The ASX 200 is up 27 points in mid-morning trading despite weak leads. Was +48. Banks and Materials ↑. Telcos weakest after TLS AGM. NAB costs, RIO Q report, RBA meeting minutes and Chinese CPI/PPI later. #ausbiz


  • RBA Meeting Minutes
  • Economic data – Westpac Leading Index
  • Ex-dividend – Autosports Group ASG) 4.8c, Shaver Shop Group (SSG) 2.4c
  • Chinese data – Inflation Rate, PPI



  • UK data – Employment data and Earnings
  • European – Balance of Trade, ZEW Economic Sentiment Index
  • US economic data – Industrial Production, Capacity Utilization, JOLTS – Job Openings, NAHB Housing Market Index, Net Long-Term TIC Flows
  • US earnings – Goldman Sachs (GS0, Johnson & Johnson (JNJ). United Health (UNH), BlackRock (BLK), Morgan Stanley (MS). After market Netflix (NFLX), IBM,
  • Fed Speak – San Francisco Fed President (FOMC voter) Mary Daly


  • Telstra (TLS) – AGM today. Guidance unchanged. FY19 EBITDA of $8.7 to $9.4bn. FY19 additional restructuring costs $600m. FY19 net one off nbn Definitive Agreement receipts less nbn cost to connect $1.5 to $1.7bn. CAPEX $3.9 to $4.4 billion. Free cashflow $3.1 to $3.6 billion.
  • Cochlear (COH) – AGM
  • National Australia Bank (NAB) – Announced additional costs of $314m after tax in connection with its customer remediation program, will reduce 2H18 cash earnings by an estimated $261m and earnings from discontinued operations by an estimated $53m. Relate to refunds and compensation to customers affected by issues in NAB’s Wealth business, including advisor service fees, plan service fees, the Wealth advice review and other Wealth related issues; Costs for implementing remediation processes; and other costs associated with regulatory compliance matters.
  • Rio Tinto (RIO) – SepQ production report. Pilbara iron ore shipments of 81.9 million tonnes (100 per cent basis) in the third quarter were 5% lower than 3Q17, due to planned maintenance cycles and safety pauses across all operations following the fatality.


  • BHP Billiton (BHP) – Copper Update – Additional interest in SolGold. BHP has entered into a share subscription agreement with SolGold Plc (SolGold) under which SolGold will issue 100 million shares to BHP. SolGold is the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador.
  • Wisetech Global (WTC) – Has acquired LSI Sigma Software (‘DataFreight’), a leading provider of customs, freight forwarding and warehouse management software solutions in the UK for ~$3.6m upfront, with a further multi-year earn-out potential of ~$1.4m related to business and product integration and customer conversion. Datafreight has annual revenue of ~$1.8m and ~$0.4m contribution to EBITDA in the year to 31 March 2018, meaning the transaction is strategic but not material.
  • Freelancer (FLN) – Q cashflow statement. Operating cash flow was $(0.8)m in the quarter and year to date break-even operating cash flow of $(0.4)m. Operating EBITDA positive for the quarter, Escrow.com was EBITDA positive for the quarter, and the Group was EBITDA positive for one month in the quarter (unaudited). Cash flow and EBITDA was impacted by one-off regulatory and legal cash flows and costs, including final payments of Escrow’s regulatory penalty for Florida prior operation of $0.4m (a Florida money transmission license has been subsequently issued) and $0.3m for insurances including setup costs for the Freelancer Enterprise division. Cash and cash equivalents for the Group in the quarter were substantially unchanged from 1H18 at $33 million as at 30 September 2018.
  • Whitehaven Coal (WHC) – Sep Q production report.
  • Downer EDI (DOW) – Peter Tompkins has resigned as Company Secretary following his appointment as Chief Executive Officer of Spotless Group Holdings Limited.


  • Wesfarmers (WES) – 1Q sales. Continued good momentum in Coles, driven by a successful ‘Little Shop” promotional campaign, improved in-store execution and investments in flybuys promotions. Comparable food sales up 5.1% driven by significant growth in average customer basket size, units sold and transaction growth. Price inflation was 0.6% for the quarter, although excluding fresh and tobacco, price deflation was 0.8%. Coles online +30%.
    • Citi has upgraded to a Neutral recommendation with a target price of $45.80 (from $46.30). The analyst notes Coles delivered its strongest lfl sales growth in three years and the highest level of inflation in 10 years. Petrol volumes continue to decline by double digits but have held up in absolute terms over the past 12 months. They have made small downgrades to estimates and upgrades Wesfarmers to Neutral from Sell following a de-rating of the stock
    • Macquarie notes sales will revert and you can’t have a “Little Shop” every quarter.
    • Morgan Stanley has an Underweight recommendation with a target price of $45.00. The analyst was surprised that food inflation has moved into positive for the first time in 10 years and this could influence the company’s future strategy. They thinks it’s too early to assess how Coles will evolve and operate as a stand-alone company, but suspects price-based competition will become less of a focus. They also note Coles has lost share within its convenience business as fuel volumes declined 16% during the quarter.
    • Morgans has a Hold recommendation with a target price of $48.40 (form $51.43). 1Q sales at Coles were ahead of the analyst’s expectations amid improved in-store execution and investment in Flybuys promotion. Sales however were offset by a number of additional costs. They’ve reduced FY19 estimates for earnings at Coles by 1%. Coles is expected to begin trading as a separately listed entity on November 21 and the analyst believes it should trade at a discount to WOW, given a smaller store network and lower earnings margins.
  • Domain Group (DHG $2.77) – Morgan Stanley has an Overweight recommendation with a target price of $4.00. The analyst considers the weakness cyclical, not structural, but is still negative, not only for Domain but also for FXJ and NEC.
  • Fairfax (FXJ $67c) – Morgan Stanley has an Overweight recommendation with a target price of $1.00. The analyst considers the extra detail in the NEC takeover documents is negative for FXJ shares. The TV advertising market has softened as has NEC’s growth. DHG has also sharply reduced guidance
  • Fletcher Building (FBU) – Has withdrawn its proposal to acquire Steel & Tube due to lack of support from Steel & Tube’s Board to progress the proposal in a timely manner. Citi has a Neutral recommendation with a target price of $5.62. The analyst believes the withdrawal is disappointing for both Steel and Tube shareholders and Fletcher Building, as it removes potential for upward earnings revisions and the prospect of a more consolidated market
  • Iress (IRE $11.43) – Morgans has upgraded to an Add (from Hold) recommendation with a target price of $14.52. The analyst upgrades following a sharp contraction in the share price, which has been caused by global uncertainty. While expecting global markets to remain volatile and the share price to move accordingly, they think shares are reasonably valued for long-term investors.
  • James Hardie (JHX $$19.21) – Morgan Stanley has upgraded to an Overweight (from Equal-weight) recommendation with a target price of $23.00. The analyst notes that JHX shares have de-rated materially and are now at its lowest level relative to the ASX Industrials for the last 10 years. They believe concerns over US housing and primary demand growth are valid but overplayed and the slump represents an opportunity. While housing affordability may have deteriorated, home builders continue to report solid new orders. They have adjusted forecasts to allow for margin pressure as prices for pulp and freight remain elevated, and marginal downgrades to earnings estimates are made across the next three years.
  • Nearmap (NEA $1.48) – Morgan Stanley has an Overweight recommendation with a target price of $2.00. The analyst thinks the economics for the business are improving both domestically and in the US. They see FY19 forecasts as achievable and believe the recent sell-off in tech stocks provides an attractive entry point for a stock offering global growth.
  • ResMed (RMD $14.45) – Macquarie has an Underperform recommendation with a target price of $13.00. The analyst thinks shares are elevated compared to historical levels and risk is to the downside in FY19 as RMD cycles a strong FY18. They expect increased competition and also further litigation risk. They prefer CSL.




US EQUITIES – S&P500 -16 (-0.59%), Dow Jones -89 (-0.35%), Nasdaq -25 (-0.33%).

Main themes

  • IT shares continue to underperform, with analyst downgrades not helping

EUROPEAN MARKETS – Mixed. STOXX500 +0.10%, UK FTSE +0.48%, German DAX +0.78%, French CAC -0.02%.


  • The US dollar is weaker at 95.06.
  • The Aussie dollar is stronger at 71.41c.

BONDS – 2-yr: +1 bp to 2.85%, 5-yr: +2 bps to 3.02%, 10-yr: +2 bps to 3.16%, 30-yr: +3 bps to 3.34%


  • WTI crude futures closed up US5c at US$71.39 due to tension following the disappearance of prominent Saudi journalist Jamal Khashoggi, which raised supply worries. Saudi Arabia said it would retaliate to any action. Support also came from data showing South Korea didn’t import any oil from Iran in September, for the first time in six years, ahead of sanctions which start in November.
  • Iron Ore – IRESS reports iron ore was up US50c US$70.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was up US45c at US$71.50/dry ton. (CFR Tianjin port)
  • LME metals – Volatile. Cu +0.96%, Ni -0.16%, Al +1.04.


  • US economic data – Retail Sales 0.1% (consensus 0.6%; prior 0.1%), Retail Sales ex-auto -0.1% (consensus 0.4%; prior 0.2%), and October Empire Manufacturing 21.1 (consensus 18; prior 19); August Business Inventories 0.5% (consensus 0.5%; prior 0.7%)
  • US earnings – Bank of American (-1.49%) despite better-than-expected revenue and earnings, Charles Schwab (-1.63%)
  • IT sector – Netflix (Raymond James cut its price target). Apple (Goldman Sachs said earnings could fall short this year as demand in China slows)
  • Goldman Sachs said the sell-off in US equities Is largely over. “We see limited further downside…Despite the recent sell-off, equity fundamentals are strong and we remain constructive on the path of the S&P 500.”


“We are all in the gutter, but some of us are looking at the stars.” – Oscar Wilde, Irish dramatist born this day in 1854. Died 30 November 1900.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s