The ASX200 is down 3f points in mid-morning trade after weak o/s leads. Off the lows with banks ↑,  H/care and Energy worst. IPL downdate, DMP FWO report. ASX200 + BIN, ELD. – GMA, GXL Ex-div ABC, AMC, BSL #ausbiz



  • Ex-dividend – Adelaide Brighton (ABC) 13.0c, Argo Global Listed Infrastructure (ALI) 2.5c, Amcor (AMC) 32.7c, APN Property(APD) 1.0c, AUB Group (AUB) 32.0c, Blue Sky Alternatives Access Fund (BAF) 4.0c, BlueScope Steel (BSL) 8.0c, Cadence Capital (CDM) 4.0c, Cyclopharm Limited (CYC) 0.5c, MNF Group (MNF) 4.1c, Pental (PTL) 0.9c, Speedcast International (SDA) 2.4c, Select Harvests (SHV) 7.0c, Southern Cross Media (SXL) 4.0c
  • Economic data – AIG Construction Index, Home Loans,
  • Japanese – Household Spending, Average Cash Earnings, Coincident Index, Leading Economic Index Prel
  • Chinese data – Foreign Exchange Reserves


  • US economic data – Nonfarm Payrolls, Nonfarm Private Payrolls, Unemployment Rate, Avg. Hourly Earnings, Average Workweek. Consensus is for 187K new jobs, up from 157k previously.
  • Fed Speak – Boston Fed President (alternate voter) Eric Rosengren, Cleveland Fed President (FOMC voter) Loretta Mester , Dallas Fed President (non-voter) Robert Kaplan


  • Domino’s Pizza (DMP) The Fair Work Ombudsman (FWO) report has found issues, the majority of which are administrative errors, totalling a little under $2,000 of underpayment of wages for 20 team members across 19 stores over a four-week period. Specifically, one franchisee with two stores was responsible for over $1,500 of the underpayment. The balance occurred across the remaining 17 stores where the average underpayment was under $25 per employee. The underpayments related to only 19 employees out of an approximate 600 (3.2%).
  • Santos (STO) – Completion of non-core Asian assets. Has received cash proceeds of US$144m at completion, which represents the sale price of US$221m
  • Incitec Pivot (IPL) – Investor Day. Downgrade to Phosphate Hill production guidance, lower distribution margins,


  • South32 (S32) – 43page booklet on approach to climate change
  • James Hardie (JHX) – Dr Jack Truong, current President – International, will succeed long-standing CEO Louis Gries as CEO towards end FY2019.
  • ALS (ALQ) – Investor Presentation,

ASX/S&P Quarterly Index Rebalancing (Effective at the Open on September 24, 2018)

No changes to the ASX20 and ASX50 indices

S&P/ASX 100 Index

  • Added – Reliance Worldwide Corporation Limited (RWC)
  • Removed – Perpetual Limited (PPT)

S&P/ASX 200 Index

  • Added – Bingo Industries Limited (BIN), Elders Limited (ELD)
  • Removed – Genworth Mortgage Insurance Australia Limited (GMA), Greencross Limited (GXL)

S&P/ASX 300 Index

  • Added – Aurelia Metals Limited (AMI), Clinuvel Pharmaceuticals Limited (CUV), Ive Group Limited (IGL), Jupiter Mines Limited (JMS), Kogan.Com Ltd (KGN), Money3 Corporation Limited (MNY), Megaport Limited (MP1), Nearmap Ltd (NEA), OM Holdings Limited (OMH), Pinnacle Investment Management Group Limited (PNI), Polynovo Limited (PNV), Praemium Limited (PPS), Sundance Energy Australia Limited (SEA), Wagners Holding Company Limited (WGN)
  • Removed – Ainsworth Game Technology Limited (AGI), Beadell Resources Limited (BDR), ImpediMed Limited (IPD), Isentia Group Limited (ISD), iSelect Limited (ISU), Magnis Resources Limited (MNS), Mortgage Choice Limited (MOC), Retail Food Group Limited (RFG), Sky Network Television Limited (SKT)


  • AGL Energy (AGL $20.03) – Credit Suisse has downgraded to an Underperform recommendation with a target price of $17.70 (form $20.60). The analyst has looked at the FY18 result in more detail and notes the realised wholesale price is higher than previously believed. They have modelled a more substantial decline in FY20 and beyond. With little earnings growth the focus is on cash flow and potential capital return, where AGL is in a strong position. CS expects a $500m buyback in FY19, moving gearing back to around 25%. They see less compelling value.


  • Origin Energy (ORG $7.69) Credit Suisse has a Neutral recommendation with a target price of $7.70 (from $9.70). The analyst has reduced its modelling for forward electricity prices and reduced energy market earnings estimates by 3.4% for FY20 and 9.6% for FY21. They see no relative reason for a more positive position on Origin Energy versus AGL Energy (AGL) but instead prefer the strong forecast cash flow from APLNG.


  • Graincorp (GNC $8.01) – Raised earnings guidance for the year ending 30 September 2018 to $255-$270m ($240-265m previously) underlying EBITDA and $60-$75m underlying NPAT. Benefit from the positive performance of the global Malt business, strong market position in the North American craft beer sector; international grain trading book and Liquid Terminals businesses also performed strongly; good progress in the Foods unit within GrainCorp Oils; Grains business experienced ongoing challenging operating conditions in eastern Australia
    • Credit Suisse has an Outperform recommendation with a target price of $9.09 (from $8.78). The analyst has downgraded FY19 estimates marginally and notes the integration of marketing and logistics should reduce network capacity in line with trading capability and increasing overall utilisation. The second site in Canada has been commissioned and should make a more meaningful contribution in FY19.
    • Deutsche Bank has a Buy recommendation with a target price of $9.20. The analyst thinks this is evidence of efficiency and integration benefits but a poor FY19 crop on Australia’s east coast (although this is considered largely priced into the stock) remains an issue. At a 13% discount to its revised valuation, they are positive.
    • Morgans has a Hold recommendation with a target price of $7.22 (from $7.50). Upgrade from better than expected marketing and malt (the latter attributed to the popularity of craft beer, particularly in the US). The analyst has lifted FY18 forecasts but reduced FY19 numbers given the severe drought will likely see Graincorp post its worst year in grains since FY07.They don’t see materially improved conditions for some time.
    • UBS has a Neutral recommendation with a target price of $8.70 (from $8.30). The analyst notes the upgrade is the result of strong craft beer demand in North America and a full contribution from the new Pocatello plant in the second half. Less surprising was the reiteration of severe drought conditions on Australia’s east coast so they’ve cut FY19 earnings estimates as forecast receivables are 3mt, versus a normal crop of around 8mt.


  • Sigma Pharmaceuticals (SIG 54c) – Guidance of Underlying EBIT of $75 million for FY19, with the second half set to benefit from costs already removed from the business. Management also continues to target FY20 Underlying EBIT in the range of $40 – $50 million, with greater clarity expected as the detailed business re-engineering program advances.
    • Credit Suisse has downgraded to an Underperform (from Neutral) recommendation with a target price of 48c (from 52c). The result was weaker than expected. Underlying EBIT of $75m in FY19 before falling to $40-50m in FY20 as a result of losing the Chemist Warehouse contract. FY19 guidance implies a strong second half skew a 54%. The analyst thinks the short term outlook challenging. SIG has appointed Accenture to execute restructuring initiatives but future business strategies remain unclear. They think any restructuring would involve substantial costs and weigh on reported earnings.
    • UBS has a Sell recommendation with a target price of 45c. 1H revenue was below the analyst’s expectations due to soft operating margins and higher costs for interest. They estimate a 45/55% earnings skew half on half is needed to achieve guidance. Cost reductions will be the key driver but they see ongoing top-line pressures.


  • Telstra (TLS $3.12) – Revised guidance for the nbn Corporate Plan 2019. While the lower volumes impact Telstra’s outlook for FY19, it is anticipated these changes will be financially positive to Telstra over the full rollout due to the effects of the natural hedge.


  • Morgans has an Add recommendation with a target price of $3.50. The analyst has tweaked forecast but the impact is immaterial, so no change to earnings.
  • UBS has a Neutral recommendation with a target price of $3.00. The analyst has factored these changes in and continues to see potential for headline FY20 upgrades and underlying FY20 downgrades to earnings per share.





US EQUITIES – S&P500 -11 (-0.37%), Dow Jones +21 (+0.08%), Nasdaq -72 (-0.91%).

Main themes

  • Tech sector underperformance continued for second day. Facebook (-2.78%)
  • Chinese trade tariffs (on $200bn) ahead and Trump also hinted a trade dispute with Japan could be next
  • ADP employment data weaker than expected and drop in factory orders has implications for Q3GDP, but initial claims was at lows since 1969.
  • German factory orders fell 0.9%

EUROPEAN MARKETS – All weaker. STOXX500 -0.59%, UK FTSE -0.87%, German DAX -0.71%, French CAC -0.31%.


  • The US dollar was down 0.1% at 95.03.
  • The Aussie dollar is little changed at 71.99c.

BONDS – 2-yr: -3 bps to 2.63%, 5-yr: -2 bps to 2.75%, 10-yr: -2 bps to 2.88%, 30-yr: -2 bps to 3.05%%


  • WTI crude futures closed down US63c or 0.8% to US$67.77. Oil inventories fell 4.3mb but gasoline inventories rose by 1.8mb. OPEC said global oil demand should break through 100mbpd for the first time this year.
  • Iron Ore – IRESS reports iron ore was up US50c at US$67.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was up US$1.80 at US$68.85/dry ton. (CFR Tianjin port) +0.9% to $66.62
  • LME metals – Mixed after recent weakness. Cu +0.96%, Ni +0.04%, Al -1.35%.


  • US economic data – ADP Employment Change 163K (consensus 186K; prior 219K); Q2 Revised Productivity 2.9% (consensus 2.9%; prior 2.9%), Q2 Revised Unit Labor Costs -1.0% (consensus -0.9%; prior -0.9%), weekly Initial Claims 203K (consensus 214K; prior 213K) which is the lowest level of initial claims since December 6, 1969. Continuing Claims 1707K (prior 1708K); July Factory Orders -0.8% (consensus -0.6%; prior 0.6%) and August ISM Services 58.5 (consensus 56.5; prior 55.7)
  • Russian ruble falls to 2 year lows – The US, Canada, Germany, and France have backed the UK finding that Russia was responsible for the use of a chemical agent in March,
  • European data – German July Factory Orders -0.9% (expected 1.6%; last -3.9%), Swiss Q2 GDP +0.7% (expected 0.5%; last 1.0%) to be +3.4% year-over-year (expected 2.4%; last 2.9%)


“In the theatre the audience wants to be surprised – but by things that they expect.” Tristan Bernard, French playright born this day in 1866. Died 7 December 1947.


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