MID MORNING MARKETS 3-8-18

The ASX200 is up 15 points in mid-morning trade. $1tr Apple today keeps the sell-off away, as IT strength offsets weaker banks and Materials. RMD result, BofE rate rise and A$ under pressure. Retail sales today. Next week RBA, CBA result.  #ausbiz

M3M4M5TODAY

  • Australian economic data – AIG Services Index, Retail Sales (expectations are for growth of 0.3%)
  • Japanese data – Nikkei Services PMI
  • BoJ Monetary Policy Meeting Minutes
  • Chinese – Caixin Composite PMI, Caixin Services PMI

TONIGHT

  • UK – Markit/CIPS UK Services PMI
  • European – Markit Composite PMI Final, Markit Services PMI Final , Retail Sales
  • US economic data – Average Workweek, Avg. Hourly Earnings, Nonfarm Payrolls, Trade Balance, Unemployment Rate, ISM Services. Expectations are for payrolls of 190K (previous 213K) and the unemployment rate is expected to fall to 3.9%.

COMPANY NEWS

  • ResMed (RMD was down 3.96% in US after-hours trade) – 4Q earnings of $109.8m. Profit 76c. Earnings, adjusted for amortization costs and non-recurring costs, were 95c. Above consensus of 90c. Revenue up 12% to $623.6m (above estimates of $616.4m. For the year, profit was $315.6m or $2.19 per share. Revenue was up 13% to $2.34bn. Quarterly dividend increased by 6% to $0.37 per share
  • A2Milk (A2M) – Will increase its shareholding in Synlait by 8.3% at NZ$10.90. It follows A@M”s reaffirmation of its supply agreement with Synlait in July.
  • Sonic Healthcare (SLH) – Has entered a laboratory joint venture with ProMedica Health System, Inc. (“ProMedica”). SHL said it’s not a material transaction but “another positive step in Sonic’s ongoing hospital laboratory partnership growth strategy.”
  • Nib (NHF) – Has acquired QBE’s travel insurance business (Australia’s fourth largest travel insurer) for $25m. IT includes the distribution and claims capability of QBE Travel, but excludes capital supporting the business and the QBE brand. The purchase provides greater scale and distribution reach, will be funded through existing available capital, and is immaterial to earnings per share.
  • AirXpanders (AXP) – Raising $20.3m through placement and pro-rata, non-renounceable rights offer.
  • ASX – Monthly report. Trades (equities, interest rates and warrant trades) up 5%. Average daily value traded $4.0bn. Futures trades down 24% and volume down 37%. Options down 27%.
  • HT&E (HT1) – ATO has determined penalties and interest relating to NZ Branch matter. HT&E said it strongly disagrees with the rate of penalties imposed and will exercise all available objection rights (including litigation).

ANALYST CHANGES

  • ALQ (ALS $8.55) – Morgans has a Hold recommendation with a target price of $8.11 (from $7.23). Guidance from the AGM was better than the analyst expected and they see solid growth in geochemistry samples and operating improvements in life sciences.

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  • Invocare (IVC $14.37) – Acquired Grafton & District Funerals and Clarence Valley Funerals, collectively known as Grafton & District Funerals based in Grafton, New South Wales. 300 funeral services and generates revenue of circa $2.0 million per annum. Macquarie has a Neutral recommendation with a target price of $13.90 (from $12.71). They note that the recent acquisitions should offset some of the temporary impact from the protect & grow strategy, which is causing disruption as additional sites are refreshed and enhanced. They think proof that IVC is delivering on its targets is necessary to drive a re-rating.

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SHORT CHANGED

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The big increases in short position last week were for Inghams (ING +2.88%), Asaleo Care (AHY +2.69%) and Sigma Health (SIG +2.55%). There was significant short covering in Afterpay Touch (APT -2.5%), Scottish Pacific (SCO -2.09%) and Invocare (IVC -2.01%)


OVERNIGHT

M10m11

SPI FUTURES +21

US EQUITIES – S&P500 +14 (0.49%), Dow Jones -8 (-0.03%), Nasdaq +95 (+1.24%).

Main themes

  • White House confirmed that President Trump asked his top trade official to consider raising proposed tariffs on $200bn worth of Chinese goods to 25% from 10%. China’s Ministry of Commerce responded “China is fully prepared and will have to retaliate to defend the nation’s dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries.”
  • Apple (+2.9%) – First company to hit $1 trillion market cap

EUROPEAN MARKETS – Lower. STOXX 600 -0.82%, UK FTSE -1.01%, German DAX -1.50%, French CAC -0.68%.

CURRENCIES

  • The US dollar was 0.6% higher at 95.18
  • The Aussie dollar is weaker at 73.67

BONDS – 2-yr: -3 bps to 2.65%, 5-yr: -2 bps to 2.85%, 10-yr: -2 bps to 2.99%, 30-yr: -1 bp to 3.12%.

  • Italian bonds underperformed after news Finance Minister Giovani Tria met with Deputy Prime Ministers Matteo Salvini and Luigi Di Maio and EU affairs minister Paolo Savona to discuss introducing a flat tax and a universal basic income for the poor

COMMODITIES

  • WTI crude futures bounced US$1.32 or 1.9% to US$68.96, after early weakness.
  • Gold futures were down US$6 at $1,227.60.
  • Iron Ore – IRESS reports iron unchanged at US$68.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was flat at US$66.45/dry ton. (CFR Tianjin port)
  • LME metals – All hit. Cu -0.53%, Ni -1.91% and Al -0.78%.

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – Weekly Initial Claims 218K (consensus 220K; prior 217K) and Continuing Claims 1724K (prior 1747K); June Factory Orders 0.7% (consensus 0.6%; prior 0.4%)
  • Tesla (+16.2%) rallied after reporting above-consensus revenues, reaffirming guidance, and CEO Elon Musk apologised for last quarter’s earnings call.
  • US results continue – More than 70% of S&P 500 companies have reported and 78% of these have reported better-than-expected profits
  • Bank of England meeting – The BofE voted unanimously to increase its official bank rate by 25 basis points to 0.75%. Governor Mark Carney said that above-target inflation reflects past Sterling weakness and higher energy prices. He said that future rate hikes will be limited and gradual, which surprised some who expected Brexit caution.

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QUOTE OF THE DAY

“Judgment comes from experience – and experience comes from bad judgment.” – Walter Wriston, former CEO and Chairman of Citicorp, born this day in 1919. Died 19 January 2005.

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