MID MORNING MARKETS 12-09-18

The ASX200 is down 10 points in mid-morning trade. Lower commodity prices weighing on Reosurces, Energy boosted by oil rally, insurance sector under pressure. Quiet news day. MYR results, ACCC APA go ahead, CIM, CGC,PPT, SEK , SHL ex-div  #ausbiz

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TODAY

  • Ex-dividend – Adacel Tech (ADA) 7.5c, Accent Group (AX1) 3.8c, Costa Group Holdings (CGC) 8.5c, CIMIC Group (CIM) 70.0c, FSA Group (FSA) 4.0c, Lovisa Holdings (LOV) 14.0c, Mercury NZ (MCY) 8.3c, National Tyre & Wheel (NTD) 2.3c, PM Capital Asian Opportunities Fund (PAF) 2.0c, Perpetual (PPT) 140.0c, Regis Resources (RRL) 8.0c, SEEK (SEK) 22.0c, Sonic Healthcare (SHL) 49.0c, Service Stream (SSM) 4.5c, Vista Group International (VGL) 1.3c
  • Economic data – Westpac Consumer Confidence Index
  • Chinese data – FDI (YTD)

TONIGHT

  • European Industrial Production
  • US data – PPI, Core PPI, JOLTS – Job Openings

COMPANY NEWS

  • Myer (MYR) – FY18 Results. Total sales -3.2% to $3.1bn (-2.7% on a comparable store basis); Total online sales $239.4m; EBITDA -24.6% to $149.4m; Statutory Net Loss $486m; NPAT before sig items -52.2% to $32.5m; No Final Div; Operating gross profit (OGP) declined by 2.9% to $1,184.4 million and OGP margin increased by 8 basis points to 38.2%; Cost of Doing Business (CODB) increased by 1.5% to $1,035.0 million. Excluding MDL, CODB declined by 1.1%; NPAT pre-implementation costs and individually significant items decreased by 52.2% to $32.5m
  • APA Group (APA) – The proposed takeover by the CKI Consortium will not be opposed by the ACCC with a court-enforceable undertaking for CKI to divest gas assets in WA to maintain competition.

ANALYST CHANGES

Macquarie Group (MQG $125.50). Yesterday reiterated expectations for FY19 to be “broadly in line” with FY18

  • Citi has a Neutral recommendation with a target price of $120.00. The analyst has updated forecasts due to the sale of Quadrant Energy and guidance for FY19 to be “broadly in line” with FY18, raising FY19 estimates for earnings per share by 6%. FY20 estimates are broadly flat, reflecting the revised timing of the Quadrant sale offset by the gain on sale from Nuix.
  • Morgan Stanley has an Overweight recommendation with a target price of $130. The analyst notes first time guidance for the first half indicates strong performance fees. They think the outlook is conservative and forecasts 10% earnings growth with support from strong markets, a weaker Australian dollar and the Quadrant sale.
  • Morgans has an Add recommendation with a target price of $13.070 (from $115.80). The analyst notes the outlook does not include the recent Quadrant Energy sale and upgrades FY19 and FY20 estimates for earnings per share by 4-8%. They think the business is tracking well with reasonably robust activity levels in all divisions, besides corporate and asset finance. With further assets realisation possible, they suspect upside earnings risk exists.

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OVERNIGHT

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SPI FUTURES -14

US EQUITIES – S&P500 +11 (+0.37%), Dow Jones +114 (+0.44%), Nasdaq +22 (+0.27%).

Main themes

  • Oil rallied, supporting the energy sector, on expectations that Hurricane Florence will disrupt supply disruptions when it makes landfall later this week
  • Tech sector outperformed – Apple +2.61% after UBS raised its target price to $250 from $215.
  • Trade – Caution after news that China will ask the World Trade Organistion for authorisation to impose sanctions on the US

EUROPEAN MARKETS – All higher. STOXX500 +0.47%, UK FTSE +0.02%, German DAX +0.22%, French CAC +0.33%.

CURRENCIES

  • The US dollar was up 0.1% at 95.24.
  • The Aussie dollar is slightly lower at 71.03c.

BONDS – 2-yr: +2 bp to 2.71%, 5-yr: UNCH at 2.82%, 10-yr: UNCH at 2.94%, 30-yr: -1 bp to 3.09%

COMMODITIES

  • WTI crude futures rallied, rising US$1.71 or 2.5% to US$69.25 as Hurricane Florence (cat4) approached North Carolina and South Carolina. It could also be the worst storm to hit North Carolina in 60 years.
  • Iron Ore – IRESS reports iron ore was unchanged at US$69.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was down US20c at US$68.35/dry ton. (CFR Tianjin port) +0.9% to $66.62
  • LME metals – Mostly lower. Cu -0.86%, Ni -1.45%, Al -2.43%.

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – NFIB Small Business Optimism 108.8 (prior 107.9); JOLTS — Job Openings 6.939m (prior 6.822m) and July Wholesale Inventories 0.6% (consensus 0.7%; prior 0.1%)
  • Apple – In addition to the UBS upgrade on the back of growth in its services business, Apple hold an update tonight where it’s expected to announce several new products.

QUOTE OF THE DAY

“For many people, being asked to solve their own retirement savings problems is like being asked to build their own cars.” – Richard Thaler, American Nobel prize-winning economist born this day in 1945

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