The ASX200 is flat in mid-morning trade despite USMCA (cue the Village People!) agreement. Energy leads after oil +2.8%. Materials and Staples ↑, banks and h’care ↓. NCK ex 24c RBA today. Hope to ease CCCs (credit crunch concerns) #ausbiz
- Ex-dividend – OneAll International (1AL) 3.5c, Imperial Pacific (IPC) 6.3c, London City Equities (LCE) 1.4c, Nick Scali (NCK) 24.0c
- Economic data – TD-MI Inflation Gauge
- RBA Interest Rate Decision
- Japanese Consumer Confidence
- UK – Construction PMI
- European PPI
CORELOGIC HOUSE PRICES – House prices fell 0.5% in September or -2.7% over the year (capital cities down 3.7%). It was the weakest annual price change since 2012.
- National prices dragged down by Sydney and Melbourne – Sydney values are down a cumulative 6.2% since peaking in July 2017 and Melbourne values are down 4.4% since peaking in November 2017. (Despite the recent falls in Sydney and Melbourne, dwelling values remain 46% and 40% higher than they were five years ago,)
- Other cities are seeing a slowing in their growth rates and regional markets are starting to see more challenging conditions.
- Brisbane, Hobart and Canberra at respective peak.
- Worst falls in sectors affected by mining downturn – regional WA and Darwin.
- Falls in the most expensive sectors (Sydney and Melbourne) a key feature. First home buyer, affordability and tightening credit (at high debt to income loans) the key drivers.
- RC could result in tighter credit conditions – and conservative lending practices could reduce credit availability.
- Credit data on Friday which showed a further slowing in housing credit to a 5 year low. Investment credit growth of 1.5% – the slowest pace on record, with occupier-housing also easing to 7.5%.
- Investor demand – higher mortgage rates, stricter lending criteria, low rental yields and weak capital gains prospects.
- Fundamental demand – net overseas migration down almost 9% in the year to March 2018 (skewed to NSW).
- Supply on the increase, with strong dwelling construction.
- “This may create some challenges for absorbing newly built housing stock, especially those dwellings targeted specifically towards investors,”
- More positive factors – economic conditions healthy, particularly labour market conditions, mortgage servicing still supportive, housing affordability is seeing first home buyers helping to offset reduced investment activity.
In the previous housing market downturn (Jun 2010 to Feb 2012), national dwelling values fell by 3.0% over the first twelve months, and 6.5% from peak to trough.
- IOOF (IFL) – Has completed the acquisition of the ANZ Aligned Dealer Groups (ADGs) and further arrangements for the completion of the acquisition of the ANZ One Path Pensions and Investments (ANZ P&I) business.
- Syrah (SYR) – Trading Halt to allow SYR to assess the damage from a fire that occurred overnight at the Primary Classifier Screen at Balama. SYR said no injuries were sustained, and the fire was isolated to this section of the plant. At this stage it appears that no major structural damage has occurred, however damage to the screen deck, pipe and electrical equipment has been sustained and an assessment of the repair time and the impact on production is being undertaken
- Suncorp (SUN – Ian Hammond has been appointed as a non-executive director
- Lynas (LYC) – Has released an open letter to the Government of Malaysia and the People of Malaysia regarding the proposed review of Lynas Malaysia Sdn Bhd’s operations.
- Mesoblast (MSB) – The 159-patient randomized placebo-controlled Phase 2b trial evaluating MSB’s allogeneic mesenchymal precursor cell (MPC) product candidate MPC-150-IM in the treatment of end-stage heart failure patients implanted with a left ventricular assist device (LVAD) has been selected as a late-breaking presentation at the 2018 Scientific Sessions of the American Heart Association being held in Chicago from November 11-13
- Clean Teq (CLQ) – Corporate Presentation.
- Eclipx (ECX $2.57) – Morgan Stanley has an Overweight recommendation with a target price of $3.00 (from $2.50) – The analyst notes the stock has rebounded on the back of SG Fleet’s (SGF) offer at $2.52 a share. They think the bid was a catalyst for the market to ascribe value to Right2Drive and Grays. They value the core leasing business at $2.50 a share and now includes $0.50 a share for Right2Drive and Grays.
- Lend Lease (LLC $19.66) – Macquarie has an Outperform recommendation with a target price of $21.81 (up 2%). The analyst has reviewed the urban regeneration projects LLC has won in the UK over the past 12 months and thinks $18bn could prove a conservative end value. They have upgraded EPS estimates for the years post FY21 because of near-term UK residential opportunities while expecting some profits will occur over the longer term.
- Rio Tinto (RIO $78.76) – Macquarie has an Outperform recommendation with a target price of $91.00. The analyst notes that tobe River joint venture has approved the US$1.55bn expenditure budget to fund a number of mine replacements. This was already in Macquarie estimates. Cnstruction is expected to commence in 2019 and first ore is scheduled for 2021. Rio Tinto has already guided to US$2.7bn in replacement capital expenditure for 2018-20 and these projects are part of this budget.
SPI FUTURES +7
US EQUITIES – S&P500 11 (+0.36%), Dow Jones +193 (+0.73%), Nasdaq -9 (-0.11%).
Main themes –
- Canada has joined revised NAFTA; agreement to be renamed United States-Mexico-Canada Agreement (USMCA)
- General Electric (+8.72%) rallied after removing John Flannery as CEO
- Energy sector outperformed, with oil reaching a 4 year high.
EUROPEAN MARKETS – All lower. STOXX500 +0.2%, UK FTSE -0.19%, German DAX +0.75%, French CAC +0.24%.
- The US dollar is stronger at 95.29.
- The Aussie dollar is little changed at 72.28c.
BONDS – 2-yr: +1 bp to 2.82%, 5-yr: UNCH at 2.95%, 10-yr: UNCH at 3.06%, 30-yr: +1 bp to 3.21
- WTI crude futures closed up US$2.05 or 2.8% at US$75.30 its highest level since November 2014.
- Iron Ore – IRESS reports iron ore was unchanged at US$69.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was unchanged at US$69.50/dry ton. (CFR Tianjin port)
- LME metals – All higher. Cu +1.15%, Ni +0.32%, Al +1.58%.
ECONOMIC DATA, NEWS & POLITICS
- US economic data – September ISM Manufacturing Index 59.8 (consensus 60.4; prior 61.3) and August Construction Spending 0.1% (consensus 0.4%; prior 0.2%)
- Italian fiscal position – The European Commission is expected to reject Italy’s 2019 deficit target of 2.4% in November
- European economic data – Manufacturing PMI 53.2 (expected 53.3; last 53.3) and Unemployment Rate 8.1% (as expected, last 8.2%); French Manufacturing PMI 52.5 (as expected, last 52.5); Italian Manufacturing PMI 50.0 (expected 50.3; last 50.1) and Unemployment Rate 9.7% (expected 10.5%; last 10.2%); Spanish Retail Sales +0.3% (last -0.5%) and Manufacturing PMI 51.4 (expected 52.7; last 53.0)
- UK data – Manufacturing PMI 53.8 (expected 52.6; last 53.0); Mortgage Approvals 66,440 (expected 64,500; last 65,160) and Mortgage Lending GBP2.90 billion (expected GBP3.20 billion; last GBP2.97 billion).
QUOTE OF THE DAY
“It is health that is real wealth and not pieces of gold and silver.” – Mahatma Gandhi, Indian leader born this day in 1869. Died 30 January 1948.