MID MORNING MARKETS 17-09-18

The ASX200 is down 17 points in mid-morning trade with aged care royal commission dominated market moves. Materials and banks also lower, Telcos and utilities ok. No BWX bid, NAB exec changes, COH ex-div. quiet week ahead #ausbiz

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TODAY

  • Ex-dividend – Alliance Aviation Services (AQZ) 6.3c, Cochlear (COH) 160.0c, Cleanaway Waste Management (CWY) 1.4c, FFI Holdings (FFI) 10.0c, HUB24 (HUB) 3.5c, Over The Wire Holdings (OTW) 1.5c

TONIGHT

  • European – Inflation Rate
  • US economic data – Empire Manufacturing

COMPANY NEWS

National Australia Bank (NAB) – Executive changes. A number of executive changes have been, mostly changes in “Customer Products & Services” becoming “Customer Experience” ann


arded a 4 year $420m (US$303m) contract extension by Antofagasta Minerals (AMSA) to continue operations at the Encuentro open pit located in northern Chile. Contract to to provide mining services with a scope of works comprising of drilling, load and haul, mobile equipment maintenance and mine services

ANALYST CHANGES

  • Amcor (AMC $13.86) – Deutsche Bank has a Buy recommendation with a target price of $16.65. The analyst notes the outlook for paper & packaging is improving. Demand remains stable and resin & aluminium costs have started to ease. At a 16% discount to valuation, it is the preferred exposure.

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  • Link (LNK $7.54) – Morgan Stanley has an Overweight recommendation with a target price of $9.00. The analyst thinks the dilution from the equity raising in April has been priced in and there is potential upside from deploying capital to grow asset services, with the market seemingly missing the opportunity for Link to build a leading European asset servicing franchise.

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  • Primary Health Care (PRY $2.84) – Fair Work Commission’s determination for support employees at the Dorevitch pathology business expected to have a $4.5m impact, post-tax, on FY19 underlying net profit
    • Deutsche Bank has a Hold recommendation with a target price of $3.00. The analyst notes PRY aims to offset the loss through a range of strategies and has made no changes to guidance.
    • UBS has a Sell recommendation with a target price of $2.70 (from $2.77). The analyst notes that PRY does not expect the final outcome to change materially and aims to fully offset the impact. Support staff will get a 9%, one-off increase to hourly wage rates and this will be back paid one-year, effectively forming the new FY18 base.

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  • Ramsay Health Care (RHC $54.98) – The analyst notes that the UK NHS has published hospital activity data for July. NHS e-referrals represent around 80% of Ramsay’s total admissions in the UK and around 8% of group revenue. July volumes increased 4.1%. The update suggests a possible divergences in the performance of Ramsay versus its UK peers. There is potential for the NHS, in order to improve waiting lists for elective surgery, to drive increase utilisation of the private system and, while the broker acknowledges it is too early to be sure, the July data indicates a relatively stronger performance for the company’s UK volumes.

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LAST WEEK

  • GLOBAL MARKETS – Equities ↑, US tech stocks star. MSFT +4.77%, NFLX +4.55%. China -0.76% underperforms. Oil stronger on hurricane and Iran sanctions. Base metals mixed. Bonds sell off. US10yr +6bp to 3.00% again. US$ off an $A
  • AUSSIE MARKETS– Equities +0.35% underperform. Smalls (+0.97%) ok but mid-caps (+0.11%) lag. Materials, Energy and tech stocks best. Consumer stocks ↓. SUN -3.7% worst of the Top20

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THIS WEEK

It’s a bit quieter on the international economic front next week but some focus on the RBA.

  • Locally – RBA Meeting minutes on Tuesday and the RBA Bulletin on Thursday. RBA Assistant Governor Christopher Kent is speaking Wednesday. House price data on Tuesday and Westpac leading index on Thursday.
  • Bank of Japan meets on Wednesday and key data includes trade numbers on Wednesday, and inflation on Friday.
  • European inflation on Monday, consumer confidence on Wednesday and Markit PMI indices on Friday
  • UK inflation on Wednesday and retail sales on Thursday.
  • Us data mostly mid-tier level – Empire Manufacturing and Philly Fed Indices. And housing data including the NAHB Housing index, building permits, housing starts and existing home sales. Also leading indicators on Thursday

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OVERNIGHT

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SPI FUTURES -2

US EQUITIES – S&P500 -2 (-0.05%), Dow Jones -22 (-0.08%), Nasdaq -5 (-0.07%).

Main themes

  • Weaker retail sales +0.1% (consensus 0.4%) but consumer sentiment hit its second-highest level since 2004
  • Bloomberg report that President Trump wants to impose tariffs on $200bn worth of China imports despite recent developments on trade talks.

EUROPEAN MARKETS – All stronger. STOXX500 +0.35%, UK FTSE +0.31%, German DAX 0.57%, French CAC +0.46%.

CURRENCIES

  • The US dollar rose 0.47% to 94.96.
  • The Aussie dollar is 0.4% lower at 71.62c.

BONDS – 2-yr: +2 bps to 2.77%, 5-yr: +2 bps to 2.89%, 10-yr: +3 bps to 2.99%, 30-yr: +3 bps to 3.13%

COMMODITIES

  • WTI crude futures closed up US59c at US$69.18.
  • Iron Ore – IRESS reports iron ore was unchanged at US$68.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was to US$1.15 at US$69.25/dry ton. (CFR Tianjin port)
  • LME metals – MIxed. Cu -0.99%, Ni +0.40%, Al -1.02%.

ECONOMIC DATA, NEWS & POLITICS

  • San Francisco Fed – Mary Daly new president
  • US economic data – August Retail Sales 0.1% (consensus 0.4%; prior 0.7%), Retail Sales ex-auto 0.3% (consensus 0.5%; prior 0.9%), August Import Prices ex-oil -0.1% (prior -0.3%), and Export Prices ex-agriculture -0.2% (prior 0.0%); August Industrial Production 0.4% (consensus 0.4%; prior 0.4%) and Capacity Utilization 78.1% (consensus 78.3%; prior 78.1%); Business Inventories 0.6% (consensus 0.6%; prior 0.1%) and Preliminary September Michigan Sentiment Index 100.8 (consensus 97.0; prior 96.2)
  • European data – Eurozone July trade surplus €17.60bn (expected surplus of €18.00bn; last surplus of €22.50 billion). Q2 Labor Cost Index +2.2%yoy (last 2.1%) and Q2 Eurozone Wages +1.9%yoy (last 1.8%); Italian August CPI +0.4% (expected 0.5%; last 0.4%) to be +1.6%yoy (expected 1.7%; last 1.6%)
  • Russian Central Bank unexpectedly increased its key rate to 7.50% from 7.25%

QUOTE OF THE DAY

“The ugly duckling is a misunderstood universal myth. It’s not about turning into a blonde Barbie doll or becoming what you dream of being; it’s about self-revelation, becoming who you are.” – Baz Luhrmann, Australian director born this day in 1962

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