MID MORNING MARKETS 25-09-18

The ASX200 is flat in mid-morning trade with few major drivers. Energy leads again, IT and consumer stocks lower. Banks ↓. Little corporate or economic news. Post results, school holidays chill #ausbiz

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 TODAY

  • Ex-dividend – Blackwall Property Trust (BWR) 5.0c, Generation Development Group (GDG) 1.0c, WPP AUNZ (WPP) 2.3c
  • BoJ Monetary Policy Meeting Minutes
  • Japanese data – Coincident Index Final, Leading Economic Index Final

TONIGHT

  • UK data – UK Finance Mortgage Approvals, CBI Distributive Trades
  • US economic data – FHFA Housing Price Index, S&P Case-Shiller Home Price Index, Consumer Confidence
  • Nike will report after the close Tuesday.

COMPANY NEWS

  • Orica (ORI) – CFO Vince Nicoletti will leave for personal reasons and be replaced by Christopher Davis, who  joined Orica in 2013 and has been Vice President Group Finance since 2015
  • Fairfax (FXJ) – The NZ Court of Appeal has not approved the merger of NZME and Fairfax.
  • Retail Food Group (RFG) – Chairman Colin Archer will retire, effective today, to be replaced by Stephen Lonie.
  • Mesoblast (MSB) –  Mesoblast’s proprietary allogeneic mesenchymal precursor cell (MPC) heart failure product candidate MPC-150-IM for use in children with hypoplastic left heart syndrome (HLHS) was featured at the First Cardiac Regenerative Symposium for Congenital Heart Disease in Baltimore, Maryland on the weekend.

ANALYST CHANGES

  • Brickworks (BKW $16.18) – Deutsche bank has a Buy recommendation with a target price of $18.40. FY18 underlying net profit was ahead of expectations. Management has indicated residential activity is likely to decline in major east coast markets while energy prices will significantly affect earnings. A solid contribution from land and development is expected.

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  • James Hardie (JHX $20.81) – Deutsche Bank has a Buy recommendation with a target price of $23.60. The analyst is happy the incoming CEO has reiterated the key growth ambitions, including the 35%/90% target in product/share and a 20-25% US fibre cement earnings margin target. They expect the company to consistently achieve its 6% primary demand growth expectations by FY21.

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  • REA Group (REA $86.06) – Morgans has an Add recommendation with a target price of $95.21. Despite a slowing residential property market, the analyst sees the company continuing to grow volume in paid depth ads. They expect REA to sail through the current slump in residential property markets and meet expectations for the first half.

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  • Sonic Healthcare (SHL $25.29) – Deutsche Bank has a Buy recommendation with a target price of $28.10. The analyst considers the US District Court decision in Columbia a negative for SHL as it sets back any potential revisions to funding cuts, or at the least delays any possible improvement in funding. (The court has dismissed the American Clinical Laboratory Association’s lawsuit to halt the implementation of cuts to reimbursement for laboratory testing.)

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OVERNIGHT

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SPI FUTURES -9

US EQUITIES – S&P500 -11 (-0.38%), Dow Jones -170 (-0.64%), Nasdaq -3 (-0.04%).

Main themes

  • Pressure after the cancellation of US-China trade talks.
  • US tariffs kick in
  • Energy sector rallies after oil responds to OPEC/Russian refusal to increase production.
  • Reports that Deputy Attorney General Rod Rosenstein has resigned (forced to resign)

EUROPEAN MARKETS – All lower. STOXX500 -0.56%, UK FTSE -0.42% German DAX -0.64%, French CAC -0.33%.

CURRENCIES

  • The US dollar was 0little changed at 94.18.
  • The Aussie dollar is lower at 72.57c.

BONDS – 2-yr: -2 bps to 2.79%, 5-yr: +1 bp to 2.96%, 10-yr: UNCH at 3.07%, 30-yr: -1 bp to 3.20%

COMMODITIES

  • WTI crude futures closed up US$1.30 or 1.8% to US$72.08 . Major OPEC/non-OPEC producers met Sunday in Algeria and decided not to increase production to offset falling supply from Iran.
  • 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 30c at US$68.90/dry ton. (CFR Tianjin port)
  • LME metals – MIxed. Cu -0.16%, Ni -2.23%, Al -1.48%.

ECONOMIC DATA, NEWS & POLITICS

  • Oil – JPMorgan forecasts Brent and WTI prices to average US$85 and US$76 per barrel, respectively, in the next six months. It says “a spike to $90 per barrel is likely” in the coming months due to US sanctions on Iranian oil exports, which have fallen dramatically in recent months as importers brace for the impending penalties.
  • European data – German September ifo Business Climate Index 103.7 (expected 103.2; last 103.9). September Business Expectations 101.0 (expected 100.2; last 101.3) and Current Assessment 106.4 (expected 106.1; last 106.5)
  • UK September CBI Industrial Trends Orders -1 (expected 5; last 7)
  • The UK government has denied reports of plans to call a new snap election in November.

QUOTE OF THE DAY

“What makes Superman a hero is not that he has power, but that he has the wisdom and the maturity to use the power wisely. From an acting point of view, that’s how I approached the part.” – Christopher Reeve (the true Superman), American actor born this day in 1952. Died 10 October 2004.

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