The ASX200 is down 121 points in mid market trade after a shocker night on Wall St. Not much new though. Broad-based losses. Gold sector +ve but all else in red. Banks back in the firing line. TCL AGM. Not much news but can’t stop looking at the screen…#ausbiz
- RBA Luci Ellis, Assistant Governor (Economics) Speech
- Ex-dividend – Asia Pacific Data Centre (AJD) 2.0c, Desane Group Holdings (DGH) 2.3c, GR Engineering Services (GNG) 5.0c, Harvey Norman (HVN) 18.0c, MFF Capital Investments (MFF) 1.5c
- Japanese data – Bank Lending, PPI
- US CPI
- Fed Speak – Atlanta Fed President (FOMC voter) Raphael Bostic
- Senate Standing Committee into financial Services continues today. CBA up fist this morning. CBA also noted this morning the Slater and Gorgon class action concerning investment in cash and deposit options in certain funds. CBA said it will vigorously defend the proceedings.
- Pendall Group (PDL) – FUM report.
- Transurban (TCL) – AGM
- Fortescue (FMG) – $500m on market share buy-back announced.
- Wesfarmers (WES) – Sarah Hunter has been appointed as Managing Director of Offceowrks
- G8 Educations (GEM) – Presentation to Morgan Stanley conference
- Fortescue Metals Group (FMG $3.67) – Ord Minnett has an Accumulate recommendation with a target price of $5.40.FMG has achieved materially improved prices in recent months and the analyst thinks this has been completely overlooked. The FMG blend and super special fines have risen more than 20% since the lows of early July while the share price has fallen 15%. While noting the issues with low-grade ore, they think the business is in good shape. The next catalyst is expected to be the ramping up of the West Pilbara fines, which will replace around 40mtpa of Fortescue blend at a significantly lower discount.
- Macquarie Group (MQG $122.91) – Citi has a Neutral recommendation with a target price of $125 (from $120). MQG has exceeded earnings expectations so far in FY19 and the analyst thinks the sale of PEXA is set to be a catalyst, with the sale is expected to push growth in FY19 cash earnings to 15%. The analyst is surprised that the stock has only had modest growth in 2018, given the market usually rewards growth stories with a substantial re-rating, but is Neutral given the record contribution from asset sales and performance fees is not considered a ‘new normal’.
- Navitas (NVT) – Has received an unsolicited, preliminary, conditional and non-binding proposal from BGH Capital Pty Ltd, AustralianSuper and Mr Rodney Jones at $5.50, a 26% premium to closing price on 9 October. Alternative is $2.75 cash and a share in a newly formed company. Macquarie has downgraded to aa Neutral (from Outperform) recommendation with a target price of $5.50 (from $4.80). The analyst thinks the transaction multiple is fair. The proposal removes uncertainties regarding the incremental investment that is required to optimise the portfolio and would enable the realisation of value at levels consistent with their expectations. The downgrade reflects the move in the share price and the low probability of a competing bid.
- Ramsay Health Care (RHC $54.33) – Citi has a Buy recommendation with a target price of $62.00. The board of Capio has unanimously recommended the RGdS offer of SEK58. Capio has consequently cancelled the planned sale of the French division to a third party and RGdS has lowered the minimum acceptance condition to 75% from 90%. The bid values the Capio equity at EUR783m. The Citi analyst says the Capio assets provide Ramsay Health Care entry to the Scandinavian and German markets as well as opportunities for further synergies in France.
- Ooh!media (OML) – Macquarie has resumed coverage with an Outperform recommendation with a target price of $6.30. The analyst notes that the acquisition of Adshel is not accretive to earnings until 2020 because of competitive tension at the time of the acquisition and the timing of synergies. But they think it provides increased exposure to structural growth and extends the platform over which investment in data and technology can be leveraged
- HT&E (HT1 $2.15) – Macquarie has resumed coverage with a Neutra recommendation with a target price of $2.13. The analyst believes the streamlined company is a highly cash-generating radio business that is operating in a robust advertising market. It is also a potential takeover target in a media sector which is consolidating and additional capital management is considered likely. On balance, they think shares are trading in line with expectations for a metro radio business.
SPI FUTURES -109
US EQUITIES – S&P500 -95 (-3.29%%), Dow Jones -832 (-3.15%), Nasdaq -316 (-4.08%).
Main themes –
- Major sell-off, with tech stocks the worst affected.
- IMR downgrades spark economic growth concerns, with cyclical sectors weakness
- US treasury yields push back towards multi-year highs
- Hurricane Michael makes landfall in the Florida Panhandle; oil traders watchful
- Trump criticises the UD Fed – “I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy…”ctually, it’s a correction that we’ve been waiting for for a long time, but I really disagree with what the Fed is doing.””
EUROPEAN MARKETS – Lower. STOXX500 -1.61%, UK FTSE -1.27%, German DAX -2.21%, French CAC -2.11%.
- The US dollar is weaker at 95.45.
- The Aussie dollar is also weaker at 70.58c.
BONDS – 2-yr: -2 bps to 2.86%, 5-yr: UNCH at 3.06%, 10-yr: +2 bps to 3.23%, 30-yr: +3 bps to 3.37%
- WTI crude futures closed down US$1.79 or 2.4% to US$73.17, weighed down by falling share markets and a downgrade in global growth
- Iron Ore –IRESS reports iron ore was unchanged at US$69.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was up US$1.15 at US$71.70/dry ton. (CFR Tianjin port)
- LME metals – Mostly lower. Cu -0.84%, Ni -2.54%, Al -0.44%.
ECONOMIC DATA, NEWS & POLITICS
- North Korea – The next summit with North Korea’s Chairman Kim Jong-un will take place after the midterm elections
- Chinese currency war – US Treasury Secretary Steven Mnuchin reportedly warned Chinese officials not to engage in competitive currency devaluation.
- US economic data – Core PPI 0.2% (consensus 0.2%; prior -0.1%) and PPI 0.2% (consensus 0.2%; prior -0.1%); Wholesale Inventories 1.0% (consensus 0.8%; prior 0.6%); Weekly MBA Mortgage Applications Index -1.7% (prior 0.0%)
- UK data – Trade deficit £11.20bn (expected -£0.90bn; last -£10.39bn). Industrial Production +0.2% (expected 0.1%; last 0.4%) to be +1.3%yoy (expected 1.0%; last 1.0%); Manufacturing Production -0.2% (expected 0.1%; last -0.2%) to be +1.3%yoy (expected 1.1%; last 1.4%). Construction Output -0.7% (expected -0.5%; last 0.5%) to be +0.3%yoy (expected 1.4%; last 2.8%). GDP 0.0% (expected 0.1%; last 0.4%)
- Growth forecast downgrade (from yesterday) – The IMF has downgraded its forecast for global growth this year from 3.9% to 3.7%. The IMF noted the risk of negative shocks had increased, and that current policies supporting growth were unsustainable over the longer term. US growth downgraded on the back of the likely impact of tariffs. The IMF also cited the flux of NAFTA and Brexit. The US and China will grow by 2.9% and 6.6% this year, respectively, would slow more than expected to 2.5% and 6.2% respectively, in 2019. Australia is forecast to grow 3.2% this year and 2.8% in 2019 (down from the 9% forecast in April).
QUOTE OF THE DAY
“Happiness is not a goal; it is a by-product” – Eleanor Roosevelt, American first lady born this day in 1884. Died 7 November 1962.