The ASX200 closed down 85 points, on lows of the day, after a mixed US jobs report and spike in bond yields. All sectors lower. REITS and GOLD best. Materials, Energy and Financials worst. MYO takeover offer, ANZ provisions, & fewer deaths for IVC the key domestic drivers. $A stable at US70.46c. US SP500 futures +0.5pts.  #ausbiz



Chinese stimulus – the PBoC has cut the reserve requirement ratio (RRR) to 14.5% for large institutions and 12.5% for smaller banks, a cut of 100bp. The move is expected to inject Y750b (into the banking system) by releasing liquidity. It’s the 4th cut this year.

Definitely boost confidence and show that the PBoC was serious to “maintain reasonably ample liquidity to drive the reasonable growth of monetary credit and social financing scale”. The PBoC said the RRR cut would not create depreciation pressure on the yuan, adding that the central bank would keep the foreign exchange markets stable.

Indicators of growth are slowing – Fixed-asset investment is growing at the slowest pace on record, while non-performing loans surged in the second quarter and defaults climbed. The July nationwide jobless rate rose to 5.1%.


ANZ – additional charges for customer compensation, accelerated amortisation of software and other notable items.

  • $374m in customer compensation – 57% relates to customer refunds impacting revenue, with the balance relating to remediation costs recorded as an expense. The total remediation charge is split approximately 66%/34% between Continuing and Discontinued operations.
  • $206m in accelerated amortisation
  • $104m restructuring charge
  • $55m in external legal costs.


  • Myob (MYO) – Bain Capital has sold 17.6% of the company to KKR at $3.15 and KKR now holds 19.9%. MYO has received an offer at $3.70, a premium of 24% to the $2.98 closing price. Bain still holds 6.1%.
  • Incovare (IVC) – Trading update. Mild winter and benign flue season. Funeral volumes were down 1.5% in Q2. Deaths in the Australian market declined by 5.9% in the June to August period (on pcp)  and IVC estimates that deaths during September have declined to an even greater extent. “We indicated at the half year that the number of deaths was lower than trend, but not outside normal year to year fluctuations. However, trading during the winter period has seen the number of deaths decline in the order of up to 8% in key markets. This variation is very unusual and, despite improving market share, there will be an impact on our full year results. I am pleased to say our strong progress in the Protect & Grow strategy and in identifying and executing strategic acquisitions will contribute to long term sustainable growth.” Every 1% decline in number of deaths equates to circa $3m of funeral revenue on an annualised basis. The decline in deaths also impacts the Cemeteries and Crematoria division with a 1% decline in volume equating to an estimated $0.7m in revenue. IVC’s funeral business has seen a decrease of circa 2,000 cases year to date (September 2018) over the prior calendar period for the comparable business. This equates to 5.8% decline in volume which represents circa $17m decline in revenue related to volume decline. The fall also reduces pricing power.

Protect and grow on track – 40% in 2018. Acquisitions – eight in Australia and three in New Zealand, contributing circa $25m in additional revenue to the group on an annualised basis.


Domestic markets last week – Resources, Energy, Gold sectors outperform. Banks, and Consumer Discretionary underperform. Small caps underperform. Aussie dollar weaker


Global markets last week – bonds sell off tech sector underperformed, Oil and aluminium higher. Banks up on yield increases





US EQUITIES – S&P500 -16 (-0.55%), Dow Jones -180 (-0.68%), Nasdaq -91 (-1.16%). The SP was down 32 poits at one point (-1.1%)

Main themes

  • The jobs number was below expectations but contained a big revision for August. The unemployment rate fell to its lowest level since 1969. Wages grew 0.3% or 2.8% yoy. The report suggests the labor market is solid and still simmering with the prospect of pent-up wage pressures as employers encounter difficulty in finding qualified workers.
  • Bond yields continued to rise. The 10 year at 3.24% the highest in 7 years.
  • CBOE Volatility Index is up 19.2% at 16.95, hitting its highest level since late June

EUROPEAN MARKETS – Lower. STOXX500 -0.86%, UK FTSE -1.35%, German DAX -1.08%, French CAC -0.95%.


  • The US dollar has settled lower at 95.67.
  • The Aussie dollar is significantly weaker at 70.50c.

BONDS – Further weakness 2-yr: +1 bp to 2.88%, 5-yr: +2 bps to 3.07%, 10-yr: +2 bps to 3.22%, 30-yr: +3 bps to 3.39%


  • WTI crude futures closed up 1.0% at US$74.34.
  • Iron Ore – Chinese holiday. 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 – Mixed. Cu -1.86%, Ni +1.04%, Al -1.82%.


  • US economic data – Nonfarm Payrolls 134K (consensus 184K; prior 270K from 201K), Nonfarm Private Payrolls 121K (consensus 180K; prior 254K), Unemployment Rate 3.7% (consensus 3.8%; prior 3.9%), Average Hourly Earnings 0.3% (consensus 0.3%; prior 0.3%), Average Workweek 34.5 (consensus 34.5; prior 34.5).
  • Trade Balance -$53.20bn (consensus -$52.6bn; prior -$50.0bn) Little evidence to confirm that tariff actions are succeeding in cutting the trade deficit in a big way; additionally, with the third quarter real average trade deficit 8.9% higher than the second quarter average, trade will be accounted for as a negative input in Q3 GDP forecasts.
  • Costco (-5.8%) despite reporting above-consensus earnings.
  • European growth downgrades – The French National Institute of Statistics and Economic Studies cut its 2018 GDP growth forecast to 1.6% from 1.7%; Italy’s National Institute of Statistics expects the domestic economy to slow down in the coming months; and Handelsblatt reported that Germany will cut its growth forecast for 2018 to 1.8% from 2.3%.
  • European data – German August PPI +0.3% (expected 0.2%; last 0.2%) to be +3.1%yoy (expected 2.9%; last 2.9%). August Factory Orders +2.0% (expected 0.7%; last -0.9%); French August trade deficit €5.60bn (expected deficit of €4.50bn; last deficit of €3.40bn). August Current Account deficit €1.60 billion (last surplus of €300 million); Italian Retail Sales +0.7% (expected 0.2%; last -0.1%) to be +2.2%yoy (last -0.5%); Spanish August Industrial Production +1.2% (expected 0.3%; last 1.2%)
  • Brexit – Reports the EU will grant the UK the right to revise its stance on trade after Brexit is completed
  • UK economic data – Halifax House Price Index -1.4% (expected 0.2%; last -0.2%) to be +2.5%yoy (expected 3.3%; last 3.7%)
  • Domestic economic data – Retail sales up 0.3% in August after a flat performance in July 18. Cafes, restaurants and takeaway food services (0.7%) led the rises. Rises were also seen in Clothing, footwear and personal accessory retailing (0.8%), Other retailing (0.4%), Department stores (0.9%), and Household goods retailing (0.2%). Food retailing was relatively unchanged (0.0%). Online retail turnover contributed 5.6% to total retail turnover in original terms in August 2018, up from 5.5% in July 18 and 4.6% in August 17.

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