. These agreements licence the warehouse automation that enables retailers to service online profitably. The analyst thinks a de-merged Coles is likely to be the partner.



The economic focus this week will be on domestic inflation on Wednesday, while the ECB meets on Thursday and the advance reading of 2Q US GP is Friday. IN company news, we have more quarterly reports including from Fortescue (FMG), Newcrest (NCM) and Iluka (ILU), while GUD has earnings and Macquarie (MQG) its AGM. Some of the bigger US names reporting include Alphabet (Google), Boeing, General Motors, Amazon, Exxon Mobil and Twitter


  • Inflation data on Wednesday will be the key domestic focus. Consensus is centred on a quarterly increase of 0.5% for an annual rate of 2.2%.
  • Very little going on in China – industrial profits on Friday the only major release
  • Quiet in Japan too – Japanese manufacturing PMI and the leading and coincident indices on Tuesday
  • The ECB meets on Thursday and we also have consumer confidence on Monday and loan growth on Wednesday
  • The advance reading od Q2 GDP will be the focus in the US. Other important data includes existing home sales on Monday and new home sales on Wednesday, with durable goods orders on Thursday and the Uni of Michigan sentiment index (final) on Friday.


  • Tuesday – Atlas Arteria (ALX) Q2 traffic stats, Iluka (ILU) Q report
  • Thursday – Fortescue Metals Group (FMG) Q report, IOOF (IFL) Q FUM, Newcrest Mining (NCM) – Q report, Macquarie Group (MQG) AGM
  • Friday – CYBG (CYB) Q report, GUD Holdings (GUD) earnings


  • Monday – After market – Alphabet (GOOG)
  • Tuesday – 23m (MM), Harley Davidson (HOG), Kimberly-Clark (KMB), Peabody Energy (BTU), Verison (VZ). After market – AT&T (T), Chubb (CB).
  • Wednesday – Boeing (BA), Coca-Cola (KO). General Motors (GM), NASDAQ (NDAQ), T Rowe Prcie (TROW), Tupperware (TUP). After market – Legg Mason (LM), Mattel (MAT), PayPal (PYPL), Universal Hralth (UHS), Visa (V)
  • Thursday – AllianceBernstein (AB), American Airlines (AAL), Anheuser-Busch InBev (BUD), Bristol-Myers (BMY), DR Horton (DHI), Goodyear Tire (GT), Hershey Foods (HSY), KKR, McDonald’s (MCD), Mastercard (MA), New York Times (NYT), Nokia (NOK), PulteGroup (PHM), Royal Dutch Shell (RDS.A) Spotify (SPOT), Under Armour (UAA), Xerox (XRX) After-market – Amazon (AMZN), Chipotle Mexican Grill (CMG), Starbucks (SBUX)
  • Friday – Chevron (CVX), Exxon Mobil (XOM), Merck (MRK), Moody’s (MCO), Twitter (TWTR)







US EQUITIES – S&P500 -3 (+0.09%), Dow Jones -6 (-0.03%), Nasdaq -5 (-0.07%).

Main themes

Trump comments the key focus – suggesting tariffs may be imposed on all imports from China and made additional comments criticising the high US dollar and attacking the Fed for rate increases  “now hurting all we have done”.

Earnings – Microsoft (+1.79%) reported better-than-expecter Q results.

EUROPEAN MARKETS – Generally lower. STOXX 600 -0.15%, UK FTSE -0.07%, German DAX -0.98%, French CAC -0.35%.


  • The US dollar was weaker at 94.45 (was 95.16 on Friday)
  • The Aussie dollar is stronger at 74.27 (from US73.60c on Friday)

BONDS – 2-yr: +1 bp to 2.60%, 5-yr: +3 bps to 2.77%, 10-yr: +5 bps to 2.90%, 30-yr: +6 bps to 3.03%


  • WTI crude futures closed up US$1 or 1.4% at US$70.46 but was down 1.24% over the week. Prices were supported by the falling US dollar and Saudi Arabia’s moves to allay fears about oversupply. The Baker Hughes rig count fell by 5 to 858..
  • Gold futures were up US$7.10 at $1,231.10 on Trump’s comments about the US dollar.
  • Iron Ore – IRESS reports iron rose US50to US$67.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was up US10c at US$64.80/dry ton. (CFR Tianjin port)
  • LME metals – Mostly stronger. Cu +1.36%, Ni +1.42% and Al +1.40.


  • Fed Speak – Following Trumps tweets, St Louis Fed President James Bullard said President Trump is just one more voice in the interest-rate debate and that the Fed will not be swayed by public criticism from the president. (Bullard express concern with the pace of hikes a few weeks ago).
  • US earnings – General Electric (-4.44), Honeywell (+3.79%), Stanley Black & Decker (+3.28%)
  • European data – May Current Account surplus €22.40bn (expected €27.20bn; last €29.60bn); German June PPI +0.3% (as expected, last 0.5%); to be +3.0%yoy (expected 2.9%; last 2.7%)
  • Bank of Japan – There was speculation the BoJ will adjust its interest rate targets or asset purchasing techniques when it meets July 30-31.
  • China – Large Chinese banks were reportedly purchased yuan and selling US dollars near 6.800 after the PBoC lowered the yuan fix for the seventh consecutive day


“To the men in Washington, the world is just a giant Monopoly board.” – Woody Harrelson, American actor born this day in 1961.


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